Sheila Ann Grange v Antony Allen Quinn and Another
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Jackson,Mrs Justice Gloster |
| Judgment Date | 29 January 2013 |
| Neutral Citation | [2013] EWCA Civ 24 |
| Docket Number | Case No: B5/2012/0580 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 January 2013 |
[2013] EWCA Civ 24
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MANCHESTER COUNTY COURT
MR RECORDER MACDONALD
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justice Jackson
and
Mrs Justice Gloster
Case No: B5/2012/0580
Miss Eleanor d'Arcy (instructed by Harrison Drury & Co. Solicitors) for the Appellant
Miss Suzanne Mansfield (instructed by Brian Drewitt, Solicitors) for the Respondents
Hearing date : 31 October 2012
OUTLINE OF THIS APPEAL
This appeal concerns (1) the principle by which a party to a contract, in this case a tenant under a lease of commercial premises, may recover from the other party a sum paid by him that has been lost as a result of that party's breach, and (2) the requirement under the Civil Procedure Rules to deal with a matter justly on appeal, including when a new point can be taken on appeal.
In brief, the appellant, Mrs Grange, was formerly the tenant of premises leased to her by the respondents, the Quinns. In these proceedings, Mrs Grange seeks to recover from the respondents the premium that she paid on executing the lease for the acquisition of the goodwill of a business which the respondents had carried on there, as damages for eviction in breach of the terms of her lease six months into the start of her six year term.
One can well understand why Mrs Grange should want to claim the premium back in these circumstances. However, in my judgment she has no legal right to do so in the circumstances, and, for my own part, I would dismiss this appeal.
In summary, my reasons, which I will amplify later, are as follows:
• The premium in the present case was paid in consideration of the sale of the goodwill and the execution of the lease. It does not fall to be treated as if it were rent payable over the term of the lease.
• The premium is only recoverable if it constitutes recoverable wasted expenditure, which does not apply in this case.
• Expenditure lost as a result of the terms of the bargain and/or as adverse trading of the appellant's business, and not as a result of the wrongful eviction, is not recoverable.
• The recorder was entitled to hold that the lessors had shown that the expenditure was lost as a result of unprofitable trading and not as a result of eviction.
• This court should not accept the appellant's invitation to take the point that the evidence as to the financial position of her business, which evidence was common ground at trial in the court below, contained material errors. Mrs Grange did not take this point until this court alerted her to it after the conclusion of the hearing of the appeal. To accept this invitation would be liable to prejudice the respondents.
HOW THIS JUDGMENT IS ORGANISED
I start by setting out the background to Mrs Grange's claims (paragraphs 6 to 9 below), and then summarise the judgment of Mr Recorder MacDonald (paragraphs 10 to 15). I then discuss the issues on this appeal in the following order:
(a) Appellant's primary case: Woodburn report irrelevant, paragraphs 16 to 22 below. I reject this case.
(b) Recovery of the premium as wasted expenditure, paragraphs 23 to 33 below. I also reject this case.
(c) Application of the principles to the facts of this case as it was argued before the recorder, paragraphs 34 to 44 below. I consider that the recorder was entitled to come to the conclusion to which he came on the case as argued before him.
(d) Discovery by the court of errors in the Woodburn report after the appeal hearing, paragraphs 46 to 47 below. The principal error is to treat the period of actual trading as longer than it was by approximately one month and the figures for projected period of trading were therefore drawn up on the wrong basis.
(e) Effect of the discovery of a serious mathematical error in the Woodburn report, paragraphs 49 to 66 below. I do not consider that this court should act on this discovery as it raises issues of fact which the respondents have not had an opportunity of rebutting.
BACKGROUND TO THE APPELLANT'S CLAIMS
The material facts may be shortly stated:
i) On 4 July 2008, Mrs Grange took a lease of premises at 44, Osbourne Street, Bredbury, Stockport SK6 2BT, where the lessors, Mr and Mrs Quinn, had previously run a sandwich shop. They lived upstairs.
ii) Apart from the express covenant for quiet enjoyment, the material terms of the lease were as follows:
• The commencement date was 14 July 2008;
• The term was six years;
• The initial rent was £5,200 per annum, payable quarterly in advance with upwards-only reviews every two years, the first such review in July 2010 being limited to £7,800 pa. The tenant also had to pay the cost of the buildings insurance for the premises;
• There was a full repairing covenant;
• All the fixtures and fittings belonged to the landlords.
iii) The lease does not refer to a premium. The parties made an oral agreement whereby Mrs Grange paid £9,950, described by the parties as a premium. The contemporaneous correspondence shows that this sum was paid for the lessors' interest in the business, or what the particulars of sale called "business/lease/fixtures and fittings…plus stock at value". The finding of fact was that this sum was paid "for the goodwill of the business as it existed in July 2008" (judgment, paragraph 13).
iv) The Quinns wrongfully evicted Mrs Grange six months into her six year term. The recorder found that both parties were honest witnesses, but that the breaches of covenant established by the lessors (such as failing to keep the windows clean) were not sufficiently serious to constitute a breach by Mrs Grange of the terms of the lease. In any event, the lessors failed to give notices terminating the lease in accordance with section 146 of the Law of Property Act 1925. They had also waived any breach by accepting a payment of rent.
The only issue on this appeal (apart from costs) is the correct relief consequent on the finding below that the eviction had been in breach of the terms of the lease.
It is important to see how Mrs Grange's claim evolved prior to trial. Mrs Grange's original claim was for damages for loss of profits. The parties appointed a joint expert, Mr Woodburn, to opine on the amount of those profits. His report was expressed to be unfavourable to Mrs Grange. In short:
i) Mr Woodburn's report found that, based on the actual and projected profits of the sandwich shop, the business had no value at the date of eviction. According to Mr Woodburn, the takings fell by about a third during the period when Mrs Grange was tenant of the sandwich shop. The profit earned in this period, before depreciation of goodwill, fixtures and fittings and (the report said) deduction of any salary for Mrs Grange, was £1,123, giving an annualised profit of only £1,758.
ii) Using this annualised figure for profits over the balance of the term, Mrs Grange would have earned profits of £10,548 before tax over the six years of the lease. This sum included both the actual period of trading up to the date of eviction and the period between that date and the end of the lease. The sum of £10,548 was £598 more than the premium which Mrs Grange had paid the respondents to acquire the lease and the business.
iii) The annualised figure of £1,758 and thus the figure of £10,548 did not tell the whole story about the financial position of the business: Mr Woodburn's calculations made a limited provision for repairs over the six year term, and no provision for:
a) any increase in the rent following a review,
b) the cost of buildings insurance, the cost of the required repainting of the premises near the end of the term,
c) the wages of Mrs Grange.
In addition, Mr Woodburn had had to make assumptions, based on his experience and opinion, as to the amount of certain expenses (eg motor insurance) because he had no information as to the actual amount of certain expenses. Furthermore, he made no provision for wages for Mrs Grange.
It was in the light of the Woodburn report that Mrs Grange elected to abandon her claim for loss of profits and to claim instead repayment of the sum of £9,950. She made an alternative claim for £9,120.83, being that part of the premium of £9,950 attributable to the balance of the term at the date of the eviction.
JUDGMENT OF MR RECORDER MACDONALD
This case came on for trial before Mr Recorder Macdonald, sitting in the Manchester County Court. At trial, Mrs Grange did not challenge the report of Mr Woodburn. Mr Woodburn was not called as a witness. His report was treated as common ground.
The recorder rejected Mrs Grange's primary and alternative claims.
The recorder found:
"[There is] an accountant's report prepared by Mr Paul Woodburn, instructed as a single joint expert. I have read his report and it has been referred to by the parties, but he has not given oral evidence…
So far as is material, he said this, on page 105 of the trial bundle, in a section headed "Summary" at paragraph 2.1:
"I have calculated the profit of the business for the period from 4 th July to 24 th January 2009, a period of 7 months and 20 days, to be £1,123 and it is summarised in a table later in the report. This profit equates to an equivalent annual profit of £1,758."
He goes on to say:
"I estimate that the loss of profits over the period of the lease to be £9,425. Based on the figures above and the assumption that the claimant would be involved in the operation of the business on a day to day basis, I do not consider there to be any value to the...
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