Marks and Spencer Plc v 1) Bnp Paribas Securities Services Trust Company (Jersey) Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 16 May 2013 |
| Neutral Citation | [2013] EWHC 1279 (Ch) |
| Docket Number | Case No: HC12B01600 |
| Court | Chancery Division |
| Date | 16 May 2013 |
[2013] EWHC 1279 (Ch)
Mr Justice Morgan
Case No: HC12B01600
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, London, EC4A 1NL
Mr Guy Fetherstonhaugh QC (instructed by S J Berwin LLP) for the Claimant
Mr Kirk Reynolds QC (instructed by Allen & Overy LLP) for the Defendants
Hearing date: 17 th April 2013
The principal issue
A lease contains a tenant's break clause which allows the tenant, subject to its compliance with certain conditions, to terminate the lease on a specified date. Rent is payable by instalments quarterly in advance on the usual quarter days. The specified date for the termination of the lease is in the middle of a quarter. On the quarter day before the specified date, the tenant is obliged to, and does, pay a full quarter's rent as an instalment of rent. The lease ends on the specified date. Is the tenant entitled to be repaid a part of the quarter's rent which he has paid, the relevant part being based on a daily apportionment of the quarter's rent in relation to the part of the quarter which is after the specified date? That is the principal issue raised in this case. A substantial sum turns on the answer to this question. Similar questions arise in relation to a rent for car parking, and in relation to payments made in relation to insurance and service charge.
The facts
Prior to 24 th January 2012, the Claimant was the tenant and the Defendants were the landlord in relation to four floors, namely the 3 rd, 4 th, 8 th and 9 th floors, of an office building in Paddington, London, W2 known as "The Point". The four floors were let under four separate sub-underleases. For ease of expression, I will refer to the sub-underleases as "leases". The 3 rd and 4 th floors were let to the Claimant by leases dated 25 th January 2006, granted by the Defendants' predecessor in title. The 8 th and 9 th floors were let to the Claimant by leases dated 19 th April 2006, granted by the Defendants' predecessor in title. The Defendants acquired the reversion on the four leases in 2007. On 15 th January 2010, the Defendants and the Claimant entered into four deeds of variation, one in relation to each lease. Each deed of variation varied the terms of a lease. The terms as varied were then "restated" by being set out in a form in the schedule to the deed of variation.
So far as material to the issues in the case, the four leases as varied are in the same terms. For ease of expression, I will refer to the lease as varied as simply "the lease". The parties referred me only to the lease in relation to the 3 rd floor. It was accepted that whatever decision I came to in relation to that lease would apply to the other three leases. Accordingly, in this judgment I will refer only to the terms of that lease and to the facts as to its determination and to the payments made under it. In the course of argument, I was referred to a large number of the provisions in the lease. I have set out in an Annex to this judgment the principal relevant provisions.
In brief summary, the relevant premises were demised for a term of years starting on 25 th January 2006 and ending on 2 nd February 2018. Although the premises were intended to be occupied by the tenant for the purposes of a business, the lease was contracted out of the security of tenure provisions in sections 24 to 28 of the Landlord and Tenant Act 1954, pursuant to section 38A(3)(a) of that Act. This meant that the term of years would expire on 2 nd February 2018 and could not continue thereafter under the 1954 Act. The Claimant had the benefit of an option (conventionally called "a break clause") to determine the lease on either 24 th January 2012 or 24th January 2016. The option to determine was conditional on certain matters. Under the lease, the tenant was obliged to pay a rack rent and a further rent (called "the Car Park Licence Fee") by equal quarterly instalments in advance. The lease also contained provisions as to payment for insurance and a service charge.
On 7 th July 2011, the Claimant served on the Defendants a notice dated 7 th July 2011 pursuant to the break clause. The notice was expressed to determine the lease on 24 th January 2012. Whether the lease would determine on 24 th January 2012 then depended on whether the Claimant would comply with the conditions expressed in the option. The first condition, imposed by clause 8.3, was that there were no arrears of Basic Rent or VAT on Basic Rent as at 24 th January 2012. The second condition, imposed by clause 8.4, was that the Claimant had paid to the Defendants, on or prior to 24 th January 2012, the sum of £919,800 plus VAT. The Defendants were entitled to waive compliance with the condition in clause 8.3 but were not entitled to waive compliance with the condition in clause 8.4.
On 19 th July 2011, the Defendants invoiced the Claimant in relation to a contribution said to be due from the Claimant in relation to insurance. The insurance was in relation to the relevant insured risks for the period 1 st July 2011 to 30 th June 2012. The sum invoiced was £14,972.85 plus VAT. On 2 nd August 2011, the Claimant paid to the Defendants the sum invoiced.
On 8 th December 2011, the Defendants invoiced the Claimant in relation to the Basic Rent, Car Park Licence Fee and service charge said to be due on 25 th December 2011. In this invoice, the sums due were calculated on the basis that the sums payable were for the period from 25 th December 2011 to 24 th January 2012 (i.e. the date of the expiry of the Claimant's break notice) and not for the full quarter beginning on 25 th December 2011.
On or about 25 th December 2011, the Claimant paid to the Defendants in relation to the Basic Rent, Car Park Licence Fee and service charge sums in excess of those invoiced by the Defendants on the 8 th December 2011. The sums paid by the Claimant were in relation to the full quarter beginning on 25 th December 2011.
On or about 18 th January 2012, the Claimant paid to the Defendants the sum of £919,800 (the sum specified in clause 8.4 of the lease) plus VAT.
The result of the foregoing was that the Claimant complied with the conditions in clauses 8.3 and 8.4 of the lease and the term of the lease ended on 24 th January 2012.
On 9 th February 2012, the Claimant wrote to the Defendants pointing out that the Claimant had paid to the Defendants sums substantially in excess of the Defendants' invoices of 8 th December 2011 and asking for repayment of the excess. On the same day, the Defendants replied stating that the invoices of 8 th December 2011 were "incorrect" and that the Claimant ought to have been invoiced for the various charges for the full quarter and that "supplementary" invoices would be served. Correspondence between the parties' solicitors then ensued. The Claimant also claimed repayment of part of the insurance payment it had made on 2 nd August 20The Defendants contended that the Claimant was not entitled to be repaid any such sums and in particular it was not entitled to be repaid that part of the sums which it had paid for the full quarter commencing on 25 th December 2011 which were in excess of the amounts invoiced on 8 th December 2011.
On 15 th March 2012, the Defendants invoiced the Claimant in relation to the Basic Rent, Car Park Licence Fee and service charge said to be due on 25 th December 2011. Unlike the earlier invoice of 8th December 2011 to which I have referred, in the invoice of 15 th March 2012, the sums due were calculated on the basis that the sums payable were for a full quarter from 25 th December 2011 to 24 th March 20The invoice of 15 th March 2012 set out the amounts due by giving credits for the smaller amounts invoiced by the invoice of 8 th December 2011.
On 20 th April 2012, the Claimant brought the present proceedings to claim repayment of sums which it had paid for the period after the termination of the lease on 24 th January 2012. The Defendants have served a Defence denying that the Claimant is entitled to be repaid any sum and, further, relying upon the terms of a settlement agreement which the parties entered into on 24 th January 2012. The Defendants contend that the terms of the settlement agreement prevent the Claimant asserting a right to be repaid the relevant sums, even if there had previously been such a right. I will deal with the facts and the arguments as to the settlement agreement towards the end of this judgment.
On 3 rd September 2012, the Defendants served on the Claimant a service charge certificate drawn up in accordance with the service charge provisions in the lease for the year from 1 st January 2011 to 31 st December 2011. All of that service charge year had elapsed before the end of the lease on 24 th January 2012. The certificate and associated paperwork showed that the expenditure for that year had been less than the expenditure shown in an earlier budget. As the Defendants had been paid by the Claimant sums on account of service charge for that year by reference to that budget, the paperwork served on the Claimant included a credit note for the sum whereby the payments on account exceeded the Claimant's liability to contribute to the expenditure. The claim was amended to include reference to the events described in this paragraph. In an Amended Defence, the Defendants have contended that as the lease had been determined before 3 rd September 2012, there was no continuing duty on the Defendants to provide any service charge certificate or give any credit for any overpayment for the 2011 service charge year. The parties also disagreed as to what if anything should be done, as between these...
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