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Issue 64 – July 2009

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Cases

Carter another v Cole another

Citation: [2009] All ER (D) 188 (May)
Alternative citations: [2009] EWCA Civ 410
Hearing date: 20 May 2009
Court: Court of Appeal, Civil Division
Judge: Laws, Jacob and Sullivan LJJ
Representation: Geraint Jones QC and Christopher Coney (instructed by TMJ Law) for the claimants. Gary Cowen (instructed by the Beavis Partnership) the defendants.
Abstract: Easement - Right of way. Court of Appeal, Civil Division: The judge had been right to conclude that there had been a derogation of a right of way and the exercise of his discretion in imposing a mandatory injunction could not be interfered with. However, the assessment of damages would be reduced from £35,831.05 to £20,000.

Keywords: Easement – Right of way – Derogation – Claimants bringing action against defendants alleging breach of right of way – Whether judge erring in uphold claim – Whether judge erring in assessment of damages.

Summary: The judgment is available at: [2009] EWCA Civ 410
The claimants owned land. They sold some of the land (53 acres) to the defendants. The defendants lived in a house on that land. The claimants retained the remainder of the land. It was approximately an acre and had a natural spring water well upon on it (the spring water land). There were some buildings on it, once used for packing apples but latterly for water bottling with associated offices. In 1996, the claimants leased the spring water land to W Ltd for a term of 20 years. The lease provided for a right of way over the land which was later sold to the defendants. The purpose of the right of way included access to the water bottling facility which W Ltd was starting. The access route was from the spring water land out to a main road. For that purpose it would be necessary that a right of way should include access by lorries. The water bottling operation needed planning permission.

The first relevant planning permission was temporary. It was granted on 30 April 1996 and permitted the use of the existing buildings on the spring water land for the bottling and packaging of spring water. The planning permission specified when certain activities and deliveries could take place. It also contained a condition as to the visibility splay at the junction with the main road. It was to be 2m x 120m either side of the junction with no obstruction above 600mm above the level of the adjoining carriageway within the splay. The reason was 'highway safety'. In May 1999, a further temporary permission was granted expiring on 30 April 2002. The same condition as to the requirement as to a visibility splay was imposed. In July 2002, a further temporary planning permission was granted.

That was to expire on 1 July 2005. There was no condition as to a visibility splay. In January 2004, the planning authority refused to make the temporary permission permanent. In August 2005, a further short temporary planning permission for the bottling plant was granted. It was for the purpose of enabling a winding down of the operation, which expired in February 2006. The defendants in about 2001 had started putting in fencing and the planting of shrubs on the land which formed part of what was the visibility splay.

The consequence was that the planning inspector in his decision of October 2004 concluded that 'on the basis of existing sight lines I consider use of this access is potentially dangerous'. He went on to say 'I understand that there is no scope to improve the sight line to a satisfactory standard as the [the claimants] has no control over the necessary land'. The claimant brought proceedings claiming that, by their works of fencing and the planting of shrubs so as to interfere with the visibility splay, the defendants had derogated from the grant of a right of way which they had given in 2000. The claimants claimed a mandatory injunction requiring the defendants to restore the splay and also claimed damages. The judge held that there had defendants had derogated from the grant of the right of way and imposed an injunction on the defendants requiring them to restore the visibility splay. He also awarded damages of £35,831.05. The defendants appealed.

The issues arose as to whether: (i) there had been a derogation from grant; (ii) the judge had been right to grant an injunction requiring the defendants to restore the visibility splay; and (iii) the judge had been right in his calculation of damages in the sum of £35,831.05. The defendants submitted that it was not the act of interference with the splay which had derogated from the grant of the right of way, but that it had been the insistence of the highway authority and the local planning authority that the claimants had not been in a position to exercise control over the splay which had been the real cause of the problem as regards access by lorries.

The appeal would be allowed in part.

In the circumstances of the case, the judge had been right to conclude that there had been a derogation of grant by the defendants and the defendants submissions could not be accepted. The judge had taken into account entirely proper reasons when existing his discretion in granting an injunction and his discretion could not be interfered with. However, on the evidence, the award of damages would be reduced to £20,000 (see [11]-[14], [17]-[18] and [27]-[28] of the judgment).
Marie-Therese Groarke, barrister
Published date: 21/05/2009
 

William Old International Ltd v Arya and another

Citation: [2009] All ER (D) 165 (Apr)
Alternative citations: [2009] EWHC 599 (Ch)
Hearing date: 20 April 2009
Court: Chancery Division, Manchester District Registry
Judge: Judge Pelling QC sitting as a judge of the High Court
Representation: Issac Jacob (instructed by Barrea & Co) for the claimant. Stephen Boyd (instructed by Needleman Treon) for the defendants.

Abstract: Derogation from grant – Doctrine. Chancery Division: The claimant landowner's claim that the third party electricity provider (EDF) was entitled to insist that the defendants' execute a deed of grant, giving EDF permission to run electricity cables over or under their land, was dismissed as the doctrine of non-derogation from grant was essentially negative in character and was limited in effect to restricting the grantor from acting in a manner that deprived the grantee of the benefit of the transaction. It was not open to the court to extend the scope of the doctrine so that it imposed a positive obligation.

Keywords: Derogation from grant – Doctrine – Scope of doctrine – Claimant purchasing land with benefit of easement securing free passage of utilities through cables lying on defendants' land – Electricity company refusing to connect electricity using cables unless defendants executing deed of grant in their favour – Defendants refusing to execute deed – Whether refusal amounting to derogation from grant – Whether scope of doctrine of non-derogation including obligation to take positive step.

Summary: The judgment is available at: [2009] EWHC 599 (Ch)
By a transfer dated 17 June 2005 (the transfer), a company (PFNL) transferred a plot of land it owned to the claimant company. The transfer contained an express grant by PFNL on behalf of itself and its successors in title, of an easement securing the free passage of various utilities, through pipes and cables that had been or were to be laid within a defined period, on an adjoining plot of land retained by PFNL. The land was sold to the claimant with the benefit of planning permission for the construction of an office. In January 2006, PFNL transferred the adjoining plot of land to the defendants. In August 2006, the claimant applied to the electricity supplier (EDF) for electricity connection. EDF sent, in response to the claimant, a plan showing the proposed cable route across the defendants' garden.

In October, the claimant sent EDF's plan to the defendants. In November, the defendants expressed concern to EDF that they had not been consulted about the proposed cabling and informed it that they would not allow any cables to laid across their land without their specific consent being obtained. The defendants requested specific details of EDF's intentions with regard to the supply and the cabling. In March 2007, the claimant entered upon the defendants' land and dug a trench, in an agreed position, across the land in which pipes and conduits for phone and electricity cables were laid. EDF was not obliged to provide a connection to the claimant's building if that required cables to be laid over or under land owned by a party other than EDF or the party seeking the connection.
However, it had power and was willing to do so if the defendants granted EDF a separate easement by a deed of grant (the deed).

EDF informed the claimant that the deed was required to be signed by the defendants if connection was to be made. The defendants refused to execute the deed and EDF, in those circumstances, would not run a cable or connect the claimant to its network. The claimant contended that the defendants were not entitled to refuse to sign the deed. The defendants contended that they were not under any obligation to execute it. The claimant brought proceedings against the defendants. It submitted that (i) it had been within the contemplation of the claimant and PFNL at the time when the land was sold to the claimant, that the claimant intended to construct an office building on the land.

Therefore, PFNL would have been under a positive obligation to enter into a deed in favour of EDF, in terms satisfactory to EDF, since to refuse to do so would be to derogate from PFNL's grant and that obligation was one that the defendants came under as successors in title to PFNL; and (ii) the defendants had derogated from the transfer of the land to the claimant by alerting EDF to the fact that the land, over or under which the cables were to run, was not owned by the claimant and/or by suggesting that there was a dispute between the claimant and the defendant. Without that information, it was submitted EDF would have made the electricity connection.

The issues were, inter alia, (i) whether the transfer required the defendants to execute the deed originally proffered by EDF or any other form of deed acceptable to EDF; and if the answer to that issue was no, (ii) whether, by their conduct, the defendants had derogated from grant and, in those circumstances, the positive step required, namely, the signing of the deed, was simply the result of the need to correct that derogation from grant.

The claim would be dismissed.

The doctrine of non-derogation from grant was essentially negative in character and it was limited in effect to restricting the grantor from acting in a manner that deprived the grantee of, or substantially all of, the benefit of the transaction. It was not open to the court to extend the scope of the doctrine so that it could be used to impose on a grantor an obligation to take positive steps, such as entering into contractual or proprietary relations with a third party on terms satisfactory to that third party (see [34], [35], [42] of the judgment).

EDF was not legally entitled to insist the defendants execute the deed of grant, as originally proffered by EDF, or any other form of deed.

Further, on a fair reading of the correspondence between the defendants and EDF, it did not constitute an outright refusal to permit access, it was a request for information with a refusal of access, pending the provision of relevant information that the defendants were entitled to ask for, and a refusal of consent pending the provision of that information. Accordingly, the behaviour of the defendants was not capable of constituting a derogation from grant (see [49], [53], [54] of the judgment).

Browne v Flower [1908-10] All ER Rep 545 applied; Chartered Trust plc v Davies [1997] 49 EG 135 considered.

Alison Blood, barrister
Published date: 20/05/2009
 

*National Insurance Corporation v Winmark Ltd

Citation: [2009] All ER (D) 240 (Apr)
Alternative citations: [2009] UKPC 16
Hearing date: 6 March 2009
Court: Privy Council
Judge: Lord Hoffmann, Lord Rodger of Earlsferry, Lord Carswell, Lord Brown of Eaton-under-Heywood and Lord Mance
Abstract: Company – Property. Privy Council: the National Insurance Corporation of St. Lucia's claim for payment of arrears of employees' contributions took priority over a bank's hypothec where, at the time that the bank had been granted its hypothec, section 74 of the National Insurance Corporation Act 2000, under which the liability to pay contributions was a 'privileged debt', was in force. Neither a privilege nor a hypothec displaced a debtor's ownership of his immovable property. The appeal was allowed.

Keywords: Company – Property – Civil code – Company property subject to hypothec – Company defaulting on obligations under loans with bank – Company in arrears with payments of national insurance contributions for employees – Whether National Insurance Corporation's claim taking priority over bank's rights under hypothec over company's property - Whether provision stating that national insurance contributions amounting to privileged debt contravening prohibition in constitution on compulsory taking of property –National Insurance Corporation Act 2000, section 74 - St Lucia Civil Code, articles  967, 1877, 1888, 1938, 1969.

Summary: The judgment is available at: [2009] UKPC 16
Section 74 of the National Insurance Corporation Act 2000 provides so far as material: '(1) Where (a) any execution has been levied against the property whether movable or immovable, of an employer, in respect of a judgment against him or her, and any such property has been seized or sold or otherwise realised in pursuance of such execution; or (b) on the application of a secured creditor, the property, whether moveable or immovable, of an employer has been sold, any sums due as contributions by such employer shall rank as a privileged debt pari passu with state taxes without the necessity for registration thereof.'

Winmark Ltd (the company) granted fixed and floating charges over its assets and undertaking to the Caribbean Banking Corporation Ltd (now RBTT Bank Caribbean Ltd (the bank)) to secure repayment of an advance of EC$12.7m and the interest due thereon. The fixed charges included a hypothec over land in St Lucia which was registered in the Land Registry. The company defaulted on its obligations under the loans and on 1 October 2004, the bank appointed a receiver. At that date the company was in arrears with its payments of contributions due under the National Insurance Corporation Act 2000 in respect of its employees. On 1 February 2005, the National Insurance Corporation (the corporation) commenced proceedings against the company to recover EC$505,564.19 arrears of contributions and a surcharge for late payment. A certificate issued by the comptroller was registered the same day.

The general principle in article 967 of the St. Lucia Civil Code was that all real rights took effect on registration. Article 1969 provided that certain specified privileges were 'exempt from the formality of registration'.
 
However, section 74 of the Act, which was in force at the date on which the bank had been granted its hypothec, stated that the privilege for contributions 'shall rank as a privileged debt', with the stated priority, without the necessity for registration thereof. On the latter basis, the master held that the corporation's claim took priority over the bank's hypothec. The Court of Appeal reversed his decision, having found that the effect of section 74 was to give the corporation rights over property in which the bank, by reason of its hypothec, had a beneficial interest, thereby contravening the prohibition in section 6 of the Constitution of St. Lucia on the compulsory taking of property. The corporation appealed to the Privy Council.

It fell to be determined whether: (i) the corporation's claim took priority over the bank's rights under its hypothec over the company's property; and (ii) whether the effect of section 74 of the Act contravened the prohibition in section 6 of the Constitution of St. Lucia on the compulsory taking of property.

The appeal would be allowed.

(1) Section 74 of the Act had to be interpreted in the light of the provisions of the St. Lucia Civil Code and the general principles of French law relating to security interests in land. When section 74 of the Act described the liability to pay contributions as a 'privileged debt', it was clearly creating a privilege within the meaning of article 1877 of the Code. It was settled law that certain individuals were preferred creditors and thus had legally protected privileges which entitled the individual to payment in preference to secured creditors such as the holders of hypothecs. Prima facie, the privileged debt took priority to the hypothec (see [4] - [7] of the judgment).

Polinere v Felicien [2000] 4 LRC 176 considered.

Principle: (2) It was clear from the Code that neither a privilege nor a hypothec displaced the debtor's ownership of his immovable property. A privilege was only 'a right which a creditor had of being preferred to other creditors' (article 1878), and, pursuant to article 1938, hypothecs did not divest the debtor of the hypothecated property. Both hypothecs and privileges were charges, namely real rights for the purpose of providing security over someone else's property (see [21] of the judgment).

In the instant case, at the time that the bank had been granted its hypothec, section 74 was in force. Accordingly, the corporation's claim took priority over the bank's hypothec. The bank never obtained any rights over the company's property which was not subject to the priority accorded by statute to any claims for contributions which might exist when the bank's security came to be enforced. It followed that section 74 did not deprive the bank of any property and section 6 of the Constitution had no application in the instant case (see [11], [23] of the judgment).
The judgment of the master would be restored (see [24] of the judgment).

Carla Dougan-Bacchus, barrister
Published date: 19/05/2009
 
Cygnet Healthcare Ltd v Greenswan Consultants Ltd and another

Citation: [2009] All ER (D) 126 (Jun)
Alternative citations: [2009] EWHC 1318 (Ch)
Hearing date: 11 June 2009
Court: Chancery Division
Judge: Proudman J
Representation: Adrian Davies (instructed by Osmond & Osmond) for the claimant. The defendants appeared by their representative.
Abstract: Land - Interest in land. Chancery Division: The claimant had been entitled to seek the costs of the construction of a distributor road from the first defendant after exercising its rights under a covenant requiring the first defendant to construct the road or authorise its construction.

Keywords: Land – Interest in land – Rights in respect of land – Covenant – Covenant requiring construction of distributor road by first defendant or authorised party – Claimant constructing distributor road after its requests to first defendant to comply with its covenant obligations unmet – Claimant seeking indemnity for costs of construction – Whether claimant entitled to recoup costs.

Summary: The judgment is available at: [2009] EWHC 1318 (Ch)
The parcels of land in issue had all originally comprised a larger holding owned by third parties. In December 2002, the second defendant company acquired a parcel of land (the C land) from the third parties. In 2004, the third parties contracted to sell the parcel to the north of the C land (the D land) to the first defendant company.
Both defendants were operated by R. In the transfer of the D Land, the first defendant entered into a covenant (the roadway covenant) that provided, inter alia: '[w]ithin one year of the date hereof: to construct an internal distributor road to the then current standard for adoption to include highway drainage over the [relevant] land  [...]  with two 1.8 metre wide footways between the existing distributor road  [...]  and the southern boundary of the [p]roperty the construction thereof to be monitored and approved by the Highway Authority and evidence of that approval to be produced to the [t]ransferor on completion of construction  [...] '
 
The covenant also contained the proviso that ' [...]  if the [t]ransferee does not carry out the several works  [...]  then at the [t]ransferor's absolute discretion the [t]ransferor may carry the same out and the [t]ransferee shall indemnify the [t]ransferor for the full cost thereof.' In May 2004, the second defendant exchanged contracts for the sale of the C land to the claimant. The claimant retained Q Ltd to commence construction of a mental health hospital on the site in February 2005. On acquiring the C land the claimant became obliged to lay the first 10 metres of the 100 metre construction of the distributor road. The claimant repeatedly requested the first defendant to take steps to construct the remainder of the distributor road in accordance with the covenant in the transfer of the D land. In February and March 2005, the claimant completed the 10 metre section of road. In light of its contractors stating that, without the completion of the distributor road, the construction of the hospital would be delayed, the claimant authorised its contractors to construct the remainder of the distributor road. The claimant then claimed, inter alia, the costs of the construction from the first defendant.

The first defendant argued, inter alia, that the claimant had denied it access to construct the road, that the road had not been built to an adoptable standard in accordance with the covenant. Further it counterclaimed that, in constructing the road, the claimant had trespassed on its land and sought damages against it.

The claims would be allowed.

The claimant had validly exercised its right to build the distributor road and claim the costs in order to avoid costly delays to itself. The claimant had given the first defendant every opportunity to proceed with construction of the road but it had failed to do so. Further, the third parties had been satisfied with the road as it had been constructed, and the first defendant had failed to show any good reason why the road had to be of a higher standard. The first defendant had also failed to discharge the burden of proving that the claimant had trespassed on its land (see [21], [25], [31] and [39] of the judgment).
 
Gareth Williams, barrister
Published date: 15/06/2009
 

Freeman v London Borough of Islington

Citation: [2009] All ER (D) 118 (Jun)
Alternative citations: [2009] EWCA Civ 536
Hearing date: 11 June 2009
Court: Court of Appeal, Civil Division
Judge: Waller, Longmore and Jacob LJJ
Representation: Christopher Baker (instructed by London Borough of Islington Legal Service) for the London Borough of Islington. Nicholas Isaac (instructed by Mary Ward Legal Centre) for the defendant.

Abstract: Housing – Local authority. Court of Appeal, Civil Division: The defendant's appeal against the decision of a judge in proceedings concerning possession of a local authority property was dismissed as it was held that the judge had not misdirected himself and his reasoning could not be faulted.

Keywords: Housing – Local authority – Possession – Defendant moving in with her father – Father having secure tenancy – Defendant's father dying – Defendant asking local authority to put flat in her name – Local authority seeking possession – Judge making possession order in favour of local authority - Housing Act 1985, section 87.

Summary: The judgment is available at: [2009] EWCA Civ 536

The defendant's father had lived in a flat in Islington that had been let to him under a secure tenancy. His health deteriorated and in 2004, and the defendant moved in with him in order to provide full time care, leaving her own flat unoccupied. The defendant's father died just over a year later, in June 2005. Following her father's death, the defendant wrote to the claimant local authority asking that the flat be put in her name. The local authority sought possession of the flat and issued proceedings. Section 87(b) of the Housing Act 1985 provided that she was qualified to succeed as a tenant under a secure tenancy, if she had occupied the flat as her principal home at the time of her father's death, and that she had resided with him throughout the period of twelve months prior to his death. The judge found that the defendant was physically living in the flat for seven days a week. He further held that the defendant was occupying the flat as her only home, but that she had not 'resided with' him throughout the previous year. He made a possession order in favour of the local authority. The defendant appealed.

She submitted that she had a right to a secure tenancy under the Act as she had 'resided with' her father throughout the period of twelve months ending with his death, and that the judge had misdirected himself, or alternatively, that he had reached a conclusion that was perverse.
 
The appeal would be dismissed.

The defendant had been right in perceiving that she needed to show either that the judge had misdirected himself, or, had reached a decision that was perverse. The question whether she had 'resided with' was one of fact and degree, and it would not have been sufficient merely to have invited the court to assess the facts and degree differently from the way it was done by the judge below. In all the circumstances, the judge had not misdirected himself or reached a conclusion that was perverse. He had correctly set out the precise statutory language when, having found the defendant was physically living in the flat for seven days a week, he had gone on to consider whether there was a 'residence with'. That approach had been correct and in accordance with the authorities. The matters referred to by the judge were entirely proper considerations, and his reasoning could not be faulted (see [30], [32]-[37] of the judgment).

Collier v Stoneman [1957] 1 WLR 1108 considered; Foreman v Beagley [1969] 1 WLR 1387 considered; Morgan v Murch 114 Sol Jo 265 considered; Peabody Donation Fund Governors v Grant 264 Estates Gazette 925 considered; Hampstead Way Investments Ltd v Lewis-Weare [1985] 1 All ER 564 considered; Swanbrae Ltd v Elliott [1987] 1 EGLR 99 considered; Crawley Borough Council v Sawyer 20 HLR 98 considered.
Benjamin Weaver, Barrister
 
Luminar Lava Ignite Ltd v MAMA Group plc and another

Citation: 2009 Scot (D) 8/6
Alternative citations: [2009] CSOH 68
Hearing date: 14 May 2009
Court: Outer House, Court of Session
Judge: Lord Glennie

Representation: Dean of Faculty and McBrearty (instructed by Harper Macleod) for the pursuers. Anderson QC (instructed by McGrigors) for the defenders.

Abstract: Contract - Sale of land. Court of Session: In an action in which the pursuers sought interdict preventing the defenders from operating a discotheque from premises on certain evenings, the court held that the pursuers had failed to make good their case that the proposed use would put the defenders in breach of an agreement in the contract for the sale of the property not to use it in direct competition on a like for like basis with the pursuers' discotheque business.

Keywords: Contract – Sale of land – Non-compete agreement – Defenders undertaking in contract for purchase of property not to use it in direct competition on like for like basis with discotheque business of pursuers – Defenders proposing to use property for discotheques on certain evenings – Pursuers seeking interdict preventing defenders from operating discotheque from property on evenings in question – Whether pursuers making good case that proposed use would put defenders in breach of non-compete agreement.

Summary: The pursuers, Luminar, were one of the Luminar group of associated companies. They were tenants of premises at West Tollcross, Edinburgh, from which they operated the discotheque business known as 'Lava Ignite'. It operated on Wednesday, Friday, Saturday and Sunday nights between 10 pm and 3 am, and had done so since at least 1 March 2008 and for some time before then. Another company in the group, LL Ltd, was formerly the owner of premises at Lothian Road, Edinburgh.

The Lothian Road and Tollcross properties were close to one another. On 5 March 2008 the first defenders, MAMA Group, entered into missives with LL Ltd for the purchase and sale of the Lothian Road property. The first and second defenders were associated companies, in the business of operating live music venues. They intended that the first defenders should purchase the property and that the second defenders, MFH Ltd, should operate it as a live music venue. The pursuers knew that. In terms of the missives, the first defenders were bound, on the date of entry, to deliver an undertaking in favour of the pursuers, referred to as the 'non-compete agreement'. On 17 and 27 March 2008 the pursuers and defenders entered into the agreement, in terms of which the defenders undertook, in clause 2.1, not to use the Lothian Road property 'for late night entertainment in direct competition on a like for like basis with the discotheque business of Luminar as carried on at [the Tollcross property] as at 1 March 2008'.

The agreement remained in force for five years.

The second defenders commenced business from the Lothian Road property under the name 'The Picture House'. They operated it primarily as a live music venue. However, they made it known that they intend to open the premises for club nights (or discotheques, the terms were used interchangeably in the evidence) on Friday evenings under the name 'Adventures in Stereo' and on Saturday evenings under the name 'Beat Control'. The pursuers contended that such use would be in breach of the non-compete agreement. In terms of the first conclusion in the action, they sought interdict of the defenders from using the Lothian Road property as a discotheque on Wednesday, Friday, Saturday and Sunday evenings between 10 pm and 3 am. In September 2008, interim interdict was granted in terms of the first conclusion. In January 2009, after the destruction by fire of the Liquid Rooms in Victoria Street, Edinburgh, the defenders applied to have the interim interdict restricted to allow them to host two club nights that had previously taken place at the Liquid Rooms. Those club nights were known as 'EVOL', which played at the Liquid Rooms every Friday night and had been established since 1991; and 'MADCHESTER', which took place on the last Saturday of every month and had operated for nearly 10 years.

The application to restrict the interdict in that way was granted, though neither EVOL nor MADCHESTER had in fact taken advantage of the restriction to put on a club night at The Picture House. The matter came before the court for the hearing of a proof before answer. The pursuers sought interdict preventing the defenders from operating a discotheque from the Lothian Road property on the evenings in question.

They did not seek to differentiate between different types or styles of discotheque. Their case was that any discotheque put on by the defenders at the Lothian Road property on Friday and Saturday nights would put them in breach of the non-compete agreement. The defenders disputed that. They said the agreement did not prevent them putting on any discotheque or club night, but only one which directly competed with the pursuers' business on a like for like basis. The type of club night they offered was of a different character to that offered by the pursuers and attracted a different clientele with different tastes: and it was not 'in direct competition on a like for like basis with the discotheque business of Luminar'.

The case turned ultimately on a question of construction, namely: did the non-compete agreement prohibit the defenders from operating any discotheque on the evenings in question, or was the prohibition less extensive than that? It was common ground that if, on its proper construction, the agreement prohibited the defenders from running any kind of discotheque at the Lothian Road premises at the times in question then the pursuers were entitled to interdict. Equally, it was common ground that if the agreement did not amount to a blanket prohibition, then the pursuers could not succeed in their action as framed.

The pursuers did not seek to argue that even if the agreement allowed the defenders to put on some types or styles of discotheque, those which they intended to put on were within the scope of the prohibition. There was detailed evidence as to the communications between the parties leading up to the sale of the Lothian Road property and the conclusion of the non-compete agreement, their respective intentions as to what they wanted to achieve and their understandings as to what was and was not going to be permitted under the agreement. It was accepted that most of that evidence, insofar as admissible (and it seemed to the court, in the main, to be inadmissible) was of marginal relevance.

There was also evidence from a variety of witnesses about different types of discotheque and the clientele they attracted or sought to attract. That involved evidence of the types of music played at different venues, the ambience that a club might try to create, and other features, such as drinks pricing policy and advertising. As part of that exercise, there was evidence from market research professionals engaged by each of the parties with a view to testing the extent to which the type of entertainment intended to be offered by the defenders at the Lothian Road premises differed from that offered by the pursuers at Lava Ignite at West Tollcross. The defenders also called expert evidence from F, a professor of music at Edinburgh University. In his affidavit and oral evidence, he emphasised his view that The Picture House and Lava Ignite would attract different clientele.

The court ruled:

The pursuers had failed to make good their case that the club nights proposed for Friday and Saturday nights at The Picture House would put the defenders in breach of the non-compete agreement.

It was convenient, before reviewing the evidence adduced by the parties, to consider the ordinary meaning of the words used in the non-compete agreement. That was where, in the ordinary case, the enquiry should start and would usually finish. In considering the rival positions, one point could be made at the outset. Had the parties intended that the defenders should be prevented from putting on any discotheque at the Lothian Road property at any particular time, they could easily have said so in terms. But they did not. Clause 2.1 did not contain an undertaking by the defenders not to use the Lothian Road property as a discotheque, or as a discotheque at certain times or on certain days. Indeed, the undertaking did not contain any reference to the nature of the defenders' business which was precluded, except that it must not be in direct competition on a like for like basis with Luminar's discotheque business.

That pointed clearly away from there being a blanket ban on the defenders putting on any kind of discotheque. It pointed to the restriction being narrower than that. Submissions were made around two specific aspects of the definition in the clause. The defenders' late night entertainment must not be in direct competition with Luminar's discotheque on a like for like basis. However, the argument about the meaning of a particular word or phrase in isolation risked taking particular words or phrases out of context. Of greater importance was to ask: direct competition on a like for like basis with what? The answer given by the clause was: with the discotheque business of Luminar carried on at Lava Ignite on the particular date.

That date was a date just prior to the date of the non-compete agreement. The clause suggested an appreciation by the parties that, as at that date, Luminar carried on a discotheque business at Lava Ignite of a particular kind or style and appealing to a certain group of potential customers; and it was direct competition with that on a like for like basis which the clause was designed to prevent. The reference to Luminar's discotheque business as carried on at that date did not seem to refer simply to the days and hours of opening as at that date, but rather to the type of discotheque that Luminar were offering then.

In summary, the clause did not seek to prevent the defenders putting on any discotheque on the days and at the times in question; it only sought to prevent them from putting on discotheques which competed on a like for like basis, by operating in a similar style and seeking to appeal to a similar group of potential customers. The court did not find in the words used by the parties any obvious ambiguity requiring evidence. In those circumstances, the main function of the evidence was to enable the court to cross-check on whether what appeared to it to be the clear interpretation of the agreement was in fact a plausible one. One could not take anything of relevance to the question of construction from the evidence about the pre-contract discussions between the parties.

Having considered the evidence about different types of music and discotheques generally, the court was satisfied that its construction of clause  2.1, in the context of the agreement read as a whole and against the background of what parties in that line of business might reasonably have understood at the time of entering into the agreement, made sense. Those involved in the music business, and in particular in the business of putting on club nights or discotheques, would understand there to be a distinction between different styles of club nights at different venues. On the evidence, there were such significant differences between The Picture House and Lava Ignite in terms of music, ambience and the clientele attracted or likely to be attracted, that it could properly be said that they did not compete on a like for like basis.
 
They sought to project a different image, reflected in the layout of the venues, the music played, the dress code (or lack of it), and the typical age of those attending. The court readily accepted the evidence from a number of witnesses that there might be a significant crossover in the customers who might go to different types of club. However, the fact that there might be a significant crossover in terms of the potential customer base simply showed that there might be competition for the leisure pound. The clause did not seek to prevent such competition.

The question was whether there was perceived to be a distinction between different types of club night or discotheque rather than which type The Picture House and Lava Ignite fell into. The market research and Professor F's evidence showed quite plainly that people did recognise a distinction. The court was satisfied, therefore, on the evidence that there was a sufficient distinction between different types of clubs and discotheques to give content to the construction of clause 2.1 at which it had earlier arrived. Because of the way in which the case was put in final submissions, the court had not had to make a finding as to whether the club nights proposed to be held on Fridays and Saturdays at The Picture House would be in direct competition 'on a like-for-like basis' with the discotheque held at Lava Ignite on Fridays and Saturdays. It was enough that some discotheques or club nights might so compete and others might not. However, if the court had had to make a decision on that point it would have found that the proposed club nights at The Picture House, if carried out in the manner indicated by the evidence, would not have competed on a like for like basis with Lava Ignite.

Prenn v Simmonds [1971] 3 All ER 237 considered.

Observed. Before the proof, affidavits were exchanged setting out the evidence of the proposed witnesses. Of consent, those affidavits were treated as the evidence in chief of each witness, subject to any elaboration and clarification in chief and to cross-examination. In the course of cross-examining the defenders' witnesses, counsel for the pursuers asked several them whether they had had sight of the affidavits lodged on behalf of the pursuers' witnesses, in effect their examination in chief. A number of them had seen those affidavits, or some of them. Counsel said that that raised a matter of practice upon which the court might wish to write. The court fully endorsed Lord Hardie's comment in Harrison's Executor v Student Loans Co Ltd that it 'has never been permissible in Scotland to brief or coach a witness with a view to his altering his evidence'. Nothing that it said should be taken as watering down Lord Hardie's remarks in the sort of case with which he was concerned.

However, the manner in which evidence was often led in a commercial proof raised somewhat different considerations. In a commercial proof it was generally (though not invariably) Lord Glennie's practice, and he believed that it was also generally the practice of the other commercial judges, to order the parties in advance of the proof to exchange and lodge in process witness statements or affidavits of the witnesses whom they intend to call to give evidence. In such cases, it was usually (though not invariably) ordered that the witness statements lodged in process should stand as the evidence in chief of each witness, subject to any necessary correction or amplification when they took the stand.

There was a considerable advantage in that practice. It could lead to a considerable saving in time at the proof; and it could encourage earlier settlement, by enabling parties to make a better assessment, in advance of the proof, of the relative strengths and weaknesses of their own and their opponents' case. Where a witness had already committed himself in writing to his primary evidence, whether by way of witness statement or affidavit, and that evidence had been lodged in court and made available to the other party, if he were to change his case he would be doing so in a transparent manner and, if asked, would have to explain why.

That was quite a different situation from one in which the alteration in the witness' evidence was not known to the opposite party or to the court and therefore could not be tested by cross-examination. In a case where witness statements or affidavits were to be used, it was helpful to the fair and efficient disposal of the case that witnesses who had already lodged statements should be shown those of the other witnesses who covered the same areas. Where that was done, supplementary statements were often produced, either narrowing the issues or showing the difference to be more acute. In the instant case, for a number of reasons, there was a piecemeal proffering of affidavits, which meant that some witnesses might have seen the other side's evidence before committing themselves to their version of events. That was undesirable, though there was no reason to think that there was any intent to depart from good practice or that it affected the evidence given.
Harrison's Executor v Student Loans Co Ltd [2005] CSOH 134, 2005 Scot (D) 11/10 considered.

Gordon McBain MA, Solicitor
Published date: 15/06/2009
 
*London District Properties Management Ltd and others v Goolamy and another

Citation: [2009] All ER (D) 164 (Jun)
Alternative citations: [2009] EWHC 1367 (Admin)
Hearing date: 16 June 2009
Court: Queen's Bench Division, Administrative Court (London)
Judge: Burnett J
Representation: Gabriel Buttimore (instructed by Healys) for the appellants. The respondents were not present and were not represented.

Abstract: Landlord and tenant – Rent. Queen's Bench Division, Administrative Court (London): The London Rent Assessment Review Panel were incorrect in finding that a rent review clause in an original assured shorthold tenancy, purporting to govern the position once it had been superseded by a statutory periodic tenancy, was effective.

Keywords: Landlord and tenant – Rent – Review – Basis of rent review – Tenants occupying property under assured shorthold tenancy – Tenants becoming statutory periodic tenants – Lease containing rent review clause – Rent increased beyond levels contemplated in rent review clause – Increase referred to assessment panel – Panel declining jurisdiction – Whether rent review clause incorporated into statutory periodic tenancy – Whether panel correct to decline jurisdiction – Housing Act 1988, section 13.

Summary: The judgment is available at: [2009] EWHC 1367 (Admin)

Section 13 of the Housing Act 1988, so far as material, provides: '(1) This section applies to (a) a statutory periodic tenancy other than one which, by virtue of paragraph 11 or paragraph 12 in Part I of Schedule 1 to this Act, cannot for the time being be an assured tenancy; and (b) any other periodic tenancy which is an assured tenancy, other than one in relation to which there is a provision, for the time being binding on the tenant, under which the rent for a particular period of the tenancy will or may be greater than the rent for an earlier period. (2) For the purpose of securing an increase in the rent under a tenancy to which this section applies, the landlord may serve on the tenant a notice in the prescribed form proposing a new rent to take effect at the beginning of a new period of the tenancy specified in the notice'.

The respondents lived at a property owned by the second and third appellant landlords and managed by the first appellant managing agent. In 2001, the respondents were granted an assured shorthold tenancy for a period of three years, with the rent being fixed for that time. The lease contained a rent review clause which purported to increase the rent by 5% every year. The rent was never raised by that percentage. Following the expiry of the terms of the lease, the respondents continued in occupation and became statutory periodic tenants. In 2008, the first appellant served a notice under section 13(2) of the Housing Act 1988 proposing an increase in rent, higher than 5%. The respondents referred the proposed increase to the London Rent Assessment Panel (the panel) for determination. The panel declined jurisdiction of the matter on the basis that the review was governed by section 13(1)(b) of the 1988 Act and that the terms of the lease were paramount. The appellant appealed under section 11(1) of the Tribunal and Enquiries Act 1992.

The appellant submitted that the review was governed by section 13(1)(a) of the 1988 Act with the result that any rent review clause in the original assured shorthold tenancy had not been incorporated into the subsequent statutory periodic tenancy.

The appeal would be allowed.

A rent review clause in an original assured shorthold tenancy, purporting to govern the position once it had been superseded by a statutory periodic tenancy, was of no effect (see [10] of the judgment).
Section 13 of the 1988 Act provided a statutory scheme governing the increase of rent under assured periodic tenancies. Section 13(1) drew a distinction between two different categories of assured periodic tenancy. Section 13(1)(a) was concerned with statutory periodic tenancies other than those which could not be an assured tenancy. Section 13(1)(b) was concerned with contractual assured shorthold tenancies. In respect of the latter category, the statutory scheme expressly did not apply where there was a contractual rent review clause binding on the tenant. The natural reading of section 13, given the contrast between the subsections, was that a rent review clause in the original assured tenancy did not oust the mechanism for increasing rent found in section 13 once that assured tenancy had been superseded by a statutory periodic tenancy (see [9] of the judgment).

Having found that the tenancy was a statutory periodic tenancy, the panel had fallen into error in considering that section 13(1)(b) was in play rather than section 13(1)(a) (see [11] of the judgment).

The case would be remitted to the panel to determine the rent.

Tara Psaila, barrister
Published date: 17/06/2009

Legislation

Housing (Replacement of Terminated Tenancies) (Successor Landlords) (England) Order 2009
LNB News 27/05/2009 35

Published date: 27 May 2009
Jurisdiction: England
Enactment citation: SI 2009/1262
Commencement date: 20 May 2009
Legislation affected: Housing and Regeneration Act 2008 amended
Enabling power: Housing and Regeneration Act 2008, schedule 11, paragraph 24
Abstract: SI 2009/1262: New tenancy can be created between a successor landlord and an ex-tenant
Summary: Applies to an occupant of a residential property who is subject to a possession order and whose landlord has changed since that order was made. If such an occupant ceased to be a tenant and instead became a "tolerated trespasser" under the original landlord, ensures that on the commencement date a new tenancy will arise.

Amends the Housing and Regeneration Act 2008 in relation to dwelling-houses in England only. Provides for Part 2 to apply, subject to specified modifications, to successor landlord cases. A successor landlord case is one where the ex-landlord's interest in the dwelling-house was transferred to another person after the original tenancy ended but before "the commencement date", and, on that date, belongs to the initial transferee or a subsequent transferee (the "successor landlord"). In the circumstances specified in Part 2, as modified, on 20 May 2009, a new tenancy is treated as arising between the successor landlord and the ex-tenant.
 
Transfer of Tribunal Functions (Lands Tribunal and Miscellaneous Amendments) Order 2009
LNB News 01/06/2009 5

Published date: 1 June 2009
Jurisdiction: England; Scotland; Northern Ireland; Wales
Enactment citation: SI 2009/1307
Commencement date: 1 June 2009
Enabling power: Tribunals, Courts and Enforcement Act 2007, sections 30(1), (4), 31(1), (2), (7), (9), 38, 51(1), 145
Abstract: SI 2009/1307: A patient under the Mental Health Act who withdraws their appeal to the First-tier Tribunal can remake that appeal from 1 June 2009.

Summary: Transfers the functions of the Lands Tribunal to the Upper Tribunal and abolishes the Lands Tribunal. Provides for members of the Lands Tribunal to hold the offices of transferred-in judge or transferred-in other member of the Upper Tribunal.

Provides that the current procedural rules for the Lands Tribunal, the Lands Tribunal Rules 1996, become Tribunal Procedure Rules.

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