Truegold International Ltd v Questrock Ltd and Another
| Jurisdiction | England & Wales |
| Judge | MR JEREMY COUSINS QC |
| Judgment Date | 11 March 2010 |
| Neutral Citation | [2010] EWHC 966 (Ch) |
| Docket Number | Claim No: TLC/848/09 |
| Court | Chancery Division |
| Date | 11 March 2010 |
[2010] EWHC 966 (Ch)
IN THE HIGH COURTS OF JUSTICE
CHANCERY DIVISION
Before: Mr Jeremy Cousins Qc Sitting as a Deputy Judge of the Chancery Division
Claim No: TLC/848/09
MR R BARTLETT (Instructed by Kenneth Elliott & Rowe) appeared on behalf of the Claimant
MR J O'MAHONY (Instructed by Lucas McMullen Jacobs) appeared on behalf of the First Defendant
MISS A HORMAECHE (Instructed by Gepp & Son) appeared on behalf of the Second Defendant
Approved Judgment
Digital Transcript of Wordwave International, a Merrill Corporation Company 101 Finsbury Pavement London EC2A 1ER Tel No: 020 7422 6131 Fax No: 020 7422 6134 Web: www.merrillcorp. com/mls Email: mlstape@merrillcorp. com (Official Shorthand Writers to the Court)
Background
I am now giving judgment in respect of this case, which was argued yesterday. This case is concerned with whether an option to purchase the freehold property known now as Zingarola Restaurant, together with adjacent land at Clatterford End, Fyfield, Essex, to which I shall refer as “the Property,” has validly been exercised. The property is registered at HM Land Registry under title numbers EX357001 and EX248544. The Option agreement was made on 30 th June 2000, between Truegold International Limited, (“Truegold”) and Gypsy Restaurant Limited (to which I shall refer as “GRL”). Depending upon the decision as to the validity of the exercise of the option, questions arise concerning the implications for the lease created by Truegold in favour of Miss Mobota Begum, who is the Second Defendant.
The Claimant was the owner of the property from about 1994 and in 1999 began negotiation with GRL with a view to the grant of a lease of the restaurant premises. The premises were then known as Gypsy Mead Restaurant. I should also mention that the property is more extensive in terms of land area than that which simply consists of the restaurant, which was ultimately the subject of a grant of a lease to GRL.
On 30 th June 2000, the Claimant granted a lease for a five year term to GRL, but from 1 st November 1999 and on the same day, entered into an Option agreement whereby the Claimant granted to GRL an option to purchase the freehold of the property, exercisable prior to 31 st October 2004. On 13 th July 2000, the option was registered against the title to both parcels of land. However, subsequently the restaurant did not flourish and on 6 th October 2000, GRL assigned the benefit of the option agreement to Questrock Limited, the First Defendant, in consideration of a payment of £5,000. Materially, for the issues which I have to decide, GRL did not also assign the lease granted to it in June 2000 (to which I shall refer as “the June lease”). On about 12 th October 2000, the precise date is not certain, GRL surrendered the June lease to the Claimant. Shortly thereafter on 30 th November 2000, the Claimant granted a new lease of the restaurant premises (to which I shall refer as “the November lease”) to the Second Defendant and to Nasira Akhtar for a 20 year term. That lease was subsequently assigned to the Second Defendant alone in February 2001. This leasehold interest was registered at HM Land Registry on 11 th April 2006, but the previous non-registration of the lease and indeed its later registration, has no bearing on the issues which I have to decide.
In July 2003, the restaurant was extensively damaged by fire and it has not been reinstated and has remained closed in the intervening years. The Claimant served a notice purporting to determine the lease in March 2006, on the basis that without fault on its part, it had not been possible to reinstate the premises within a two year period. The validity of that notice is disputed on the part of the Second Defendant, who alleges in any event a continuing tenancy, having regard to the provisions of Part II of the Landlord and Tenant Act 1954. That dispute as to the validity of the notice served by the Claimant and the continuation of the tenancy under the 1954 Act is the subject of separate proceedings in the Chancery Division, and it is neither necessary nor appropriate for me to comment on those matters which that litigation raises. I have been invited to decide the issues before me on the assumption that the November lease still subsists.
In August 2004, solicitors acting for the First Defendant, Messrs Lucas, McMullen Jacobs (to whom I shall refer as “LMJ”), by letter indicated that the First Defendant wished to exercise the option. The letter was sent to Messrs Mackrell Turner Garrett, solicitors then acting for the Claimant (I shall refer to that firm as “MTG”). The solicitors who had originally acted for the Clamant in the grant of the option and in respect of the first lease, the June lease, were David A Barley, but they had ceased to act for the Claimant some time before. During October 2004, LMJ corresponded with MTG as to the intended giving of a notice to exercise the option. I shall deal with this correspondence and the steps taken to exercise the option more fully when I consider below the particular issues which I must determine.
By 21 st October 2004, LMJ had not established to their satisfaction that MTG were authorised to accept service of an option notice and took steps to serve the same directly on the Claimant at its offices in the British Virgin Islands (“the BVI”). The Claimant and the First Defendant say that service at those offices was effective; however, subsequent developments caused LMJ to take additional steps with a view to serving a similar option notice on MTG. In the alternative to its case as to valid service in the BVI, the Claimant maintains that the notice required was validly served on MTG. The First Defendant supports that alternative contention.
The Second Defendant's case is that an option notice was not effectively or validly served upon the Claimant, whether in the BVI or upon solicitors MTG. In essence what is said is that the First Defendant was never entitled to serve an option notice on the true construction of the Option agreement and further, that attempts to serve in both the BVI and upon MTG were defective. Further, there is a dispute as to the effect in law of the alleged exercise of the option at a time subsequent to the grant of the lease by Truegold, the Claimant, to the Second Defendant.
The issues
The issues which I have to determine are, therefore, first, whether the First Defendant was entitled to exercise the option in October 2004 (“the entitlement issue”). Secondly, whether a valid notice exercising the option was served prior to 31 st October 2004 (“the validity issue”). Thirdly, whether assuming that the option was validly exercised, the First Defendant's rights acquired pursuant to such exercise take priority over those of the Second Defendant “the priority issue”).
The Entitlement Issue
The option agreement recorded that it was made between Truegold, the Claimant, whose registered BVI office was identified, as vendor and GRL as purchaser. It identified the property and the option date. The purchase price was stipulated to be a sum calculated in accordance with the valuation provisions in the Third Schedule. The following provisions of the option agreement are of particular relevance:
“1.10 'the Vendor's Solicitor' [was defined to] mean David A Barley of 25 Bell Street, Sawbridgeworth, Hertfordshire, CM21 9AS or such other solicitors as the Vendor may appoint from time to time and so notify the Purchaser's Solicitors.
1.11 'the Purchaser's Solicitors' [were defined to] mean Foskett Marr Gadsby & Head of 181 High Street, Epping, Essex, CM16 4BQ or such other solicitors as the Purchaser may appoint from time to time and so notify the Vendor's Solicitors.
1.12 'the Lease' [was defined to] mean a Lease bearing the same date as this Agreement of a part of the Property and made between the Vendor (1) and Purchaser (2).”
I interpose at this point to note that the reference to the lease there was, of course,
a reference to the June Lease, as I have described it.
“1.17: The expression 'the Vendor' and 'the Purchaser' includes their respective successors in title and assigns.
2. Agreement
IN CONSIDERATION of the sum of TEN POUNDS (£10.00) paid by the Purchaser to the Vendor (receipt of which the Vendor acknowledges) the Purchaser shall have the option of purchasing the Property for an estate in fee simple in possession subject to and with the benefit of those matters as mentioned in the Second Schedule at the Purchase Price.
3. Exercise of the Option
The Option shall be exercisable by notice in writing from the Purchasers of the Vendor at any time prior to the Option Date and if the same shall be exercised the Vendor shall sell the Property to the Purchaser for the said estate for the Purchase Price.
4.1 The date for completion of the sale pursuant to the exercise of the Option shall unless otherwise agreed in writing be the first Working Day after the expiration of 20 Working Days from the later of:
4.1.1 the Option Date, or
4.1.2 the date that the Purchase Price is agreed between the Vendor and the Purchaser or a Notice of Determination is issued by the independent surveyor in accordance with the provisions of the Third Schedule.
4.2 The Purchaser may withdraw the Option Notice at any time prior to either reaching agreement as to the Purchase Price with the Vendor or within 20 Working Days of the date of the Notice of Determination in which event it shall be deemed that the Option Notice had not been served and the deposit (together with accrued interest) shall forthwith be refunded to the Purchaser.
5. Deposit
A deposit of TEN THOUSAND POIUNDS (£10,000.00) shall be paid to the Vendor on the service of the Option Notice such...
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