Rvb Investments Ltd v Alastair Roderick Bibby
| Jurisdiction | England & Wales |
| Judge | Judge Behrens |
| Judgment Date | 25 January 2013 |
| Neutral Citation | [2013] EWHC 65 (Ch) |
| Court | Chancery Division |
| Date | 25 January 2013 |
| Docket Number | Case No: 1TF 00604 |
[2013] EWHC 65 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
NEWCASTLE UPON TYNE DISTRICT REGISTRY
The Combined Court Centre
The Quayside
Newcastle
NE1 3LA
His Honour Judge Behrens sitting as a Judge of the High Court in Leeds
Case No: 1TF 00604
Stephanie Jarron (instructed by FBC Manby Bowdler LLB) for the Claimant
Alastair Bibby acted in person
Hearing dates: 16 and 17 January 2013
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is a dispute between a landlord and the surety of an insolvent tenant. There are two leases involving Units 2 and 4 Durbar Industrial Estate, Durbar Avenue, Coventry. In each lease RVB Investments Limited ("the Landlord") was the landlord, Cannon Transport (Midlands) Limited ("the Tenant") was the tenant and Mr Bibby ("the Surety") was the surety.
The Tenant is insolvent having entered into Creditors Voluntary Liquidation on 30 July 2008. On 25 th November 2008 the Liquidator filed a Notice of Disclaimer in respect of Unit 4. On 27 th March 2009 the Tenant was dissolved. On 19 th May 2011 the Treasury Solicitor filed Notice of Disclaimer in respect of Unit 2.
On 5 th August 2011 the Landlord's solicitors ("Manby Bowdler") wrote to the Surety requesting that he take a new lease of Unit 2 for the residue of the term. The rent inserted into the draft was not the same as the rent under the old lease because the Landlord sought to take advantage of the rent review provisions in the lease. The Surety has refused to do so.
In these proceedings the Landlord seeks:
an order for specific performance that the Surety should execute and complete the new lease;
rent, service charge due in respect of Units 2 and 4 amounting to £557,258.08 (now agreed (subject to liability) in the sum of £528,002.22);
if an order for specific performance is not granted, then rates due in respect of Unit 2 amounting to £27,914.23 (now agreed (subject to liability) in the sum of £23,261.87).
The Surety resists the claim on a number of grounds:
He asserts that the Surety's obligations came to an end on the dissolution of the Tenant on 27th March 2009.
He asserts that the leases were surrendered or forfeited by the Landlord.
He relies on section 17 of the Landlord & Tenant (Covenants) Act 1995.
He asserts that the Court should not order specific performance
The Leases
The lease of Unit 2 was dated 4 th December 2007 and was for a term of 5 years from that date. The initial rent was £78,000 p.a payable in advance on the usual quarter days. It contained covenants by the Tenant to pay a service charge, sums in respect of insurance and to indemnify the Landlord against rates and other taxes. It contained a provision for a rent review on the third anniversary of the term (i.e. 4 th December 2010). The rent review provisions are contained in Schedule 8 and occupy some 3 pages of the lease. In summary:
At the review date the rent is to be reviewed "in accordance with the provisions of this Schedule"
The reviewed rent is to be the greater of the rent payable immediately before the review date adjusted by the Retail Price Index and the Open Market Rent on the review date.
There is a detailed procedure for determining the Open Market Rent on the review date. In summary:
1) It may be agreed at any time between the Landlord and the Tenant.
2) (In the absence of agreement) it is determined by an independent valuer on the application of either party made not more than 3 months before or any time after the review date (time not being of the essence).
When the amount of the reviewed rent has been ascertained a memorandum is to be signed by and on behalf of the Landlord and the Tenant and annexed to the Lease.
The provisions relating to the Surety are incorporated in clause 8 of the Lease and contained in Schedule 6. In the light of the arguments in this case it is convenient to set them out in full
1. The Surety covenants with the Lessor and without the need for any express assignment with the Lessor's successors in title that the Lessee will during the period from the date hereof until the expiry of the tenancy hereby created or (if earlier) the date on which the Lessee ceases to be bound by the covenants in this lease ("the Guarantee Period") pay the rents and all other sums due under and perform and observe the covenants on the part of the Lessee and other terms of this lease and that if the Lessee fails to do so the Surety will do so and will indemnify the Lessor against damages cost and expenses incurred by the Lessor as a result of the Lessee's failure.
2. The Surety will be liable to the Lessor as a sole or principle debtor PROVIDED THAT any neglect or forbearance of the Lessor in endeavouring to obtain payment of said rents and payments as and when the same become due or its delay to take steps to enforce performance or observance of the covenants on the part of the Lessee and other terms of this lease and any time which may be given by the Lessor to the Lessee shall not release or in any way lessen or affect the liability of the Surety hereunder.
3. If this lease is disclaimed or forfeited during the Guarantee Period the Lessor may within six months after such disclaimer or forfeiture by notice in writing require the Surety to accept a new lease of the Premises for a term equivalent to the residue which if there had been no disclaimer or forfeiture would have remained of the Term at the same rent and subject to the like covenants and conditions as are payable under and applicable to the tenancy immediately before the date of such disclaimer or forfeiture and in such case the Surety shall pay the Lessee's costs incurred by the Lessor in connection with such new lease and the Surety shall accept such new lease accordingly and will execute and deliver to the Lessor a counterpart thereof.
The lease of Unit 4 is dated 9 November 2005 and was for a term of 5 years from that date. The rent payable was £48,000 p.a payable in advance on the usual quarter days. It contained covenants by the Tenant to pay a service charge, sums in respect of insurance and to indemnify the Landlord against rates and other taxes. It is not necessary to refer to the rent review clause. The provisions relating to the Surety are identical to those in the Unit 2 lease.
The law
There are a number of factual disputes which it will be necessary to resolve in relation to the question of whether the leases have been forfeited or surrendered. However the liability of a surety of a lease where the tenant has entered liquidation and the liquidator and/or the Crown has disclaimed liability under the lease is primarily a question of law. It is convenient to deal with these issues before embarking on the resolution of the factual issues.
Before doing so it is right that I should record my thanks to both Mr Bibby (and/or his McKenzie Friend who had plainly done a lot of research) and Ms Jarron for the very detailed and helpful skeleton arguments they provided.
Although Mr Bibby represented himself he provided me with a detailed skeleton argument, a detailed written closing submission and an analysis of the law with copies of all authorities relied on. It was most helpful. His cross-examination was pertinent and to the point.
The effect of liquidation – Disclaimer by the Liquidator.
The liquidation of the Tenant has no effect upon its obligations to pay rent and comply with other covenants under the leases. The lease remains vested in the Tenant although the passing of the resolution to wind up the Tenant is defined as a "Terminating Event" and gives the Landlord the right (but not the duty) to re-enter after serving an appropriate section 146 Notice. [See clause 6 of the leases]. Similarly the Landlord has a right of re-entry for non-payment of rent.
Sections 178 to 182 of the Insolvency Act 1986 are a group of sections governing the disclaimer of onerous property by a liquidator of a company that is being wound up. Section 178(2) empowers a liquidator to disclaim any onerous property." Onerous property means any unprofitable contract, and any other property of the company which is unsaleable or not readily saleable or such that it may give rise to a liability to pay money or perform any other onerous act. Subsection (4) sets out the effect of a disclaimer. It reads:
'A disclaimer under this section—(a) operates so as to determine, as from the date of the disclaimer, the rights, interests and liabilities of the company in or in respect of the property disclaimed; but (b) does not, except so far as is necessary for the purpose of releasing the company from any liability, affect the rights or liabilities of any other person.'
Subsection (6) spells out a further consequence of disclaimer:
'Any person sustaining loss or damage in consequence of the operation of a disclaimer under this section is deemed a creditor of the company to the extent of the loss or damage and accordingly may prove for the loss or damage in the winding up.'
The effect of these provisions in so far as they affect the liability of guarantors was considered in detail in the decision of the House of Lords in Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] A.C. 70. As Lord Nicholls, who gave the leading speech, explained:
The matter stands differently where the landlord has the benefit of covenants from a guarantor. In this situation the liabilities of the insolvent tenant to the landlord are ended, but not so as to affect the obligations of the guarantor to the landlord. That is the effect of para (b) of...
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