Kilmartin Sci (Hulton House) Ltd and Safeway Stores
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE WARREN,Mr Justice Warren |
| Judgment Date | 27 January 2006 |
| Neutral Citation | [2006] EWHC 60 (Ch) |
| Docket Number | Case No: HC04 C 03769 |
| Court | Chancery Division |
| Date | 27 January 2006 |
[2006] EWHC 60 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Warren
Case No: HC04 C 03769
Nicholas Dowding QC and Christoher Stoner (instructed by Messrs Eversheds) for the Claimant
John McGhee QC and Michael Pryor (instructed by Messrs Clifford Chance) for the Defendant
Hearing dates: 11th, 12th, 13th, & 16th January 2005
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.
Introduction
This is a claim for specific performance of an agreement for a lease dated 31 January 2002 (" the Agreement") made between the Claimant (" Kilmartin") as proposed landlord and the Defendant (" Safeway") as proposed tenant. The relevant property (" the Premises") comprises the basement and ground floor of Hulton House, 165 Fleet Street, London which were to be leased for the operation by Safeway of a small city-centre supermarket or convenience store. A premium of £1 million was to be paid for the proposed lease, which was for a term of 25 years at an initial rent of £600,000 pa subject to review. The provision of this retail space by Kilmartin was part of a major refurbishment of the building, the upper floors (with which I am not concerned) consisting of office space.
Following the acquisition of Safeway by Morrisons plc in March 2004, a reassessment of Safeway's needs led to the commercial decision that the Premises were not required. Safeway accordingly considered whether it was bound to continue with the acquisition or whether the terms of the Agreement entitled it to walk away. The Agreement provided that the Premises should be of a specified minimum Net Internal Area (" NIA"); if that was not achieved, Safeway would have the option to terminate the Agreement. In this context, NIA is to be ascertained in accordance with the Fifth Edition of the RICS Code of Measuring Practice (" the Code"). Safeway contends that that minimum area was not achieved; if that is correct, it is common ground that Safeway is not bound. Kilmartin contend that the NIA was in excess of the minimum and is accordingly entitled to specific performance of the Agreement.
Events leading up to the Agreement
The Agreement was entered into after negotiations that took place in the last two weeks of January 2002. Kilmartin had been negotiating with Sainsbury's with whom heads of terms had either been agreed or were close to agreement by about 22 January 2002. Safeway was keen to achieve a presence in the area and, in the short period of two weeksat the end of January, managed to beat Sainsbury's bid.
There are a number of provisions of the Agreement to which I need to refer.
Clause 1 contains definitions. I refer to the following:
a. "Anticipated Net Internal Area": in relation to the Basement Area 1020 square metres and in relation to the Ground Floor 890 square metres, a total of 1910 square metres. This was the area which Kilmartin's architects anticipated being the area of the completed shell. In fact, this figure may have been based on an incorrect application of the NIA approach. However, nothing turns on this in relation to the question of construction which I need to decide.
b. "Certificate of Practical Completion": a certificate of practical completion of the Works issued by the Architect pursuant to the Building Contract (ie the contract between Kilmartin and a contractor in relation to the Works).
c. "Condition": the grant of Satisfactory Planning Permission.
d. "Material Variations": any variation, alteration or addition to the Works which has any of a number of consequences including one which "materially reduces the Anticipated Net Internal Area".
e. "Minimum Area": a net internal area which is less than 1852.7 square metres. It is agreed that the reference to net internal area is to Net Internal Area as defined. The figure of 1852.7 is 97% of 1910. This reflects the Agreement reached in negotiations that Safeway would be entitled to terminate the agreement if the area of useable space provided was more than 3% less than 1910 square metres.
f. "Net Internal Area": the net internal area of the Premises (the Basement and Ground Floor as described in the Lease (in the form set out in the Agreement) "measured in accordance with the Fifth Edition of the RICS Code of Measuring Practice".
g. "Onerous Conditions": any one of a number of conditions including one which "limits the Net Internal Area of the Premises to less than the Minimum Area".
h. "Satisfactory Planning Permission": a Planning Permission (ie for the Works) which does not contain (among other matters) any Onerous Condition.
i. "Tenant's Works": the works to be carried out by the Tenant under Clause 9.
j. "Specification": the plans detail drawings schedules and other documents detailing the Works annexed to the Agreement as Annexure 5.
k. "Works": this includes (i) the works to be carried out by Kilmartin to the shell of the premises (ii) the internal works and ducting to enable Safeway to carry out its fitting out works and (iii) any other works referred to in the Specification.
Clause 3: Kilmartin was to grant and Safeway was to accept a lease of the ground floor and basement for 25 years at a premium of £1m and a rent of £600,000 pa (subject to review) in the form of the draft lease attached to the Agreement as Annexure 2.
Clauses 3 and 4.2: The obligation to grant the lease and most of the remaining provisions of the Agreement were conditional upon the Satisfaction Date occurring prior to 1 February 2003. The Satisfaction Date was 2 Working Days after either satisfaction or waiver of the Condition. The Condition was the grant of a Satisfactory Planning Permission.
Clauses 4.4.4 and 4.4.5: Kilmartin agreed to use all reasonable endeavours to obtain a Satisfactory Planning Permission as soon as reasonably practicable after the date of the Agreement and to take account of Safeway's reasonable representations. Clause 4.4.6: Any dispute as to whether a Satisfactory Planning Permission had been granted was to be determined by a solicitor acting as an expert. Planning permission was obtained on 16 October 2002; Safeway accepted it as a Satisfactory Planning Permission containing no Onerous Conditions on 12 November 2002.
Clause 5.2: Following the Satisfaction Date Kilmartin was to use all reasonable endeavours to agree the Building Contract no later than 25 days after that date.
Clause 6.1.3: Kilmartin was to procure commencement of the Works on the Start Date (the later of 31 October 2002 or 20 Working Days from the Satisfaction Date). Clause 6.1.5; Kilmartin was (subject to any Permitted Extension) to procure completion of the Works by 31 March 2004.
Clause 6.1.9: Kilmartin was to ensure that its architect submitted to Safeway a statement showing its computation of NIA not less than 5 Working Days before the date on which its architect anticipated that the Certificate of Practical Completion would be issued.
Clause 6.2.2: Kilmartin was not to make any variation without the consent of Safeway (consent not to be unreasonably withheld) and was not to make any Material Variation without the prior written consent of Safeway (there being no proviso about consent not being unreasonably withheld).
Clause 6.4.3.1: As soon as practicable but in any event within 5 working days of the issue of the Certificate of Practical Completion, Kilmartin was to procure that its architect and Safeway's representative should attempt to agree the Net Internal Area.
Clause 6.4.3.4 and 6.4.3.5: Any dispute as to the Net Internal Area was to be resolved by an Independent Measuring Surveyor acting as an expert.
Clauses 8.1 and 8.9: The lease was to be completed, and the premium paid, on the Completion Date (which was the Working Day 5 Working Days after the issue of the Certificate of Practical Completion).
Clause 9.1: The tenant was entitled to carry out the Tenant's Works once the premises had reached the point where such works could be carried out without interfering with the execution of the Works or any works on the remainder of the building. Apart from the definition of Tenant's Works referring to Clause 9, Clause 9 is headed "Tenant's Fitting Out Works and Tenant's Works" suggesting that there may be a difference between the two. There is no definition of Tenant's Works other than that set out above which simply refers to Clause 9 and there is no separate definition of Tenant's Fitting Out Works at all, although Clause 9 does make reference to fitting out works. However, as will be seen, the Specification does make reference to fitting out works.
Clause 15.1: Safeway was entitled to terminate the Agreement if (among other things) the Net Internal Area was less than the Minimum Area (clause 15.1.5). Clause 15.4: Prior to doing so Safeway was to serve an Intended Termination Notice and was only entitled to terminate the Agreement in the event of no Step In Notice being served.
Under the Lease, the Permitted Use was any use permitted by Class A1 Town and Country Planning (Use Classes) Order 1987 (effectively retail shops) and as ancillary to such use any use ancillary to the use of the Premises as a supermarket.
The specification at Annexure 5 to the Agreement is a document which started out as Safeway's standard form specification for the construction of new stores. It was heavily amended in manuscript by Mr Ince of Hancock Ward, Safeway's architects, and sent to Mr Pendlebury of Hamilton Associates, Kilmartin's architects, on 29 January 2002. It was then further amended by Mr...
To continue reading
Request your trial
-
Decision Nº LRA 148 2013. Upper Tribunal (Lands Chamber), 03-06-2015 , [2015] UKUT 0288 (LC)
...and others v Crown Estate Commissioners, LON/00BK/LVL/2011/0013, unreported Kilmartin SCI (Hutton House) Limited v Safeway Stores Plc [2006] EWHC 60 (Ch) Lucie M. v Worcestershire County Council and Evans [2002] EWHC 1292 (Admin) Havering London Borough Council v MacDonald [2012] UKUT 1454 ......
-
Decision Nº RA 21 2010. Upper Tribunal (Lands Chamber), 20-07-2011
...Respondent in person The following cases are referred to in this decision: Kilmartin Sci (Hulton House) Limited v Safeway Stores [2006] EWHC 60 (Ch) Scottish and Newcastle Retail Limited v Williams (Valuation Officer) [2001] RA119 Williams (Valuation Officer) v Scottish and Newcastle Retail......