TCG Pubs Ltd ((in Administration)) and Another v The Master and Wardens or Governors of the Art or Mystery of the Girdlers of London

JurisdictionEngland & Wales
JudgeMr Justice Mann
Judgment Date10 April 2017
Neutral Citation[2017] EWHC 772 (Ch)
Docket NumberCase No: HC-2016-001065
CourtChancery Division
Date10 April 2017

[2017] EWHC 772 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Rolls Building, 7 Rolls Buildings

Fetter Lane, London EC4A 1NL

Before:

Mr Justice Mann

Case No: HC-2016-001065

Between:
(1) TCG Pubs Limited (in administration)
(2) David Christian Chubb and Michael John Andrew Jervis (as Joint Administrators of TCG Pubs Limited)
Claimants
and
The Master and Wardens or Governors of the Art or Mystery of the Girdlers of London
Defendant

Mr Julian Greenhill (instructed by Berwin Leighton Paisner LLP) for the Claimants

Mr Christopher Pymont QC and Mr Duncan McCombe (instructed by Hogan Lovells LLP) for the Defendant

Hearing date: 19 th January 2017

Judgment Approved

Mr Justice Mann

Introduction

1

This case involves a dispute between the claimant tenant (in administration) ("TCG") and the defendant landlord ("the Girdlers") in relation to the proposed assignment of a lease of pub premises known as the Hop Poles, 17/19 King St, London W6. An outline of the dispute, sufficient to understand the facts which are set out below, is as follows. The lease contains a provision prohibiting assignment without the consent of the landlord, such consent not to be unreasonably withheld, but prior to seeking consent the tenant is obliged to offer the lease to the landlord at its market price. In the present case the tenant claims to have made that offer and that the landlord has failed to take it up. The landlord disputes that an appropriate offer was made. Having made the offer, the tenant claims that it has also sought consent to assign. There is a dispute as to whether the tenant (as opposed to the assignee) has sought such consent. If there was an application for consent, there is then a dispute as to whether the landlord is unreasonably withholding it, because the landlord is insisting on a rent deposit or guarantee in respect of the incoming tenant's liabilities.

2

Mr Julian Greenhill appeared for TCG and its administrators. Mr Christopher Pymont QC led for the Girdlers. Each of them conducted their respective cases with commendable economy and clarity.

Witnesses

3

Relatively brief witness evidence was adduced by each party. They were all professional men. Their respective credibilities were not challenged and I find that they were all doing their honest best in giving their evidence. The witnesses were as follows:

4

Mr David Chubb . Mr Chubb is one of the administrators of the tenant company and he gave limited evidence as to the transaction pursuant to which TCG has agreed to sell the lease. There was no real contention about his evidence.

5

Mr Lee Medlock. Mr Medlock acts as solicitor to the intended purchaser of the lease, Stonegate Pub Company Ltd ("Stonegate") and gave evidence in a witness statement about some of those dealings. He was not cross-examined.

6

Mr Christopher Berry. Mr Berry is a partner in Hogan Lovells International LLP, solicitors acting for the Girdlers both in the conveyancing and in this action. His evidence went to his dealing in relation to the conveyancing, including some of his dealing with his client. I thought he was strikingly straightforward in his evidence.

7

Mr Robin Neill. Mr Neill is a member of the Court of Assistants of the Girdlers (essentially the main governing body) and of the property committee which handled the notices and applications by TCG when they were made. He is also a practising barrister, specialising in the construction field. He gave evidence of how the matter was handled within the Girdlers and of the state of knowledge of those directly representing the Girdlers. Again, he was very straightforward about it.

The principal facts

8

In the course of considering some of the more refined points that arise in this case I shall have to set and consider some finer detail of the evidence, but the principal factual framework of this dispute is as follows. In what follows any recitation of fact should be taken as a finding by me unless the contrary appears.

9

The lease in question is dated 22 June 1987 and was made between the Girdlers as landlord and Watney Combe Reid and Truman Ltd as tenant, for a term of 40 years from 24 June 1987. TCG took the lease by an assignment which was not before the court but as to which there is no dispute. Clause 3 of the lease contained the tenant's covenants. Many of them are what can be regarded as standard and some of them are particular to the use of the premises as a pub. Clause 3(12) contains a number of particular pub-related covenants mixed in with others. Clause 3(12)(I) contains the main clause which lies at the heart of these proceedings, and it is necessary to set out its entire terms:

"(I) That the living accommodation of the demised premises shall not be used otherwise than for the accommodation on a service occupancy basis only of a 'bona fide' full-time manager and staff who shall be required to reside on the demised premises as a term of his employment or (if an individual) of Watney PROVIDED (i) Watney may assign or sublet the whole of the demised premises only during the said term to a wholly owned subsidiary of Grand Metropolitan PLC of which Watney is a subsidiary without prior written consent of the Girdlers Company PROVIDED NEVERTHELESS that Watney if they wish to assign or sublet (other than sublettings pursuant to sub-clause (iii) hereof) the whole of the demised premises during the said term to any other party must first grant an option to the Girdlers Company (such option to be exercised within sixty days of the date of receipt of notice by the Girdlers Company of application by Watney to assign or sublet (save where pursuant as aforesaid) the whole of the demised premises to such other party) to buy back the residue of the said term at the then current open market value of the demised premises such value to be agreed by the Girdlers Company and Watney within two months of the Girdlers Company exercising such option or failing agreement within such time the same shall be determined by an independent valuer specialising in licensed property valuation acting as an expert appointed by the said parties or in default of agreement within one month thereof by the President of the Royal Institution of Chartered Surveyors upon the application of either party and at the joint expense of both parties (including the Tenants furnishings and loose goods inventory and stock in trade). If such option is not exercised by the Girdlers Company as aforesaid Watney may with the consent of the Girdlers Company such consent not to be unreasonably withheld or delayed assign or sublet the whole of the demised premises."

"(iii) Watney may sublet the whole only of the demised premises without the prior consent of the Girdlers Company to a brewery tenant for a term not exceeding ten years in a form substantially following Watney's usual tenancy agreement from time to time provided the same shall have an absolute prohibition against assignment and further subletting of the whole or any part of the demised premises, PROVIDED that the Girdlers Company may require that prior to any such assignment or underlease Watney procures that any proposed assignee or under-tenant enters into a formal deed to be prepared by the Girdlers Company solicitors in which (i) the proposed assignee or under-tenant shall covenant directly with the Girdlers Company that from and after the execution of such assignment or underlease the assignee or under-tenant will pay the rents hereby reserved and perform and observe the other covenants and conditions on the part of Watney herein contained (including the provisions of this sub-clause (I)) during the residue of the said term (ii) in the case of an assignment or underlease to a company or other corporate body substantial and reputable sureties acceptable to the Girdlers Company shall enter into covenants with the Girdlers Company jointly and severally to guarantee the payment of the said rents and the performance and observance of the said covenants and conditions hereunder during the residue of the said term…"

10

It is the words in the second proviso to sub-clause (I) ("PROVIDED NEVERTHELESS") that give rise to the principal issues in this case. I shall return to the wording below when I consider the principal points that arise. For the sake of brevity and clarity I shall refer to this proviso in the lease as "the option clause", without in any way pre-judging the issues that arise in this case.

11

The proviso in sub-clause (iii), ostensibly entitling the landlord to require a surety (and which is relied on by the landlord in this case) applies to "such assignment or under-lease" and on one reading of the sub-clause it might be said that it applies only to the matters referred to in that particular sub-clause. However, both parties accepted that the assignment referred to was capable of catching an assignment of the term outside the Watney group and the proviso would thus be capable of applying to the assignment which TCG seeks to make in the present case. I therefore do not have to consider that point of construction.

12

Sub-clause (I) does not itself contain the usual express prohibition on assignment without consent, but that comes later in Clause 3. Clause 3(16)(A) and (B) provides that the tenant will not do the following:

"(16)(A) not to assign underlet charge part with or share the possession of part only of the demised premises

(B) not to assign underlet part with or share possession or grant any licence in respect of the demised premises except as permitted pursuant to Clause 3(11)."

13

There was a minor dispute between the parties as to whether or not the cross-reference to Clause 3(11) was a correct cross-reference or not. Mr Greenhill submitted it was not; he said it was an obvious mistaken cross-reference to Clause 3(12). He relied on that in support of a point...

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    ...to TGC Pubs Limited (in administration) & Others v The Master and Wardens or Governors of the Art or Mystery of the Girdlers of London [2017] EWHC 772 (Ch), per Mann J at paragraphs 74-78. [8] So far as the balance of convenience was concerned, it was submitted that there was a strong prima......

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