Salford City Council v Torkington and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Potter,Lord Justice Mance,Lord Justice Wall |
| Judgment Date | 09 December 2004 |
| Neutral Citation | [2004] EWCA Civ 1646 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2004/0585 |
| Date | 09 December 2004 |
[2004] EWCA Civ 1646
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MANCHESTER DISTRICT REGISTRY
(HHJ KERSHAW QC SITTING AS A JUDGE OF THE HIGH COURT)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Potter
Lord Justice Mance and
Lord Justice Wall
Case No: A3/2004/0585
Mr N Berragan (instructed by the Solicitors' Office, Salford City Council) for the appellant
Mr A Gourgey QC and Mr I Foster (instructed by Messrs Berg & Co) for the respondents
Introduction
This is an appeal by the claimant Salford City Council ("the council") from a judgment dated 1 March 2004 of His Honour Judge Kershaw QC sitting as a High Court Judge in favour of the defendants, the former tenants of shop premises let to them by the council. On an assessment of damages following an earlier trial on liability, the judge awarded the defendants judgment on their counterclaim in the total sum of £401,155.68, comprising damages of £181,111.26 together with interest thereon of £222,044.42. The council was ordered to pay the defendants' costs of the action and counterclaim.
The proceedings were started by the council by writ dated 7 December 1988 claiming forfeiture together with arrears of rent and mesne profits under a lease in respect of a local grocer's shop at 180 Cleggs Lane, Salford. The defendants did not dispute that there were rent arrears and subsequently agreed the amount claimed by the landlord. However, pursuant to an amended defence and counterclaim dated 25 April 1989, the defendants counterclaimed inter alia damages for misrepresentation and breach of a collateral warranty which they set off against the rent. The council accepted for the purpose of the proceedings that the claim for damages could be set off. The original date fixed for trial of the action was 5 November 1990. However that date was vacated and in or about mid-1991 the action went to sleep. In April 2000 the defendants applied for directions, the council consenting, and the trial of liability on the defendants' counterclaim was eventually heard by Judge Kershaw over three days in February 2001. The judge found for the defendants on liability and made directions for trial of the outstanding issues concerning quantum. That hearing took place on 15 and 16 July 2003, in the course of which the council conceded that damages on the counterclaim would inevitably exceed the arrears of rent so that the claim for forfeiture failed. The judge delivered a written judgment in draft dated 7 August 2003 endorsed to the effect that he expressed a provisional view formed after considering the submissions of counsel; however, since it did not accord exactly with the positions for which either was contending they were afforded the opportunity to comment. A further hearing took place on 2 September 2003 and final judgment on quantum was handed down in writing on 1 March 2004.
The Background Facts
At all material times the first defendant was a businessman with a motor business in Bolton and other interests. The second defendant, who was the former manager of a wine store, lived with him. On 11 September 1981 the defendants took an assignment of the lease of a local grocer's shop at 180 Cleggs Lane which is now surrounded by a large development called the Hay Mill Estate. The development was still under construction at the time and the shop was acquired by the first defendant as an investment and as a business for the second defendant to manage. 180 Cleggs Lane was opposite the entrance to the estate and in a prime position to serve its needs. It was a run-down business at the time with little of its lease remaining. However, the first defendant considered that the new development would revive the business in respect of which he proposed to obtain a new lease. There was to be one intended shop on the new estate, in a position close to the defendants' shop, and the defendants were concerned as to its potential by way of competition. On enquiry from an officer of the council prior to the assignment, the council assured the defendants that the intended shop was being developed by the council to be leased by it as a fish and chip shop and there would not be any other shops on the Hay Mill Estate. In reliance on that assurance, the defendants completed the assignment of the tenancy which was due to expire by effluxion of time on 26 February 1982, but in respect of which the tenant enjoyed a statutory right of renewal.
In fact, the shop on the Hay Mill Estate (2 Hay Mill Avenue) was leased by the council to a tenant as a grocer's shop which opened on 7 March 1982.
Nonetheless, the defendants sought a new tenancy pursuant to their statutory right and were granted a new lease of 180 Cleggs Lane on 21 January 1983 for a term of 6 years from 26 February 1982. The defendants intended to preserve their position and increase their trade by operating an off-licence as well as the grocery business. By agreement, the terms of their new tenancy permitted the shop to be used for the purpose of the "business of general grocers and off-licence".
Prior to the grant of that new lease the council had assured the defendants that the lease of the shop at 2 Hay Mill Avenue (by now operating as a grocer's shop) did not permit use as an off-licence and that it would not compete with the defendants other than by its operation as an unlicensed grocer's shop.
There was in fact no restriction on user in the lease of 2 Hay Mill Avenue and, subsequently, that shop applied for and was granted an off-licence in competition with the defendants. 2 Hay Mill Avenue was closed for a period between 1985 and February 1986, but thereafter traded as an off-licence during the period January to March 1987 and then from 22 May 1987 onwards.
Further, in April 1984, Salford County Council granted a 99-year lease of two proposed shops within a council development at 300 Cleggs Lane without imposing any restriction as to user of those shops. In February 1986 a general store opened at 300 Cleggs Lane. It later obtained an off-licence in December 1987.
The result of the combined competition from the store at 300 Cleggs Lane and the off-licence at 2 Hay Mill Avenue was that the defendant's profits declined between year ending April 1986 to year ending April 1987 from £17,000-odd to £2,000-odd.
In June 1987 the defendants put the business up for sale. Based on the figures to year ending April 1986, the agents instructed to sell it valued the business at £65,000 plus stock. The reason for sale was stated to be:
"Our client has owned the business for over six years and is moving to another business venture."
It was the first defendant's evidence that he had been contemplating selling because competition had caused sales and profits to fall and that the defendants finally made the decision because of the grant of the licence for Hay Mill Avenue.
The judge found that the defendants ceased trading and closed their business on 14 February 1988 the position being that, "by mid-1987 the unlawful competition of the business at 300 Cleggs Lane and the new off-licence at Hay Mill Avenue took away any significant net profit and the position was apparent to [the defendants]". They continued to occupy the premises for 15 months or so, but then moved out to a new home near Bolton. The first defendant throughout attended to his other business interests and the second defendant, following collapse of the shop business, became employed in one of those other businesses, rather than running the shop. The premises were abandoned unoccupied and liability for rent continued to accrue.
Throughout the 1990's, the area and the estate deteriorated and experienced considerable problems of vandalism. Nevertheless, the other shops continued in business and, in August 1992, a petrol station forecourt opened which sold provisions of various kinds in a 'mini-market'.
Liability
The judge held that each of the assurances given by the council (see paras 3 and 6 above) amounted to a collateral contractual warranty, first, in relation to the defendants taking the original assignment as proposed and, second, in consideration of their application for a new tenancy on the terms proposed. He said that, if he was wrong in law that there were collateral contracts on each occasion, the second assurance amounted to a representation on the basis of which the defendants entered into their new lease and were entitled to damages. He held that there had been breaches of each collateral warranty. Although he did not specify in terms the facts which amounted to breaches of those warranties and/or which rendered the second assurance false, there was no dispute as to the dates upon which the various rival businesses had commenced or that, by reason of such commencement, they competed with and adversely affected the defendants' grocery and off-licence businesses so as to cause their closure. There is no appeal from these findings.
Quantum
At the hearing on quantum, the judge dealt with the heads of loss asserted in 'Bands' agreed by the parties. The defendants' witnesses were the first defendant and an accountant, Mr Cooper, who gave evidence as to the takings of the defendants' business week by week between April 1982 and February 1988 which was not disputed. The claimants' loss of turnover and profit due to "unlawful competition" during the period, as agreed between the parties or as found by the judge, (as to which there is no appeal), were as follows:
| Band 1: 7 March 1982 – 21 January 1983 | £4,577 |
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