Seafood Shack Ltd v Alan Darlow
| Jurisdiction | England & Wales |
| Judge | Jarman |
| Judgment Date | 19 June 2019 |
| Neutral Citation | [2019] EWHC 1567 (Ch) |
| Court | Chancery Division |
| Date | 19 June 2019 |
| Docket Number | Case No: E30CF027 |
[2019] EWHC 1567 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN WALES
PROPERTY TRUSTS AND PROBATE LISTS (Ch D)
Cardiff Civil and Family Justice Centre
2 Park Street, Cardiff, CF642UA
HIS HONOUR JUDGE Jarman QC
Case No: E30CF027
Mr Owen Prys Lewis (instructed by Robertsons Solicitors) for the claimant
Mr Samuel Shepherd (instructed by Harding Evans Solicitors) for the defendant
Hearing dates: 18 May 2019
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.
HIS HONOUR JUDGE Jarman QC
HH Judge Jarman QC:
By a lease (the lease) dated 7 February 2017 the defendant, Mr Darlow, demised premises (the premises) at 5A High Street Cardiff to Seaford Shack UK Ltd (SSUKL) for a term of 25 years. It is common ground that no such company existed then or since. The claimant company (SSL) was incorporated in May 2016. Its wholly owned subsidiary Seaford Shack (Cardiff) Ltd (SSCL) was incorporated in November 2016. The sole director and shareholder of SSL at the time of incorporation was Darryl Kavanagh. He appointed Terry Rogers as the sole director of SSCL at the time of its incorporation. In the event, it was the latter company which traded from the premises as a seafood restaurant, but that went into liquidation and by notice of disclaimer dated 23 January 2018 the liquidators disclaimed any interest in the premises on its behalf. Mr Darlow resumed possession. SSL claims that the lease should be construed so as to refer to it as tenant, or should be rectified to do so, and claims damages from Mr Darlow for taking repossession unlawfully. Mr Darlow denies each of those claims. By order dated 9 April 2019, HH Judge Keyser QC ordered that four issues be tried as preliminary issues, and it is with those issues that this judgment is concerned.
The issues are:
i) Whether, on the true construction of the lease, SSL was a party to the lease;
ii) Whether, if rectification be required to show SSL as a party to the lease, rectification ought to be granted;
iii) Whether the re-taking of possession of the premises by Mr Darlow on or about 29 December 2017 was lawful;
iv) Whether SSL is entitled to possession of the premises.
The background is largely uncontentious. Mr Darlow instructed a firm of chartered surveyors Emmanuel Jones to market the premises and David Williams of that firm dealt with it. In the Autumn of 2016, he and Mr Kavanagh, who was then based in the Republic of Ireland, negotiated terms and eventually agreed heads of terms.
Mr Williams drew up a memorandum of heads of terms dated 12 October 2016. These were emailed to Mr Kavanagh by Mr Williams on 17 October. After a discussion between them on 28 October, there was an email exchange between them later that day. At about 1pm Mr Williams emailed what he referred to as “final heads of terms.” which gave the tenants details as “Seafood Shack UK Limited C/O DPC Vernon Road Stoke on Trent ST4 2QY.” In that document, Mr Darlow's solicitor was identified as Timothy Russen of Jacklyn Dawson and that of the tenant as Mark Walsh of Kenny Stephenson Chapman in Waterford.
Mr Williams in that email said that Mr Darlow needed to sign off and asked Mr Kavanagh to confirm that they could proceed. Mr Kavanagh in cross examination accepted that he realised that the purpose of this email was to see if the heads of terms were acceptable to him. He said that he sent them to his solicitor but gave no clear reason why the mistake was not picked up then.
About 15 minutes after receiving that email, Mr Kavanagh replied by email saying, “I can confirm that we will be proceeding as per the terms attached…” whereupon Mr Williams forwarded the final terms to Mr Darlow and to Mr Russen by email, in which the attachment was described as “Seafood Shack-5a High Street.”
About 45 minutes after that, Mr Williams emailed Mr Kavanagh again saying this:
“Just one thing the client has raised and he has asked can instead of 6 months rent free rent be paid half ie £25,000 over the first year. Also in regard to the company Seafood Shack Ltd is a shell company as such is there another company or personal guarantee you can offer?”
Mr Williams did not file or give evidence. That reference to SSL was the only such reference in the documentation surrounding the execution of the lease. Mr Kavanagh was asked in cross-examination how he responded to that email and said that he thought he telephoned Mr Williams to say that as he was spending a great deal of money on the premises, and that should be enough by way of comfort, and understood that that position was accepted. Mr Darlow in cross examination said that he recalls reference prior to execution of the lease to SSUKL but not to SSL or SSCL. He thought that guarantees were asked for but could not recall details.
On 24 November 2016, Mr Russen emailed Mr Walsh with the subject “5A High Street, Cardiff-Darlow to Seafood Shack UK Ltd.” He said that he understood that Mr Walsh would be acting on behalf of the tenant and enclosed documentation including a draft agreement for lease and draft lease. These identified the tenant as SSUKL and gave the same address. Mr Kavanagh accepted in cross-examination that he looked at these documents and said that it must have been an oversight that the mistake was not then spotted.
By email dated 19 December to Mr Russen which was headed “Our Client: Seafood Shack UK Limited,” Mr Walsh enclosed the execution page of the lease in duplicate, the original of which he said would follow in the post later, on the basis, amongst other things, that “the directors of the tenant authorised Darryl Kavanagh to execute the lease for and on its behalf.”
By email dated 4 January 2017 in reply, Mr Russen acknowledged receipt of the original lease and asked for confirmation of Mr Walsh's client's address and company registration number for insertion in the lease. Mr Walsh replied by email dated 9 January confirming the name and address set out in the draft. During his oral evidence, Mr Kavanagh confirmed that at the time SSL and SSCL shared that registered address. No company registration number for SSUKL was provided by Mr Walsh, and the space for the number in the draft remained blank upon execution.
It was not until August 2017 that the issue of the tenant's name was taken up. By an email dated 23 of that month to Mr Walsh, Mr Russen said this:
“You will recall that we completed the lease for the above premises on 7 th February this year. Your client was Seafood Shack UK Ltd. The agent has now telephoned to say he can find no evidence of this company at Companies House. Is it a company registered in Ireland? If so can you please supply the registration number. If not in whose name should the lease have been taken? We will then have to put it right.”
SSL and Mr Kavanagh then instructed a different solicitor, Julian Hamilton-Barns to deal with the matter. Mr Russen was copied into an email dated 17 October 2017, in which Mr Hamilton-Barns confirmed his instruction and said:
“As part of my wider review of the business I note that the lease between your client Alan Darlow and [SSL] is actually in the name of Seafood Shack UK Limited, which is a company that has not been formally registered. I suspect that this was an oversight when the lease was put into place. As a consequence it will probably prove to be impossible to register the lease at HMLR, but whatever the position, the matter needs to be rectified with SSL being the Lessee.”
Mr Russen took instructions and then sent out a draft lease naming SSL as tenant, but otherwise with the same commencement date and terms as the lease. That was returned, incorrectly executed, at the beginning of December 2017.
In the meantime, there had been meetings between Mr Kavanagh, Mr Hamilton-Barns and Mr Rogers. By this time Mr Kavanagh and two others had been appointed directors of SSCL alongside Mr Rogers. Mr Kavanagh says that he became uneasy during these meetings, to use his phrase, and instructed yet another solicitor, Paul Simon of Thomas Simon Ltd to deal with the lease matter.
On 27 December 2017, Mr Hamilton-Barns had a telephone conversation with Mr Darlow, having been unable to contact Mr Russen because of the holiday period. A few minutes later he sent an email to Mr Darlow in which he copied in Mr Russen. He said that he acted on behalf of SSCL which was insolvent to the tune of over £800,000 and the plan was to place it into administration and to sell the business and assets. The letter continued:
“Darryl Kavanagh wants the lease to be completed in the name of…SSL, in which case he can ditch SSCL and then start a phoenix operation some time in the new year disregarding the rights of all of the SSCL creditors. My suggestion is that a new lease is granted to the buyer of the SSCL…business and assets.”
In his witness statement, Mr Kavanagh says that on 29 December 2017, he was phoned by an investor who told him that Mr Rogers had changed the front door codes of the premises and had barred the back doors, thus preventing access to staff and deliveries.
On 2 January 2018, SSCL was wound up and joint liquidators appointed. In an email the same day, Mr Simon informed Mr Russen of this and continued that SSCL had “…ceased occupancy of the property and there does not need to be any further communication with either the company or their legal advisor Mr Hamitlon-Barns.” He added that the rent had been paid to date and wanted to know what the position was about securing the formal lease to SSL.
In reply the next day Mr Russen attached a draft of the lease which had been signed by Mr Kavanagh and sent to him by Mr...
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