IAA Vehicle Services Ltd v HBC Ltd
| Jurisdiction | England & Wales |
| Judge | Hodge |
| Judgment Date | 05 January 2024 |
| Neutral Citation | [2024] EWHC 1 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: PT-2023-MAN-000130 |
[2024] EWHC 1 (Ch)
HIS HONOUR JUDGE Hodge KC
Sitting as a Judge of the High Court
Case No: PT-2023-MAN-000130
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
IN MANCHESTER
PROPERTY, TRUSTS AND PROBATE LIST (ChD)
Manchester Civil Justice Centre
1 Bridge Street West
Manchester M60 9DJ
Vendor and purchaser — Specific performance — Lessee's option to purchase reversion — Option providing that ‘upon valid exercise of the option’ a binding agreement ‘shall come into existence’ — Standard conditions of sale requiring purchaser to pay a deposit of 10% of the purchase price ‘no later than the date of the contract’ — Exercise of option without payment of deposit — Whether purchaser obliged to pay deposit on or before date of exercise of option — Whether time of the essence for payment — Whether non-payment of deposit constituted a repudiation of purchase contract — Whether vendor entitled to treat contract as discharged — Whether purchaser entitled to specific performance
The following cases are referred to in the judgment:
Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168, [2010] 3 EGLR 165, [2011] 2 All ER (Comm) 223
Federal Republic of Nigeria (The) v JP Morgan Chase Bank NA [2019] EWHC 347 (Comm), affirmed at [2019] EWCA Civ 1641, [2019] 2 CLC 559
Millichamp v Jones [1982] 1 WLR 1422
Peacock v Imagine Property Developments Ltd [2018] EWHC 1113 (TCC)
Rennie v Westbury Homes (Holdings) Ltd [2007] EWHC 164 (Ch), [2007] 2 EGLR 95
Samarenko v Dawn Hill House Ltd [2011] EWCA Civ 1445, [2013] Ch 36
Miss Alice Hawker (instructed by Freeths LLP, Sheffield) for the Claimant
Mr Tim Calland (instructed by Birketts LLP, Ipswich) for the Defendant
Hearing date: 20 December 2023
Draft Judgment circulated: 31 December 2023
Judgment handed down: 5 January 2024
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.
HIS HONOUR JUDGE Hodge KC
JUDGE Hodge KC:
I: Introduction
This is my considered judgment following the attended trial in Manchester, on Wednesday 20 December 2023, of a Part 8 claim issued as recently as 16 October 2023. The claimant is represented by Miss Alice Hawker (of counsel), instructed by Freeths LLP (Freeths), and the defendant by Mr Tim Calland (also of counsel), instructed by Birketts LLP (Birketts).
The claimant is the tenant under three separate leases of commercial premises at Bilsthorpe, Canvey Island, and Billingham, each for terms of ten years from and including 14 June 2013. The first two leases were granted on 14 June 2013, and the third on 5 August 2013. None of the leases excludes the security of tenure provisions contained in Part II of the Landlord and Tenant Act 1954 (as amended). By clause 7 (21) of each Lease (headed ‘Option’): ‘The Landlord grants to the Tenant the Option’. The ‘Option’ is defined by clause 1 (16) as meaning ‘the option to acquire the freehold interest from the Landlord as set out in Schedule 6’. The defendant (formerly known as ‘Holding & Barnes (CI) Limited’) is the landlord. It is common ground that each of the three options was validly exercised by written notice dated, and given on, 7 June 2023, giving rise to contracts of sale between the parties, which changed their relationship to that of vendor and purchaser.
The principal relief sought by the claimant is a declaration that the three options were validly exercised and are binding on the defendant, and an order for specific performance of the three resulting sale contracts.
The defendant contests the claim. It says that the claimant repudiated the contracts by failing to pay the required 10% deposits by midnight on the date it exercised the options; and that it has accepted these repudiations, with the result that the contracts are at an end. By its acknowledgment of service, the defendant seeks a declaration that the three options are not binding on the defendant due to the claimant's failure to pay the deposits, and the defendant's subsequent termination of the contracts.
The claimant disputes that payment of the deposits was required no later than the date the options were exercised. It maintains that it is, and always has been, ready, willing and able to pay the deposits; and it has transferred the aggregate sum of those deposits to its solicitors' client account. The only obstacle to the claimant's ability to pay the deposits is the defendant's refusal to provide payment details for its conveyancer (to whom the deposits must be paid under the standard commercial property conditions of sale). In response, the defendant says that the claimant should have sought the payment details, or at least tendered payment of the deposits, no later than the date on which the options were exercised; and, in any event, that the lack of bank details is irrelevant in view of the claimant's continued denial that any deposits were payable.
The headline issues in this case are whether: (1) the claimant was obliged to pay the 10% deposits on or before the date of exercise of the options, (2) non-payment of those deposits constituted a repudiation of the resulting purchase contracts, and (3) the defendant is entitled to treat those contracts as discharged.
This hearing was originally listed to determine an application by the claimant, issued on 9 November 2023, for summary judgment on its claim. Sensibly, the parties agreed that the hearing should be used finally to determine the claim. This was reflected in a consent order I approved on 30 November, which was sealed by the court on 10 December 2023. I commend the parties and their legal representatives for the constructive approach they have taken to the resolution of this dispute, which will result in a final determination (subject to any appeal) within less than three months after the issue of the claim form.
The evidence consists of two witness statements, both dated 12 October 2023, from Mr Thomas Charles Rumboll, a director of the claimant, and a single witness statement from Mr Terence Anthony Holding. In the interests of furthering the overriding objective of the Civil Procedure Rules of dealing with the case justly, and at proportionate cost, I have dispensed with the requirements of PD 57AC, governing the form of witness statements for trials in the Business and Property Courts, since the evidence in this case turns entirely on documents that are common to both parties, and the outcome depends entirely upon matters of legal argument. There was no cross-examination of either witness.
For structural reasons only, this judgment is divided into the following parts (although these are not self-contained, and the contents of any one part have informed the others):
I: Introduction
II: The options
III: Factual background
IV: Submissions
V: Analysis and conclusions
VI: Disposal
II: The options
The option to purchase the reversion is contained in Schedule 6 to each of the three leases. Paragraph 2 (headed ‘Option’) provides:
(a) In consideration of the sum of ONE POUND (£1.00) now paid by the Tenant to the Landlord (the receipt of which is acknowledged) the Landlord grants to the Tenant an option during the Option Period to purchase the Freehold Interest at the Purchase Price.
(b) Subject to paragraph 3 below, the Tenant may exercise the Option at any time during the Option Period by serving the Tenant's Notice on the Landlord.
(c) The Option will immediately terminate on the Determination of the Term.
Miss Hawker points out that there is a peculiarity in relation to the Canvey Island lease. Despite the reference, in paragraph 4 (a) of Schedule 6, to the purchase of ‘the Freehold Interest’, the subject-matter of the lease consists of two leasehold titles, expiring in 2032. However, she submits that any confusion is clarified by the following matters:
(1) The definition of ‘the Freehold Interest’ in sub-paragraph 1.2 of paragraph 1 (a) of Schedule 6 refers expressly to the title number (EX 598837), thereby resolving any confusion.
(2) When read together with the particulars of the demised premises in Schedule 1 to the Canvey Island lease, it is clear that the parties intended to grant an option to purchase the landlord's reversionary interest.
(3) When read together with the contemporaneous Bilsthorpe lease, and the later Billingham lease, it is clear that the parties intended to transfer the defendant's reversionary interest upon exercise of the options.
Mr Calland has not sought to argue to the contrary. I accept this submission.
‘The Option Period’ is the full ten year terms of the Billingham and Bilsthorpe leases (from and including 14 June 2013 to 13 June 2023) and the last six years of the Canvey Island lease (from and including 14 June 2017 to 13 June 2023). ‘The Purchase Price’ is £1.6 million for the Billingham lease, £210,000 for the Bilsthorpe lease, and £2.1 million for the Canvey Island lease.
Paragraph 3 is headed ‘Option Conditions’ and provides:
The Tenant's Notice will be of no effect unless it is given:
(a) by, or on behalf of, each and every person who together constitute the Tenant at the date of exercise of the Option;
(b) in accordance with the notice provisions contained in clause 7 (5) of this Lease;
(c) in respect of the whole of the Freehold Interest; and
(d) once all sums payable pursuant to the Vendor Loan Notes 2013 which were issued on or about the date of this Lease by HBCR Limited...
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