K/S Victoria Street v House of Fraser Ltd and Others
| Jurisdiction | England & Wales |
| Judgment Date | 01 November 2010 |
| Neutral Citation | [2010] EWHC 3006 (Ch) |
| Docket Number | No. HC10-C-01511 |
| Court | Chancery Division |
| Date | 01 November 2010 |
[2010] EWHC 3006 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Mr. John Randall QC
(Sitting as a Deputy High Court Judge)
No. HC10-C-01511
MR. A. SPEAIGHT QC (instructed by Stockler Brunton) appeared on behalf of the Claimant.
MR. N. TAGGART (instructed by Slaughter & May) appeared on behalf of the Defendants.
(Approved by the Judge)
THE DEPUTY JUDGE:
This case concerns an agreement dated 26 th January 2006 for the sale and lease back of premises known as Beatties Department Store in Victoria Street, Wolverhampton. The claimant was the purchaser and lessor. The three defendants are companies in the same group, the third defendant being the former ultimate group holding company of the well-known retailers House of Fraser, and the first and second defendants being two of its subsidiaries.
The agreement was in large part completed on the same day, with the claimant acquiring the freehold title from, and granting a 35 year lease (title to which was registerable, and has since been registered, at H M Land Registry) back to, the first defendant, which had, since the previous summer, been the freehold owner of the premises. The essential terms of the agreement were that the sale price for the premises was £46m; the lease term, as I have mentioned, was 35 years; and the rental was £2.25m per annum subject to five yearly rent reviews. The third defendant acted as surety for the first defendant's performance of its obligations. However, a few of the clauses – and materially clauses 3.5 and 3.6 – remained executory. This is an action for specific performance in respect of those clauses, which I shall read shortly. Permission to amend the defence was given unopposed at the outset of the hearing.
I have before me, firstly, an application by the claimant for summary judgment in respect of specific performance of an assignment of the lease from the first defendant to the second defendant, and a guarantee by the third defendant of the second defendant's liabilities as assignee. To that the defendants raise seven lines of defence, to which I will come in a moment.
Secondly, I have the defendants' application for summary judgment in their favour, dismissing the claim. For the purposes of that cross-application, the defendants have ultimately relied on the first three of their seven lines of defence.
In paragraph 3 of the defendants' skeleton argument they summarise those seven lines of defence as follows: (1) that clauses 3.5 and 3.6 of the Agreement are void and unenforceable as mere agreements to agree; (2) that the same clauses are void and unenforceable by reason of non-compliance with the Law of Property (Miscellaneous Provisions) Act 1989, s.2; (3) that the same clauses are void and unenforceable by reason of their contravention of the Landlord and Tenant (Covenants) Act 1995 ('the Covenants Act') s.25, as interpreted by Mr. Justice Newey in Good Harvest Partnership LLP v Centaur Services Limited [2010] EWHC 330 (Ch), [2010] 2 WLR 1312 (' Good Harvest'); (4) if the same clauses are enforceable, specific performance should be refused by reason of the claimant's laches; (5) if the same clauses are enforceable, specific performance should be refused by reason of the claimant's delay in seeking that remedy, which requires it to be ready, desirous, prompt and eager to assert such a claim; (6) if the same clauses are enforceable, specific performance should be refused by reason of the claimant having waived the right to rely on those clauses; and (7) if the same clauses are enforceable, specific performance should be refused because such an order would be futile, for even if the first defendant assigned the lease to the second defendant, pursuant to clause 3.15F of the lease the second defendant would be entitled immediately to transfer the lease back to the first defendant.
A number of the seven issues thereby raised, which are relied on, of course, in respect of the claimant's Part 24 application as indicating a defence with a real prospect of success, are matters of construction and/or law unaffected by any dispute of fact. In the event that I do not find outright for either party's Part 24 application, the claimant has invited me finally to determine as many of the seven issues as I feel able properly to do at this stage. The defendants similarly invite me finally to determine at least issues 1 to 3 and perhaps, though less confidently, issue 7 as well.
The brief facts giving rise to the dispute in question will appear in my consideration of issues 4 and 7 below. I will therefore not summarise them at this stage of the judgment, rather I will turn directly to issue 1.
The question of whether the relevant clauses are void and unenforceable as mere agreements to agree turns on the application of familiar legal principles to the particular clauses properly construed. They read as follows:
"3.5 The Seller [i.e. D1] agrees to assign the Lease to an assignee (being a Group Company of the Surety [i.e. D3] being of equal or greater covenant strength to James Beattie Limited and if a company is not chosen by 20 April 2006 then the assignee shall be Stores [i.e. D2] and Stores agrees to take that assignment) by no later than 26 April 2006 and the Surety agrees to enter into a deed of guarantee of that assignee's liabilities as surety in the form set out in Schedule 3 of the Lease.
3.6 The Parties agree to settle the documentation for the assignment and guarantee referred to in Clause 3.5 as soon as practicable".
The leading authority where an agreement was held void and unenforceable as an agreement to agree remains the decision of the House of Lords in May and Butcher Ltd v The King [1934] 2 KB 17n. The leading authority where an agreement has been held, in the face of such an argument, to be sufficiently certain, with the court being able to supply the necessary mechanics to make the agreement work, is another decision of the House of Lords, Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444.
The general principles are conveniently summarised in Chitty on Contracts (30 th ed. 2008) vol. 1 at paras. 2–126 to 2–130, from which I need read only short extracts:
"2–126 Terms 'to be agreed.'
…Even where the points left outstanding are of relatively minor importance, there will be no contract if it appears from the words used or other circumstances that the parties did not intend to be bound until agreement on these points has been reached…
2–128 Agreement not incomplete merely because further agreement is required.
Because the courts are 'reluctant to hold void for uncertainty any provision that was intended to have legal effect' they may sometimes give effect even to an agreement which provides for further terms 'to be agreed'… May & Butcher v R was distinguished [in Foley v Classique Coaches Ltd [1934] 2 KB 1] on a number of grounds: the agreement in Foley's case was contained in a stamped document; it was believed by both parties to be binding and had been acted upon for a number of years; it contained an arbitration clause in a somewhat unusual form which was construed to apply 'to any failure to agree as to the price'; and it formed part of a larger bargain under which the defendants had acquired the land at a price which was no doubt based on the assumption that they would be bound to buy all their petrol from the claimant. While none of these factors is in itself conclusive, their cumulative effect seems to be sufficient to distinguish the two cases.
2–129
Thus an agreement is not incomplete merely because it calls for some further agreement between the parties. Even the parties' later failure to agree on the matters left outstanding will vitiate the contract only if it makes it 'unworkable or void for uncertainty'…in Neilson v Stewart [(1991) SLT 523]…[t]he House of Lords held that there was nevertheless a binding contract for the sale of the shares as the parties had not intended the validity of this contract to depend on the outcome of the negotiations as to the repayment of the loan…Commercial agreements are often intended to be binding in principle even though the parties are not at the time able or willing to settle all the details…
2–130 Criteria laid down in the agreement
…An agreement may also lack contractual force where, though it lays down a criterion for resolving matters which are left open, it goes on to provide that the principles for determining the application of that criterion are to be settled by further negotiations between the parties". (footnotes omitted).
Mr. Nicholas Taggart, who appeared for the defendants, cites, in further support of his submission, two of the key passages from speeches in May and Butcher Ltd v The King, the reference to which I have already given. At p.21 Viscount Dunedin said this:
"This case arises upon a question of sale, but in my view the principles which we are applying are not confined to sale, but are the general principles of the law of contract. To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties". (my emphasis).
At p.22 Lord Warrington of Clyde, agreeing, said this:
"The decision...
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