No.1 West India Quay (Residential) Ltd (Appellant/Cross-Respondent) v East Tower Apartments Ltd (Respondent/Cross-Appellant)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henderson |
| Judgment Date | 06 October 2016 |
| Neutral Citation | [2016] EWHC 2438 (Ch) |
| Docket Number | Appeal Ref: CH-2016-000066 |
| Court | Chancery Division |
| Date | 06 October 2016 |
[2016] EWHC 2438 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE COUNTY COURT AT CENTRAL LONDON
Her Honour Judge Walden-Smith
Claim No. B10CL598
Rolls Building,
Royal Courts of Justice
Fetter Lane, London, EC4A 1NL
The Honourable Mr Justice Henderson
Appeal Ref: CH-2016-000066
Mr Jonathan Wills (instructed by Trowers & Hamlins LLP) for the Appellant
Ms Lina Mattsson (instructed by Penningtons Manches LLP) for the Respondent
Hearing date: 29 June 2016
Introduction
Long leases of residential property commonly contain a covenant by the lessee not to assign or underlet the whole of the demised premises without the prior written consent of the lessor, such consent not to be unreasonably withheld. The present appeal and cross-appeal concern a qualified covenant of this nature contained in three materially identical long underleases ("the Underleases") of residential apartments in the tower at No.1 West India Quay, 26 Hertsmere Road, London E14. The head lessor, No.1 West India Quay (Residential) Ltd ("West India Quay"), is the defendant, and the lessee, East Tower Apartments Ltd ("ETAL"), is the claimant, in proceedings under Part 8 of the CPR brought by ETAL in the County Court at Central London seeking declarations that consent had either been unreasonably refused by West India Quay, or had not been granted within a reasonable time, in respect of proposed assignments of the Underleases to external purchasers.
More specifically, ETAL sought declarations that West India Quay had unreasonably delayed consent in relation to apartment 28.08, and had unreasonably withheld consent in relation to apartments 27.02 and 27.09.
The case was heard by Her Honour Judge Karen Walden-Smith over two days, on 27 July and 4 December 2015. In her written judgment dated 16 December 2015 ("the Judgment"), the judge held for the landlord, West India Quay, in respect of apartment 28.08. She held that no formal request had been served in accordance with the provisions of the Landlord and Tenant Act 1988 ("the 1988 Act") until 29 April 2015, and consent to assign was granted within a reasonable time thereafter, on 13 May 2015.
In respect of apartments 27.02 and 27.09, West India Quay had refused consent to assign for three reasons set out in its letter of 26 May 2015 to ETAL's solicitors, Penningtons Manches LLP. First, ETAL would not agree to give an undertaking in respect of West India Quay's fees of £1,600 plus VAT, comprising legal fees of £1,250 plus VAT and surveyor's fees of £350 plus VAT. ETAL asserted that the legal fees were unreasonably high, and that no surveyor's fee should be paid because it was unreasonable for West India Quay to require inspection of the apartment by a surveyor. Secondly, following on from this last point, West India Quay wished to carry out an inspection before reaching a conclusion on consent to assign, in order to check whether there had been any breaches of the terms of the Underleases. ETAL challenged the need for any such inspection as a prerequisite of permission to assign, and therefore refused to pay the fee requested. Thirdly, West India Quay had asked to be provided with a bank reference for the prospective assignees, in order to assess and consider their covenant strength. Again, ETAL challenged the reasonable need for such references, and therefore refused to provide them.
The judge decided each of these issues in favour of the lessee, ETAL. She also found that a reasonable fee for the assignments would have been £350 plus VAT. Accordingly, by paragraph 1 of her Order dated 15 February 2016 (as amended under the slip rule, CPR rule 40.12) ("the Order"), she declared that the following conditions imposed by West India Quay for consent to assign were not reasonable:
"(1) an undertaking for fees in the sum of £1,250 plus VAT and/or £1,600 plus VAT;
(2) that an inspection of the premises must take place before consent for assignment is given;
(3) that an undertaking for the fees of the inspection must be given before any inspection is arranged; and
(4) that a current UK bank reference be provided for any prospective assignee."
Paragraph 2 of the Order declared that West India Quay had been in breach of its statutory duty under s.3 of the 1988 Act in relation to the assignment of the Underleases of apartments 27.02 and 27.09 by imposing one or more of the above conditions. West India Quay was also ordered to pay ETAL's costs of the action, to be assessed if not agreed, and to make a payment on account of £28,000 by 29 February 2016. West India Quay's application for permission to appeal was refused.
West India Quay was subsequently granted permission to appeal by Nugee J on 12 April 2016, together with a stay of the Order pending determination of the appeal. The grounds of appeal are set out at considerable length in West India Quay's appellant's notice, but shortly stated they are as follows:
i) the judge erred in finding that it was not reasonable for West India Quay to seek a bank reference from ETAL in respect of the proposed assignee;
ii) the judge erred in finding that it was not reasonable for West India Quay to require an undertaking from ETAL in the sum of £350 plus VAT in respect of the attendance of a surveyor to inspect the demised premises as part of the consideration of each application for permission to assign, and to require that such an inspection take place as part of its consideration of each application;
iii) the judge erred in finding that it was not reasonable to charge more than £350 plus VAT by way of legal fees in respect of West India Quay's consideration of each application for consent to assign; and
iv) the judge erred in relation to costs by not awarding West India Quay its costs of a preliminary hearing before His Honour Judge Collender QC on 3 July 2015.
By a respondent's notice dated 6 May 2016, ETAL in effect seeks permission to cross-appeal on three grounds:
i) the judge erred in finding that West India Quay had not been in breach of the 1988 Act in relation to the assignment of apartment 28.08;
ii) having found that £350 plus VAT would have been a reasonable sum to require in respect of legal fees, the judge was wrong to allow West India Quay to retain that amount; and
iii) the judge also erred in relation to costs, by refusing to order West India Quay to pay ETAL's costs on the indemnity basis.
Subject to these points, ETAL seeks to uphold the remainder of the Order for the reasons given by the judge in the Judgment.
No application for permission to cross-appeal was made by ETAL to the judge, nor has the application been considered by any judge of the High Court. Accordingly, in considering the cross-appeal I will need to decide whether permission should be granted for each of the three grounds, although counsel sensibly argued the cross-appeal on the assumption that permission might be granted, effectively treating the hearing before me as a rolled-up hearing.
There are two further procedural points which I should mention.
First, although the case was initially brought by ETAL as one of considerable urgency, and included a claim for exemplary damages if the proposed sales of apartments 27.02 and 27.09 were lost, arrangements were then made whereby ETAL agreed to comply with all of West India Quay's requirements in order to allow the sales to proceed, but without prejudice to ETAL's case that the conditions were unreasonable. On this footing, West India Quay gave an undertaking to refund the sums paid if the claim succeeded, and the Order therefore includes a provision requiring West India Quay to pay ETAL £3,400 plus VAT by 29 February 2016. It follows from this that the claim for damages was not pursued at the hearing before the judge. The terms of the agreement made between the parties are relevant, however, to the second ground of the cross-appeal.
Secondly, the evidence before the judge was all in the form of witness statements, and there was no cross-examination or oral evidence (despite an erroneous reference by the judge in paragraph 34 of the Judgment to an explanation given by West India Quay which "did not withstand the scrutiny of cross-examination"). This slip was no doubt caused by the fact that the parties made their closing submissions over four months after the first day of the hearing on 27 July 2015. This is therefore a case where the appeal court is in as good a position as the trial judge to assess and draw inferences from the evidence. Nevertheless, the parties rightly accepted that the hearing before me should proceed in the usual way as an appeal limited to a review of the decision of the judge, and not by way of a re-hearing: see CPR rule 52.11(1), and the commentary in the White Book at paragraph 52.11.1. In order to allow the appeal on any ground, I must therefore be satisfied that the judge's decision was wrong: see rule 52.11(3)(a). There is no suggestion that any "serious procedural or other irregularity" took place which might have rendered her decision unjust within sub-paragraph (3)(b).
The principal witness for ETAL was its solicitor, Mr John James Morrison of Penningtons Manches LLP. The only evidence for West India Quay was given by a director of the company, Mr Lambros Hadjiioannou. Each of them filed two witness statements, the second in response to the other's first statement.
The Underleases
As I have said, each of the Underleases is in materially identical form. I will take the Underlease of apartment 27.02 as an example. It is dated 17 August 2004, and made between West India Quay as lessor and ETAL as lessee. In consideration of a premium of £352,800, West India Quay demised the premises...
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