Peel Land and Property (Ports No. 3) Ltd v TS Sheerness Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,Lord Justice McFarlane,Lord Justice Vos |
| Judgment Date | 14 February 2014 |
| Neutral Citation | [2014] EWCA Civ 100 |
| Docket Number | Case No: A3/2013/1993 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 February 2014 |
[2014] EWCA Civ 100
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice Morgan
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Rimer
Lord Justice McFarlane
and
Lord Justice Vos
Case No: A3/2013/1993
Mr Jonathan Seitler QC and Ms Tiffany Scott (instructed by Gordons LLP) for the Appellant
Mr Kirk Reynolds QC and Mr Greville Healey (instructed by McGuirewoods London LLP) for the Respondent
Hearing date: 20 January 2014
Approved Judgment
Introduction
This appeal, brought with the permission of the judge, Morgan J, is against paragraph 3(c) of his order dated 15 July 2013 made following the delivery of his judgment dated 14 June 2013 ( [2013] EWHC 1658 (Ch)). The point is one of construction arising under a lease. It was but one of many questions the judge had to answer.
The claimant/appellant is the landlord, Peel Land and Property (Ports No. 3) Limited ('Peel'). The defendant/respondent is the tenant, TS Sheerness Steel Limited ('TSS'). The essence of the dispute is whether, as the judge held, TSS is at liberty to sever, and deal as the legal and beneficial owner with, the items that paragraph 3(b) of the order identified as tenant's fixtures (there is now no dispute that they are such fixtures). Peel's case, contrary to the judge's decision, is that TSS does not have an unqualified right so to sever and deal with the items. It claims that TSS is only so entitled (i) at the end, or sooner determination, of the term of the lease, or (ii) during the currency of the term, in connection with the use of the demised premises for such industrial purpose as may from time to time be approved by Peel. Clause 2(11) of the lease makes plain TSS's right under (i), on which there is no issue. As for (ii), Peel says that that is made plain by clause 2(6). TSS disagrees.
The facts
TSS is the tenant of a steel recycling plant at Wellmarsh, Sheerness, Isle of Sheppey, Kent ('the premises'). It holds the premises under a building lease dated 1 February 1971 made between Medway Ports Authority as landlord and Sheerness Finance Company Limited as tenant. The term of the 1971 lease is 125 years from 1968. The lease was varied by a lease dated 15 October 1973 between the same parties under which an adjoining area of land with a building on it was leased to the tenant for the same term of years as under the 1971 lease. Both leases are, in the material respects, in the same terms; and both were varied by a deed of 14 July 1992. I need hereafter to refer only to the 1971 lease ('the lease').
Peel acquired the reversion on 16 July 2008 and is the current landlord. A former tenant was Thamesteel Limited ('Thamesteel'), which went into administration on 25 January 2012. Peel then commenced these proceedings against Thamesteel, seeking an order restraining it from selling, disposing of, interfering with or otherwise dealing with the plant and machinery on the premises. TSS is a special purpose vehicle established to acquire Thamesteel's business and assets and it took an assignment of the lease on 7 June 2012, following which it was substituted as the defendant. The proceedings raised issues as to the legal status of many items of plant and machinery. The judge found that all but one of such items were either chattels (those listed in paragraph 3(a) of the order) or tenant's fixtures (those listed in paragraph 3(b)). There is no challenge to those conclusions. The challenge is as to his holding as to TSS's right to deal with the tenant's fixtures during the currency of the term. That requires a consideration of the terms of the lease.
The terms of the lease
The lease is a form of building lease. The parcels clause demised to the tenant:
' ALL THAT piece or parcel of land situate at [Sheerness, Kent] shown on the plan annexed hereto and thereon edged red (hereinafter called "the Site") Together with the Buildings erected thereon or on some part or parts thereof (hereinafter called "the said premises") …'
The upper case 'B' in 'the Buildings' might suggest that the words would be defined, but they are not. The site comprised about 50 acres of industrial land. The parties agree that there were three buildings on the site at the time of the lease, as was recorded in Nourse LJ's judgment in Sheerness Steel Co PLC v. Medway Ports Authority [1992] 1 EGLR 133, at 133.
By clause 1, the tenant covenanted with the landlord to:
'… erect and complete by [31 December 1973] a new building consisting of a fully equipped steelmaking plant and rolling mill capable of producing not less than [50,000] tons of steel products per annum (hereinafter called "the Works") …'
And by clause 1(2) the tenant covenanted that:
'The Works shall be carried out in all respects in a substantial and workmanlike manner and to the reasonable satisfaction of the Lessor's Surveyor or Architect (whose fees shall be borne by the Tenant) and in accordance with:
(a) detailed plans elevations sections specifications and materials based thereon to be previously submitted to and approved in writing from time to time by the Lessor's Surveyor or Architect (whose approval shall not be unreasonably withheld or delayed) (whose fees shall be paid by the Tenant) …'.
Clause 2 contained further tenant's covenants, of which the material ones are the following (in particular, clause 2(6)):
'(6) Not at any time during the said term to erect make or maintain or suffer to be erected made or maintained any building erection alterations or improvements nor to make or suffer to be made any change or addition whatsoever in or to the said premises save in connection with the use of the premises for the purpose of steel making steel rolling and operations ancillary thereto
(7) To keep the said premises and all other buildings erected on the said premises or on some part or parts thereof the fixtures and fittings and all additions thereto in good and substantial repair and condition and to paint such parts of the exterior thereof as are normally painted not less than once in every seven years …
(11) At the end or sooner determination of the said term to yield up the said premises so repaired and maintained amended and kept as aforesaid together with all additions and improvements made thereto in the meantime and all fixtures and fittings of every kind in or upon the said premises or which during the said term may be affixed or fastened to or upon the same except tenants or trade fixtures …
(13) To permit the Lessors their agents surveyors workmen and other persons … to enter upon the said premises … during the continuance of this lease …
(c) To take inventories of the Landlord's fixtures
(d) To view the condition of the said premises and to give or leave notice in writing upon the said premises for the Tenant of all defects and wants of repair or removal of fixtures then and there found And the Tenant will within three months or as soon thereafter as may be reasonably possible after every such notice well and sufficiently repair and make good and reinstate in accordance with the covenants in that behalf hereinbefore contained all such defects and wants of repair and removal of fixtures whereof notice shall have been so given or left as aforesaid
(14) Not to use or occupy the said premises other than for the purposes of steel making steel rolling and operations ancillary thereto or for such other purposes as may from time to time be approved by the Lessors (such approval not to be unreasonably withheld) …
(21) (a) At all times during the continuance of the term … to keep the said premises and all buildings now or hereafter to be erected thereon … and the Lessors' fixtures therein insured in the full rebuilding value thereof …
(b) In case the said premises or any part thereof shall at any time … be destroyed or damaged by the insured risks then and as often as the same shall happen to lay out with all reasonable speed all moneys received in respect of such insurance in rebuilding and otherwise reinstating the said premises …'.
The 1992 deed of variation made various amendments to the lease. The only one I need to refer to is that amending clause 2(6) to provide as follows:
'(6) Not at any time during the said term to erect make or suffer to be erected made or maintained any building erection alterations or improvements nor to make or suffer to be made any change or addition whatsoever in or to the said premises save in connection with the use of the said premises for such industrial purpose as may from time to time be approved by the Lessors under clause 2(14)' (My emphasis)
The amendment substituted the emphasised words for ' the purposes of steel making steel rolling and operations ancillary thereto' in the original form of clause 2(6). One reason for it was probably because if the landlord were to consent under clause 2(14) to the premises being used other than 'for the purposes of steel making steel rolling and operations ancillary thereto', clause 2(6) in its original form would have prevented the tenant from making alterations etc in connection with such new permitted use.
The operations carried out on the premises
The premises are not being currently used for steel making, steel rolling or ancillary purposes but it is not suggested that that means that TSS is in breach of covenant. Whilst by clause 1 the tenant covenanted to erect and equip a new building on the site consisting of a plant and mill 'capable' of producing not...
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