Harbour Estates Ltd v HSBC Bank Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lindsay |
| Judgment Date | 15 July 2004 |
| Neutral Citation | [2004] EWHC 1714 (Ch) |
| Docket Number | Case No: HC04C00823; Case No. HC04C00929 |
| Court | Chancery Division |
| Date | 15 July 2004 |
[2004] EWHC 1714 (Ch)
The Honourable Mr Justice Lindsay
Case No: HC04C00823; Case No. HC04C00929
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
G. Fetherstonhaugh Q.C. (instructed by Davenport Lyons) for Harbour Estates Ltd
J. Male Q.C. (instructed by Denton Wilde Sapte) for HSBC Bank PLC
Hearing dates: 15 th June 2004 and 16 th June 2004 with written supplements on 18 th and 28 th June 2004
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 have before me two actions concerned with the benefit of an unusually-framed break clause which entitled a lessee who had its benefit, on giving due notice, to bring the term to an end. There is an argument as to whether the benefit of the clause was merely personal or "touched and concerned the land". The right to terminate the lease has become valuable. Had its benefit passed automatically from the original lessee as the assignor to the assignee of the term (as that assignee, the current lessee, asserts) despite the benefit not having been mentioned in the assignment or did it not pass by reason of its not being mentioned as doing so (as the current lessor asserts)? It is clear that the benefit would have passed had it been mentioned. The proceedings require a close look at and give rise to difficult questions as to a relatively little-considered provision, Section 63 of the Law of Property Act 1925, and as to some parts of the law authoritatively described, as long ago as 1931, as arbitrary. If the benefit did not pass automatically, the current lessee seeks rectification of the Assignment.
On the 13 th January 1994 Midland Bank plc as landlord, acting as trustee for others, granted an underlease ("the Lease") to its 100% subsidiary Stafford Properties Ltd ("Stafford"). The demised premises were at 3, Harbour Exchange, Isle of Dogs, London, E1, on the third floor. A corresponding underlease was made as to the fourth floor. For convenience I shall refer to only one of the two underleases; the case is in all respects the same for each of them. The term of the Lease was from 24 th June 1993 to the 24 th December 2013. The rent was substantial and reviewable. The expressions "the Landlord" and "the Tenant" were respectively defined to include, in effect, their respective successors in title. Clause 6 of the Lease provides as follows:-
"6. The Tenant may determine this Lease on 23rd June 1999, 23 rd June 2004 or 23rd June 2009 by serving on the Landlord not less than six months written notice of its desire to terminate the Term on such date ("the Date of Commencement").
6.1 The Lease shall expire on the relevant Date of Determination and neither party shall have any further liability to the other in respect of the Premises save in respect of and without prejudice to any right of action of either party in respect of any antecedent breach by the other of this Lease.
6.2 Time is of the essence in respect of this Clause 6.
6.3 Any notice served under Clause 6 shall be irrevocable.
6.4 On the Date of Determination the Tenant shall:
(a) give vacant possession of the Premises to the Landlord and
(b) deliver to the Landlord the title documents to the Premises and the keys to the Premises.
6.5 The benefit of this Clause 6 is personal to Stafford Properties Limited and shall not be capable of assignment to or exercise by any other person PROVIDED THAT the benefit of this Clause 6 may be assigned to an assignee of this Lease permitted pursuant to paragraph 11 of the Sixth Schedule ("a Permitted Assignee") where the Permitted Assignee is a Group Company (as defined in paragraph 11 of the Sixth Schedule) or in the reasonable opinion of the Landlord the Permitted Assignee has prior to the date of the assignment provided to the Landlord for its approval (such approval not to be unreasonably withheld):
(a) references satisfactory to the Landlord; and
(b) its audited accounts showing for the last three years either pre-tax profits of not less than three times the Current Rent and positive assets or net assets with a value of not less than five times the Current Rent and positive pre-tax profits."
Nothing in Clause 6. 6 or 7.1 throws any light on the questions before me. Clause 7.2 provides:-
"7.2 If the Tenant serves notice to determine this Lease in accordance with Clause 6 but the Lease does not determine on the Date of Determination then the provisions of Sections 24 to 28 (inclusive) of the Landlord and Tenant Act 1954 shall again apply."
The Sixth Schedule ("Tenant's Covenants"), brought in by Clause 2 of the Lease provided, so far as material:-
11.1 Not to assign or charge part only of the Premises
11.2 Not to part with or share the possession or occupation of the whole or any part of the Premises (except as provided in sub-paragraphs 11.3, 11.4 and 11.5 of this paragraph)
11.3 Not to charge or assign the whole of the Premises PROVIDED THAT the Tenant may within four months after obtaining the written consent of the Landlord (which shall not be unreasonably withheld or delayed) charge the whole of the Premises or assign the whole of the Premises to a respectable and responsible assignee who shall first have entered into a covenant with the Landlord to pay the Rent and other monies payable by the Tenant under this Lease and to perform and observe the other covenants on the part of the Tenant contained in this Lease during the residue of the Term and on condition that if the Landlord reasonably requires the Tenant shall procure that a guarantor or guarantors reasonably acceptable to the Landlord shall enter into a direct covenant with the Landlord in such terms as the Landlord shall reasonably require
11.4 ………………..
11.5 (a) Notwithstanding any of the provisions of this Paragraph 11 the Tenant may (after giving written notice to the Landlord containing all relevant information) share occupation of the Premises with any Group Company on condition that any such sharing shall not create any relationship of Landlord and Tenant and that on any such occupier ceasing to be a Group Company such occupation shall immediately cease or be otherwise documented in accordance with the provisions of this Paragraph 11
(b) "Group Company" for the purposes of Clause 6 and this Paragraph 11 means any corporation which is a Holding Company of the Tenant or which is a subsidiary of any such Holding Company and for the purposes of this definition the following words shall bear the following meanings:
"corporation" shall have the meaning ascribed to it by Section 740 of the Companies Act 1985
"Holding Company" shall have the meaning ascribed to it by Section 736 of the Companies Act 1985
"Subsidiary" shall have the meaning ascribed to it by Section 736 of the Companies Act 1985
12 Within fourteen days after any assignment underletting mortgage or charge surrender or other disposition transmission or devolution of the Premises or any part of them to give to the solicitors for the time being of the Landlord notice in triplicate specifying the basic particulars of the same and at the same time to supply to them two certified copies of the instrument making or evidencing the same and pay to them a registration fee of twenty-five pounds or such higher sum as shall be reasonable at the time plus such registration fee as shall be payable to the Superior Landlord or his solicitors."
By or on the 8 th December 1999 the reversion immediately expectant upon the Lease had become vested in the Royal Bank of Canada Trust Co. (Jersey) Ltd ("RBC") as the "Landlord". Midland Bank plc, the erstwhile landlord, had no longer any relevant concern in the premises as trustee and had changed its name on the 27 th September 1999 to HSBC Bank plc ("the Defendant"). It wished to become tenant in place of its subsidiary, Stafford. On the 8 th December 1999 RBC gave leave to Stafford to assign to the Defendant. In the grant of licence to assign the Defendant was referred to as "the Assignee". Clauses 3 and 6 of the Licence respectively provided:-
"3 Licence
Subject to the covenants and conditions set out below the Landlord consents to the assignment of the Leases to the Assignee
6 Restriction
This Licence is restricted to the particular assignment hereby permitted."
There is nothing in the Licence to suggest that the permission which it gave or the assignment which it contemplated was or would be circumscribed or limited save as that Clause 6 supra indicated. There is nothing, in other words, to indicate that at that stage Stafford had in mind, or had been denied permission for, an assignment which was in any way of less than it could be. Nor did RBC seek to impose any condition relating to the break clause, such, for example, that the break clause, after assignment of the term, should be personal to the assignee or that it should be (or continue to be) personal to Stafford.
On the 13 th December 1999 Stafford assigned the Lease in writing to the Defendant. In that instrument ("the Assignment") the Defendant is called "the Buyer". Under the heading "Definitions and Interpretations" sub-clauses 1.3 and 1.4 provided as follows:-
"1.3 "the Property" means the premises more particularly described in the Lease and briefly described in the Second Schedule
1.4 "the Term" means the term granted by the Lease"
Recitals in Clause 2 included that Stafford (there referred to as "the Seller") had agreed to assign the Lease to "the Buyer" for the residue of the term. Clause 3 provided:-
"3 Assignment
In consideration of the performance and observance of the...
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