Home Information Cases (1) Ropemaker Properties Ltd (2) Churchmanor Estates Co Plc v (1) Bella Italia Restaurants Ltd (2) Casual Dining Ltd (2018)

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(1) Ropemaker Properties Ltd (2) Churchmanor Estates Co Plc v (1) Bella Italia Restaurants Ltd (2) Casual Dining Ltd (2018)

Summary

An agreement for lease relating to a retail unit had not been validly terminated by the tenant. As the conditions to which the agreement was subject had been satisfied, the tenant was bound by the agreement.

Facts

The court had to decide whether an agreement for lease (the agreement) made between the predecessors of the claimants and the defendants as tenant and guarantor had been validly terminated by the tenant or whether the agreement was unconditional and bound the defendants.

The agreement related to a new development, the first phase of which was to include two retail units. One unit was the subject of the agreement and the other was the subject of a similar agreement made with another tenant. Both agreements were subject to conditions precedent to the obligations to build and then to grant and take the leases. The conditions precedent were the occurrence of three unconditional dates. One such date was "the date upon which the Landlord or Developer serves notice ... that the Neighbouring Unit Condition has been satisfied". Once all three dates had arrived, the agreement would become unconditional. Clause 13.2 of the agreement provided that the Neighbouring Unit Condition was "the satisfaction of all of the Neighbouring Unit Conditions Precedent and the Developer or the Landlord giving written notice to that effect to the Tenant". The "Neighbouring Unit Conditions Precedent" were defined as "the conditions precedent to which the letting of the Neighbouring Unit [was] subject". Clause 13.3 provided as follows: "The Landlord or the Developer shall give the written notice to the Tenant referred to in clause 13.2 as soon as reasonably practicable after the satisfaction of the last of the Neighbouring Unit Conditions Precedent". Clause 13.4 provided as follows: "The Landlord and/or the Developer may waive the Neighbouring Unit Condition in its absolute discretion at any time before a notice is served under clause 15.3". Clause 14.2 provided that if any of the unconditional dates had not occurred by the "Agreement Long Stop Date", being 11 November 2016, the landlord or the tenant could at any time thereafter "give written notice to the other and the Guarantor" to determine the agreement. On 30 August 2016, the landlord gave written notice to the tenant's solicitors of satisfaction of the Neighbouring Unit Condition. On 16 May 2017, the tenant sent written notice to the landlord to terminate the agreement pursuant to cl.14.2. That was given on the basis that the Agreement Long Stop Date had passed and the Neighbouring Unit Condition had not been satisfied. On 1 August 2017, the landlord served a further notice on the tenant to the effect that it had waived the Neighbouring Unit Condition under cl.13.4 and that therefore all of the Neighbouring Unit Conditions Precedent had been satisfied.

Held

The outcome of the case depended on the validity of the three notices which had been given. The landlord and the developer had accepted that the notice of 30 August 2016 was invalid because it was not given in writing to the tenant itself, in compliance with the notice requirements of the agreement. However, the tenant's notice of 16 May 2017 was also invalid. It had been given to the landlord but not to the guarantor. Even though the tenant and the guarantor were sister companies, the tenant had to comply with the provisions in the agreement concerning the service of written notices. It had failed to do so in relation to the guarantor. Its submission that sufficient notice of intention to terminate the agreement had been given in writing to the guarantor by means of board minutes of the parties' parent company could not be accepted; it made no difference that the relevant requirements had been substantially complied with or had no apparent purpose or benefit. On the other hand, the landlord's notice of 1 August 2017 was valid. The reference in cl.13.4 to "clause 15.3" was a mistake. That reference was to be understood as a reference to a notice under cl.13.3. Moreover, it was to be understood as a reference to a valid notice that had effect under cl.13.3. Accordingly, the landlord retained its right to waive the Neighbouring Unit Condition, before termination of the agreement, irrespective of the invalid notice which it had given under cl.13.3 on 30 August 2016. There was no challenge to the formal validity of the notice of 1 August 2017, stating that the landlord had waived the Neighbouring Unit Condition and that as a result the Neighbouring Unit Condition had been satisfied and the unconditional date had occurred. The effect was that the agreement became unconditional on 1 August 2017 at the latest, when all the unconditional dates had occurred. The tenant and the guarantor were therefore bound by the agreement (see paras 6, 15-16, 26-27, 34, 44-45 of judgment).

Judgment for claimants

Chancery Division
Fancourt J
Judgment date
2 May 2018
References
[2018] EWHC 1002 (Ch)

Practice areas