Intergraph (Uk) Ltd v Wolfson Microelectronics Plc
| Jurisdiction | England & Wales |
| Judge | MR. RICHARD SNOWDEN QC,RICHARD SNOWDEN QC |
| Judgment Date | 13 March 2012 |
| Neutral Citation | [2012] EWHC 528 (Ch) |
| Docket Number | Case No: HC11C02099 |
| Court | Chancery Division |
| Date | 13 March 2012 |
[2012] EWHC 528 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Richard Snowden QC
(Sitting as a Deputy Judge of the High Court)
Case No: HC11C02099
Caroline Shea (instructed by Olswang LLP) for the Claimant
Thomas Jefferies (instructed by Boyes Turner) for the Defendant
Hearing date: 6 February 2012
The issue in this case is whether there has been an effective termination of a lease dated 31 March 2006 between the Claimant ("Intergraph") (as landlord) and the Defendant ("Wolfson") (as tenant) ("the Lease"). The Lease was of office premises on the first floor of Delta 100, Great Western Way, Swindon ("the Premises").
The issue turns on the interpretation of a letter agreement between the parties dated 22 February 2011 ("the Agreement"). Wolfson had served a notice in August 2010 to exercise a break clause to terminate the Lease on 28 February 2011 ("the Break Notice"), and the Agreement was entered into after it had become apparent that Wolfson would not be in a position to comply with one of the preconditions under the Lease to the effectiveness of the Break Notice.
The disputed provision of the Agreement was to the effect that Intergraph would accept the effectiveness of the Break Notice upon condition that Wolfson paid an agreed sum on or before 28 February 2011. The issue arises because due to an administrative error in its accounts department, Wolfson did not make the payment of the agreed sum on 28 February 2011, and Intergraph refused to accept late performance.
Intergraph contends that time was of the essence of this provision of the Agreement, as it had been in relation to the original preconditions to the valid exercise of the break clause in the Lease. Wolfson contends that the Agreement was an agreement under which the parties agreed that the Lease would terminate in any event, and that time was not of the essence of the provision for payment of the specified sum on or before 28 February 2011.
The Evidence
Witness statements were provided by the solicitors for each side whose communications led to the Agreement (Mr. Michael Higgin, a partner in Olswang LLP for Intergraph, and Ms. Caroline Jameson, the head of Wolfson's Legal Department). Both statements contained legitimate evidence of the evidence of the genesis of the Agreement, which, apart from one point, was not in any substantial dispute. I shall summarise that evidence below.
However, both sides also exhibited and referred to e-mails between them in which the arrangements which were subsequently embodied in the Agreement were discussed; and to a greater or lesser extent they each gave evidence as to their own understanding and what they perceived to be the joint intention of the parties in entering into the Agreement. On well-established authority, such evidence of prior negotiations and subjective intention is not admissible as an aid to construction of the Agreement (see e.g. Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101) and at the hearing both counsel rightly accepted that they could not place any reliance upon such materials.
The Facts
By the Lease, Intergraph demised the Premises to Wolfson for a term of 10 years at an initial annual rent of £50,909.50 plus VAT, subject to review. The Lease contained a break clause permitting the Lease to be terminated by notice on each of 28 February 2009, 28 February 2011 and 28 February 2013.
On 30 September 2008 the parties entered a further lease ("the New Lease") of adjacent premises on the first floor of the building ("the New Lease Premises") for a term expiring at the same time as the Lease, and including a break clause operable on the same dates as under the Lease.
Also on 30 September 2008, the parties entered a deed of variation of the Lease, which included provisions to address the effect of the occupation of the New Lease Premises.
The relevant provisions of the Lease (as varied) were as follows.
Clause 22 of the Lease contained an option for the tenant to determine the Lease on the following terms:
"22.1 In this clause, "Termination Date" means each of 28 August 2009, 28 February 2011 and 28 February 2013 of the Term.
22.2 Subject to the pre-conditions in clause 22.3 being satisfied on the relevant Term Date, and subject to clause 22.4 the Tenant may determine the Term on the relevant Termination Date by giving the Landlord not less than six (6) months' written notice. The Term will then determine on the relevant Termination Date, but without prejudice to any rights of either party against the other for any antecedent breach of its obligations under this Lease.
22.3 The pre-conditions are that:
22.3.1 vacant possession of the whole of the Premises is given to the landlord;
22.3.2 all rent and other sums due under this Lease and the New Lease up to the relevant Termination Date have been paid in full;
22.3.3 ….
22.3.4 (unless the Tenant has either in full compliance with Clause 13.12.2 of this Lease, assigned or underlet the New Lease such that the Premises and the New Lease Premises are no longer occupied by the same person or has (where the Premises and the New Lease Premises are still occupied by the same person) first fully complied with Clauses 13.12.2(a) and 13.12.2(b) of this Lease) the Tenant gives vacant possession of the whole of the New Lease Premises having validly exercised the option to determine contained in clause 22 ("Tenants Option to Determine") of the New Lease and fully complied with the preconditions contained in such clause.
22.4 The Landlord may waive any of the pre-conditions set out in clause 22.3 at any time before the relevant Termination Date by written notice to the Tenant.
22.5 Time will be of the essence for the purposes of this clause."
It is common ground that the reference in the first two lines of clause 22.3.4 to "Clause 13.12.2" was a mistake and should be read as a reference to clause 13.12.1 of the Lease. But nothing turns on that.
Clause 13.12 of the Lease (as varied) provided that the tenant would not be entitled to assign or underlet the Lease,
"13.12.1 unlessthe Tenant either simultaneously assigns or underlets … the whole of the New Lease Premises to the same assignee or undertenant ….; or
13.12.2 until the tenant has first:
(a) created (to the Landlord's reasonable satisfaction) an independent means of access to and egress from the New Lease Premises wholly out of the Premises;
(b) reinstated all partitioning between the Premises and the New Leases [sic] Premises (save for any partitioning across the access referred to in clause 13.12.2(a)) to the Landlord's reasonable satisfaction; and
(c) given a covenant to the Landlord that any future underlease or assignment (as the case may be) of the New Lease will grant to the undertenant or assignee (as applicable) sufficient rights to use the independent means of access referred to in clause 13.12.2(a) above."
Both the Premises and the New Lease Premises became surplus to Wolfson's requirements and were vacated in 2009 as part of a reorganisation of its business. Wolfson's staff members were relocated to premises in Newbury and their access passes to the building containing the Premises and the New Lease Premises were returned to Intergraph in November 2009.
By letter dated 19 August 2010, Wolfson served the Break Notice to determine the Lease on 28 February 2011. However, by mistake, no notice was served to determine the New Lease as well. This had the result that Wolfson was unable to satisfy the main precondition to an effective break of the Lease in clause 22.3.4, namely giving vacant possession of the whole of the New Lease Premises at the same time.
To get over this difficulty, Wolfson initially sought to persuade Intergraph to accept a surrender of both the Lease and the New Lease. However, the terms sought by Intergraph were not acceptable to Wolfson. This left Wolfson with only one option if it was to be able to satisfy all of the preconditions in clause 22.3 for an effective termination of the Lease – namely to carry out the works required by clauses 13.12.2(a) and 13.12.2(b) (creating an independent means of access and reinstating the partitioning) so as to meet the requirements of the exception set out at the beginning of clause 22.3.4.
To this end, on 13 January 2011 Wolfson's solicitors e-mailed Intergraph's solicitors explaining that Wolfson was arranging for the reinstatement of the partitioning and creation of an independent means of access to the New Lease Premises and stating that it was anticipated that such works would be completed prior to 28 February 2011. The letter concluded with the assertion that if all of the other preconditions set out under clause 22.3 of the Lease were met, Wolfson's break would be effective.
As anticipated by that e-mail, Wolfson made arrangements to meet the requirements of 13.12.2(a) and 13.12.2(b) by engaging its contractor to carry out works at the Premises. Prior to the date fixed for those works to commence, the parties corresponded about the financial and other obligations of Wolfson under the Lease and the New Lease. These included the level of rental and service charge arrears, specific items of dilapidations and Intergraph's suggestion that partitioning works be done in such a manner as to create a new corridor providing access to the New Lease Premises. During that exchange, Wolfson asked whether Intergraph would prefer Wolfson simply to pay an agreed sum for the...
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Intergraph (UK) Ltd and Another v Wolfson Microelectronics Plc
...(Official Shorthand Writers to the Court) Monday, 2 April 2012 THE JUDGE: 1 On 13 March I handed down judgment in this matter, [2012] EWHC 528 (Ch), finding for the claimant to the effect that the lease in question had not been validly determined. Those who have read the judgment will know ......