Monsolar IQ Ltd v Woden Park Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Nugee,Lord Justice Males,Lord Justice Baker |
| Judgment Date | 29 June 2021 |
| Neutral Citation | [2021] EWCA Civ 961 |
| Docket Number | Case No: A3/2020/1072 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 961
Lord Justice Baker
Lord Justice Males
and
Lord Justice Nugee
Case No: A3/2020/1072
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY TRUSTS AND PROBATE LIST (ChD)
Mr Justice Fancourt
[2020] EWHC 1407 (Ch) and [2020] EWHC 1521 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Timothy C Dutton QC (instructed by Geldards LLP) for the Appellant
Mr Toby Watkin and Mr Luke Wilcox (instructed by Osborne Clarke LLP) for the Respondent
Hearing date: 10 June 2021
Approved Judgment
Introduction
The Appellant, Woden Park Ltd ( “Woden Park”), is the owner of a 15-acre site at Woden Park near Cardiff ( “the Land”). By a lease dated 8 July 2013 ( “the Lease”) Woden Park demised the Land to the Respondent, MonSolar IQ Ltd ( “MonSolar”), for a term of 25 years and 6 months from that date for use as a solar farm. These proceedings concern the proper construction of a provision in the Lease for rent review.
I will set out the provision in question straightaway. It is found in sch 6 of the Lease. This provides for a starting Rent of £1,000 per acre or £15,000, and for annual Review Dates on the anniversary of the date of the Lease. Paragraph 3 of sch 6 then provides:
“ Review of Rent
The Rent payable under this Lease will be reviewed in accordance with this paragraph 3 on each of the Review Dates and such Rent payable from and including each such Review Date shall be the Revised Rent which shall be calculated as follows:
I will refer to this as “the Formula”.
It is common ground that there is no ambiguity in how the Formula, read literally, operates. It is also common ground that the effect is that although the index referred to is the General Index of Retail Prices or RPI, the rent will not increase over the term in line with RPI but (assuming RPI generally increases) at a very much higher rate. I refer below to some example calculations.
In these proceedings MonSolar claimed that the Formula should be construed so that the rent was indexed in line with RPI, contending that this could and should be done under the principle by which clear mistakes in the drafting of a document can be corrected as a matter of construction, as exemplified by Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1011 (“ Chartbrook”). I will call this “the Chartbrook principle” although the principle itself long pre-dates that case.
Fancourt J accepted MonSolar's contentions. He delivered two judgments, one ( “the Main Judgment” or “Jmt”) at [2020] EWHC 1407 (Ch) on 5 June 2020, and a second one ( “the Supplementary Judgment” or “SJmt”) at [2020] EWHC 1521 (Ch) on 12 June 2020. The combined effect of both judgments was encapsulated in his Order dated 12 June 2020 granting an appropriate declaration in favour of MonSolar.
Woden Park appeal, with permission granted by Newey LJ, on two grounds, namely that it was neither clear that the Formula contained a drafting error, nor clear, if there were an error, what the error was.
Despite the able submissions of Mr Timothy C Dutton QC, who appeared for Woden Park, I agree with the submissions (also very able) of Mr Toby Watkin, who appeared with Mr Luke Wilcox for MonSolar. I consider that Fancourt J reached the right conclusion for the right reasons and would dismiss the appeal accordingly.
Background
Both parties adduced evidence by way of witness statement, but there was a dispute about the admissibility of the evidence on both sides. Fancourt J resolved these issues, and there is no appeal against them, so it is unnecessary to go into the detail. There was no cross-examination, nor indeed any trial at all as counsel for one of the parties fell ill the day before trial, and rather than reschedule the trial, it was agreed that Fancourt J should determine the construction of the Formula on the basis of the documents, such parts of the written evidence as he determined to be admissible, and written submissions.
The background facts which were either agreed, or which Fancourt J found to be admissible, were as follows. Woden Park was incorporated in September 2012. Its sole director was a Mr Feakins. It bought 38 acres of agricultural land at Woden Park (including the 15 acres that make up the Land) in January 2013. Planning permission for a solar photovoltaic park (or solar farm) on the Land was obtained in March 2013. MonSolar was incorporated, again with Mr Feakins as its sole director, in April 2013. Mr Feakins then caused Woden Park to grant the Lease to MonSolar on 8 July 2013.
MonSolar, which was owned by companies ultimately owned by or on behalf of Mr Feakins, was incorporated as a single purpose vehicle or SPV to hold the Lease, and as part of a structure to enable a sale of the project development rights as a package, these rights consisting of the Lease, the planning permission and an electricity grid connection offer which Woden Park had obtained. The Lease was therefore not an arms' length transaction. Although there has been no assignment of the Lease, which remains vested in MonSolar, control of MonSolar has now passed to others.
That is all one needs to know by way of background.
The Lease
The Lease was granted by Woden Park to MonSolar. It was executed by Mr Feakins on behalf of both parties. It demised the Land for a term of 25 years and 6 months from the date of grant of 8 July 2013, subject to a tenant's break clause as noted below. It is described on the coversheet as a lease of land “for the installation of solar photovoltaic equipment”, and the tenant's user covenant required the tenant to use it only for the purpose of installing and operating a solar photovoltaic system. The tenant was also required to remove the system and reinstate the site — the relevant clause does not in fact expressly say when, but Fancourt J read it, in my view obviously correctly, as applying on the termination of the Lease. Sch 5 contained provisions whereby the tenant could break the Lease at any time on not less than 6 months' written notice, slightly oddly split into paragraph 2.1 which applied before the tenant's works had been commenced and paragraph 2.2 which applied afterwards, although there is no relevant difference between the two rights.
Sch 6 is headed “Rent”. The first paragraph (not expressly numbered, but the next one is paragraph 2) contains definitions for the purpose of the schedule. The relevant ones are as follows:
| “Base Index Figure” | the Index Figure published in respect of the month two months before the commencement of the Term |
| “General Index” | the General Index of Retail Prices (RPI – all items) … |
| “Index Figure” | the figure published at the relevant time as the General Index |
| “Rent” | A x B where ‘A’ equals the area of the Site measured in acres which is 15 acres and ‘B’ equals £1,000 ( £1,000 per acre) |
| “Review Date” | each anniversary of the date of this Lease during the Term and ‘Review Dates’ shall be construed accordingly |
| “Revised Index Figure” | the Index Figure published in respect of the month two months before the relevant Review Date |
| “Revised Rent” | the increased Rent payable with effect from the relevant Review Date. |
Paragraph 3 provides for the rent to be reviewed in accordance with the Formula in the terms set out at paragraph 2 above, which I repeat here for convenience:
“ Review of Rent
The Rent payable under this Lease will be reviewed in accordance with this paragraph 3 on each of the Review Dates and such Rent payable from and including each such Review Date shall be the Revised Rent which shall be calculated as follows:
By reading in the relevant defined terms, the Formula can be more simply expressed as follows:
There are certain other provisions of sch 6 which it is convenient to note here:
(1) Paragraph 2 provides for the rent to be payable half-yearly in arrears.
(2) Paragraph 4 provides as follows:
“ Index
4.1 In the event of any change after the date hereof in the reference base used to compile the General Index, the figure to be shown in the General Index after such change shall be the figure which would have been shown in the General Index if the reference base current at the date hereof had been retained
4.2 If the General Index shall cease to be published there shall be substituted as the relevant calculation in paragraph 3 a new arrangement (the “Revised Indexation”) whereby the figure to be calculated under paragraph 3 shall reflect increases in the cost of living on a similar basis to that set out in paragraph 3
…”
(3) Paragraph 5 provides as follows:
“ Interim payment pending the determination of the Revised Rent
5.1 If the Revised Rent shall not have been ascertained by the relevant Review Date, until such time as the Revised Rent is ascertained, the Tenant shall continue to pay the Rent previously payable
5.2 Within thirty days of the Revised Rent being ascertained, the Tenant shall pay to the Landlord a sum equal to the difference between the Revised Rent and the Rent actually paid during the interval between the relevant Review Date and the date upon which the Revised Rent is ascertained.
There is no dispute between the parties as to how the Formula, applied literally, operates. It was described by Fancourt J in the Main Judgment at [8]–[11] as follows:
“8. It is accepted by the Tenant that, read literally, the indexation clause operates as...
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