Business tenancies - Dilapidation - Fixtures - Repairing covenants
Held: The tenant appealed against a decision made during a claim for breach of repairing covenants brought against it by the respondent landlord. The lease provided that the tenant was to repair or replace the landlord's fixtures and fittings as necessary. It also provided that the tenant could make any internal non-structural alterations to the building without the landlord's consent. During major refurbishment works, the tenant informed the landlord that it would replace the tiled carpets with a strip carpet system. The landlord did not object. After termination of the lease, the landlord claimed that the re-carpeting had not been in compliance with the repairing covenant.
The judge held that the tiled carpets had been landlord's fixtures and that the tenant was liable in respect of them. The Court of Appeal reversed. The Court of Appeal agreed that the judge had been correct in describing the tiled carpets as landlord's fixtures and fittings, regardless of the fact that they were re-laid at the tenant's cost at the start of the term. However, it did not matter whether the tiles were fixtures or fittings. On the true construction of the tenant's unqualified right to make alterations, that right extended to the tiled carpets whether they were landlord's fixtures or landlord's fittings. The lease contained a heavily qualified right for the tenant to make structural or external alterations to the building, but also an entirely unqualified right to make internal non-structural alterations. It would be a commercial nonsense for the relevant clause to permit alteration by replacement of landlord's fixtures, but make no provision for alteration or replacement of landlord's chattels provided within the building for the tenant's use under the lease. The only sensible interpretation was that it provided a right to the tenant to make alterations affecting any of the landlord's property within, or forming part of the building, save for the structure and exterior. Accordingly, the replacement of the tiled carpets with the strip carpet constituted a permitted alteration.
Break clauses - Notice - Service - Surrender
Held: A tenant served break notices by recorded delivery on each of the landlords named in its lease at the business address given therein. Only one named landlord had retained any connection with that address. The landlords claimed for declarations that the defendant tenant's notices purporting to exercise a break clause had not been validly served and that consequently the leases to the tenant subsisted. The Court held that it was within the landlords' power to inform the tenant of a change of address and, if they failed to do so, they bore the risk of documents not reaching them. The claim was dismissed and the tenant entitled to a declaration that the leases had been terminated at the break point.
Transfer of land - Mistake - Rescission - Tracing
Held: The claimants were father and son and had farmed land together in partnership. They were concerned about possible claims to the partnership land from other members of the family. They claimed that their solicitors had advised them to create a discretionary trust and that that there would be no capital gains tax chargeable on the transfer of the land into that trust. The trust was created, however capital gains tax was chargeable on the transfers. The claimants sought to set aside on the ground of mistake the transfer of part of the land. The Court granted the declaration sought. It further held that following a rescission of a transfer of property on the ground of causative and basic unilateral mistake, the property transferred would revest beneficially in the transferor, subject to third party rights. In a case where third party rights could not be disturbed, there was no reason not to apply the tracing process to exchange products of the transferred property in order to find other assets to which to make a claim instead.
Conveyancing - Professional negligence - Trustee Act 1925 s.61 - Solicitors - Conveyancer
Held: The claimant purported to purchase a property, but the vendor was a fraudster and not the registered proprietor of the property. By the time the fraud was discovered, the whole of the purchase price had been paid to the conveyancer retained by the claimant to act on his purchase of the property, who had paid it to the solicitors who acted for the fraudster. The solicitors had transferred the money to an account in Dubai. None of the money was recovered. It was common ground that the monies paid away by the conveyancer and the solicitors were payments made in breach of trust. Evidence was heard that the fraudster had supplied the solicitors with utility bills showing him living at a different address, a forged passport and Land Registry showed a different address for the registered proprietor. No enquiries were made by the solicitors. In answer to enquiries, the solicitors had informed the conveyancer that they had no documents relating to the property from the fraudster. No issue had been raised by the conveyancer.
The claimant sought damages against both the solicitor and the conveyancer. Both sought relief from their liability under the Trustee Act 1925 s.61. The Court gave judgment in favour of the claimant. The solicitor should have made further enquiries. A reasonable solicitor carrying out due diligence and adopting a risk-based approach ought to have clearly considered whether the fraudster was the owner of the property in order to assess whether the transaction was lawful. The vendor's solicitor was as a trustee of the purchase money while it was in his possession pending completion as was the purchaser's solicitor. There was an absolute obligation not to release the money before completion. There was no obvious justification for interpreting s.61 more leniently against a vendor’s solicitors than for a purchaser's solicitor. The same standard of reasonableness applied to both. The solicitors had failed to discharge the burden to establish that they had acted reasonably, and were not entitled to the benefit of s.61.The conveyancer had also been in breach of contract and/or duty to the claimant in failing to inform him that the enquiries had not verified a link between the fraudster and the property. The claim for damages for breach of contract and negligence succeeded.