Nurdin & Peacock Plc (Plaintiff) v D B Ramsden and Company Ltd (Defendant (by Original Action) D B Ramsden and Company Ltd and Others (Defendant (by Counterclaim)
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE NEUBERGER |
| Judgment Date | 17 July 1998 |
| Judgment citation (vLex) | [1998] EWHC J0717-6 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 17 July 1998 |
| Docket Number | CH. 1997-B-No.3293 |
[1998] EWHC J0717-6
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice Neuberger
CH. 1997-B-No.3293
and
Mr Jonathan Brock QC and Mr Alexander Hill-Smith (instructed by Messrs Brookstreet Des Roches, Witney, Oxfordshire) appeared on behalf of the Plaintiff.
Mr Edward Nugee QC and Mr Patrick H. Walker (instructed by Messrs. John Barkers, Grimsby) appeared on behalf of the Defendant.
This is an official judgment of the court and I direct that no further note or transcript be made.
The Hon Mr Justice Neuberger
INTRODUCTION
This case involves a claim by a landlord to rectify the provisions relating to rent in a lease. It is brought against the original tenant and the current tenant, to whom the lease was assigned by the original tenant.
OUTLINE OF THE UNCONTROVERSIAL FACTS
Before the grant of the lease
D B Ramsden & Company Limited ("DBR") is a company which is and was at all relevant times effectively owned and controlled by Mr Dudley Ramsden ("Mr Ramsden"). In 1990, DBR ran a retail cash and carry operation from three substantial properties in the north of England. Two of these properties were owned freehold by DBR, and one of them, at Leads Road, Hull ("the premises") was held under a long lease. Through trade connections, Mr Ramsden knew Mr Roy Hall, and his son Mr Andrew Hall ("Mr Hall"), who were respectively the chairman and managing director of Roy Hall Cash & Carry Limited, a company which had been a Hall family company until it had been acquired, in 1988, by Fitzwilton (UK) PLC ("Fitzwilton UK"), a wholly owned English subsidiary of Fitzwilton PLC ("Fitzwilton"), an Irish company. By the summer of 1990, Mr Ramsden wished to sell the business being carried on by DBR at the premises, and he entered into discussions with Mr Andrew Hall around early October 1990 to that end.
By 17th October 1990, negotiations were sufficiently far advanced for Mr Richard Robinson, a partner in Wilkin & Chapman, DBR's solicitors, to write a letter to Mr Andrew Hall summarising the proposals. They involved, inter alia, the grant of an underlease ("the lease") of the premises for a term of 15 or 25 years at a rent equivalent to £4.50 per square foot per annum with "rent reviews every five years", the sale of the business carried on at the premises for £350,000, payable in three instalments, and a covenant against competition. The letter envisaged that completion would take place in early November. Negotiations then ensued.
Although the initial rent sought by DBR was based on £4.50 per square foot per annum ("£4.50"), the solicitor instructed by Mr Hall, Mr Philip Cowen (then a partner in Cowen & Company) informed Mr Robinson on about 30th October that the rent under the lease should be at a rate of £3.50 per square foot per annum ("£3.50"). This figure was based on valuation advice received from a surveyor instructed by Fitzwilton UK, David Rose of the Elliott Partnership, who had already been in negotiations with a surveyor instructed by DBR, Mr Simon Blood, of Dickinson Davey & Markham.
On 2nd November, Mr Ramsden met Mr Hall to discuss various outstanding items (including the rent payable under the projected lease); they reached an accord upon which they shook hands. The accord they reached is summarised in a fairly full note prepared by Mr Ramsden. The note included the following:
"As a compromise we have finished up at £3.50 for years 1, 2 and 3—rising to £4.50 at years 4 and 5."
The solicitors then got down to the detailed drafting of the various documents. It was envisaged that the proposed transaction would be effected by three documents, namely a Sale Agreement, involving the sale of the business at the premises by DBR, the lease, which was to be granted by DBR for a term of 25 years from 17th November 1990, and an anti-competition covenant, to be entered into by Mr Ramsden ("the covenant"). In the case of each document, the other party (i.e. the purchaser under the Sale Agreement, the tenant under the lease, and the beneficiary under the covenant) was a company called Linrock Limited ("Linrock") which had been acquired "off the shelf" on about 6th November 1990 by Fitzwilton UK. Mr Andrew Hall was appointed sole director of Linrock on 9th November 1990. (In fact, Linrock changed its name to Roy Hall (Hull) Limited on 19th November 1990 but I shall refer to it as "Linrock" for the purposes of this judgment). Mr Cowen was responsible for drafting all the documents on Linrock's side, but, while Mr Robinson retained responsibility for the drafting of the Sale Agreement and the covenant on DBR's side, the responsibility for drafting the lease was that of his conveyancing partner, Mr Sutcliffe.
On 13th November, a meeting took place at Mr Robinson's office in Grimsby. That meeting was attended by Mr Ramsden and Mr Robinson, for DBR, and Mr Cowen and Mr Roy Hall, who was standing in for his son who was away on business, for Linrock. The purpose of the meeting was to deal with any uncertainties ordisagreements which had arisen during the drafting negotiations. Although there was a suggestion to the contrary in the oral evidence, it seems unlikely that anything significant was said about the rent payable under the lease at that meeting. There had been an accord on 2nd November as to the rent for the first five years, and there was no need to discuss it 11 days later, because neither side wished to resile from the accord. By the end of the meeting, all existing problems had been sorted out, and it was effectively agreed that Linrock would take over the business and the premises over the weekend of the 17/18th November, which is what in fact happened.
Thereafter, the solicitors continued trying to finalise the precise terms of the documentation, and Mr Sutcliffe was seeking the consent of DBR's mortgagee, Midland Bank PLC ("the Bank") for the grant of the lease. On 16th November 1990, he wrote to the Bank confirming that the premises were to be let at a rent of £3.50 for the first three years and £4.50 for the fourth and fifth years.
Meanwhile, Mr Hall had informed Mr Rose, the surveyor appointed by Fitzwilton UK, what he had agreed with regard to the rent with Mr Ramsden. On 14th November, Mr Rose wrote to Mr Hall (with a copy to Mr Cowen) repeating his advice that the premises were worth between £3.25 per square foot per annum and £3.50, and that the level of rent which Mr Hall had agreed represented "an average rental of £3.90 per square foot" and that, on the assumption that the rent review provisions in the lease were in normal "upwards only" form, the minimum rent on the commencement on the sixth year of the term would be £4.50 per square foot whichmight well be substantially in excess of the market rent at that time. A copy of this letter was received by Mr Cowen on 16th November. On 19th November, Mr Cowen telephoned Mr Robinson to say that the proposed rent of £4.50 for the fourth and fifth years of the terms was too high, and suggesting that the rent remained fixed, based on £3.50, for the whole of the first five years of the term, and that, during the fourth and fifth years of the terms, an annual payment, not being rent, but representing the difference between a rent based on £4.50 and a rent based on £3.50, be paid. Mr Robinson made a brief note of that telephone conversation. That note also records something about the position after the first review date under the lease.
On 19th November, Mr Cowen sent a fax to Mr Robinson stating that "Andrew [sc. Mr Hall] has spoken with Dudley [sc. Mr Ramsden] and it has been agreed as follows". There then followed five topics of which the third was as follows:
"For the reasons explained to you my clients can only agree to the lease rent being at no more than £3.50… for the first five years. I understand that your client agreed to this but that there would be a side agreement (or a suitable amendment to the lease) to provide for my clients to make a contribution towards the cost of repairs in year 4 and 5 at the rate of £1 per foot in those years only."
Mr Cowen then went on to deal with the question of certain repairs to the premises, which DBR was to carry out under the terms of the lease.
The following day, the 20th November, Mr Robinson sent a four page fax to Mr Cowen, which began by setting out what he understood had been agreed in relation to certain sums payable on completion of the Sale Agreement. The fax then went on to say "As I see it the following points are still to be resolved", and there then followed two items in respect of the lease, three items in respect of the Sale Agreement, and a question relating to the warranty of the accounts. The second item which was "still to be resolved" in relation to the lease was in the following terms:
"The agreement will be amended to reflect that the rent for the five year period will be £3.50 per square foot but that your clients will pay a contribution of £1 per square foot in years four and five towards repairs such payments to be invoiced and made on the same dates as the rent payments. I have spoken to Dudley Ramsden about the basis of the rent review in year six and he is quite adamant that when he and Andrew Hall agreed matters, it was on the basis that the rent for years four and five would be £4.50 per square foot and hence that the minimum rent in year six would be £4.50 per square foot. He would not wish to alter that arrangement. Of course by that stage it may be that the market rent is in excess of £4.50 per square foot but I would like it quite specifically agreed that that is the base rent for...
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