Channel Hotels and Properties (U.K.) Ltd v Tamimi

This is an appeal by Channel Hotels and Properties (U.K.) Ltd. (“CHAPS”) from the order made by Lightman J. on 14 November 2003. The judge had two actions before him, both relating to a lease (“the Lease”) dated 4 November 1996 for a term of 1005 years commencing on 25 December 1995 of the roof space (“the Roof Space”) at Albert Court, Prince Consort Road, London, SW7 (“the Property”) granted by the freehold owner, Britel Corporation NV (“Britel”), to ACP Ltd. (“ACP”). ACP charged the Lease to First Penthouse Ltd. (“FP”), the Claimant in the first action and the Second Defendant in the second action. Britel transferred the freehold to a company now called Albert Court (Westminster) Freehold Co. Ltd. (“Albert Court”) which on 17 May 2000 granted CHAPS an overriding lease in reversion on the Lease for a term of 1005 years plus one day (“the Overriding Lease”). CHAPS is the Defendant in the first action and the Claimant in the second action. FP as chargee sold the Lease to Fahad Al Tamimi (“Mr. Tamimi”), the First Defendant in the second action. In that action there are four Defendants other than Mr. Tamimi and FP. They are underlessees of parts of the Roof Space but did not appear and were not represented at the hearing before the judge.

FP commenced the first action on 22 November 2002 after it applied to CHAPS for a licence to assign the Lease to Mr. Tamimi and after CHAPS refused consent. FP assigned the Lease to Mr. Tamimi on the footing that it was free to do so because CHAPS had unreasonably withheld consent. The issue for the judge in that action was whether FP was entitled to a declaration to that effect.

CHAPS commenced the second action on 16 July 2003, claiming that at that date the Lease was liable to forfeiture for breaches of a covenant against assignment without consent and of a covenant to carry out and complete the development of the Roof Space as expeditiously as possible. Mr. Tamimi and FP denied the claim, alleging that there had been an unreasonable withholding of consent to the assignment to Mr. Tamimi and a waiver of the right to forfeit the Lease.

On 12 September 2003 Hart J. directed the trial of preliminary issues to determine whether there was an unreasonable withholding of consent to the assignment, whether the right to forfeit arose as claimed and, if so, whether that right was waived. Other issues such as whether, if the right to forfeit arose, relief from forfeiture should be granted, were left until after the determination of the preliminary issues.

Lightman J. determined the preliminary issues. In his reserved judgment he considered first the question of waiver. Mr. Tamimi and FP conceded for the purpose of the proceedings before the judge that ACP was in breach of the covenant to carry out and complete the development of the Roof Space as expeditiously as possible. The judge said that the critical issue for that question was whether the breach of covenant was a once-and-for-all breach or a continuing breach of covenant. He held that the breach was not a continuing breach and that CHAPS had irrevocably waived the breach and the right to forfeit for that breach.

The judge then considered whether CHAPS had unreasonably refused its consent to the assignment. He held that CHAPS as landlord could have no reasonable ground for objecting to the assignment and that the refusal of consent was unreasonable.

Accordingly the judge granted the declaration sought by FP in the first action and dismissed the second action. He refused permission to appeal to this court, but such permission was granted by Jacob L.J.

On this appeal we have had the benefit of admirable arguments from Mr. Paul Morgan Q.C., appearing for CHAPS in this court although he did not appear before the judge, and from Mr. Timothy Dutton, appearing here as he did below for FP. Mr. Michael Pryor for Mr. Tamimi has provided helpful written submissions but at the appeal hearing confined himself to adopting Mr. Dutton’s oral submissions.

On this question the sole issue for this court is whether a breach of the covenant to carry out and complete the development of the Roof Space as expeditiously as possible is a once-and-for-all breach or whether the obligation is a continuing one which is broken each day the tenant is in breach. I have already noted the concession before the judge and maintained in this court that ACP was in breach of that covenant at the time the breach was waived. If the obligation is a continuing one, then CHAPS can rely on the continuing breaches after the waiver.

The covenant obliged the lessee “to carry out and complete the Works as expeditiously as possible”. The term “the Works” was defined in recital D to the Lease as works comprising either one large penthouse or five penthouses or such other number as the lessee might reasonably nominate, provided that planning permission for the same was granted, and was first approved by the lessor.

On 16 August 2002 CHAPS served on FP and Mr. Tamimi a notice under s. 146 Law of Property Act 1925 alleging breach of that covenant. On 10 September 2002 Britel and CHAPS together with another company, NUBBH Ltd. (“NUBBH”), to whose role in this case I will come later, purported to exercise a right under the Lease, thereby affirming the Lease and so waiving any breach. Further on 31 March 2003 at the request of FP the company secretary of CHAPS, who is a typist, signed a receipt for £7 for 7 years’ rent due from ACP to the lessor, and that too was claimed to amount to a waiver.

Mr. Morgan submits that the obligation under the covenant was a continuing one, such that the lessee could at different times be in breach and then at other times comply with the obligation. He says that the position is as described in Chitty on Contracts, 29^th ed. (2004) para. 28-035:

“If the breach consists in a failure to act, it may be held to continue die in diem until the obligation is performed or becomes impossible of performance or until the innocent party elects to treat the continued non-performance as a repudiation of the contract.”

He points out that the judge does no more than state his conclusion (in para. 30 of the judgment):

“In my judgment however the breach of covenant is not a continuing breach: there was a once and for all obligation to "carry out and complete" the Project with the required expedition. The time for completion expired in 2001 and the right of re-entry arose on that date.”

I take the reference to the expiration of the time for completion in 2001 to be based on CHAPS’s pleaded case that, had ACP complied with its obligation to complete the Works as expeditiously as possible, they would have been completed by April 2001 (see. para. 12 of CHAPS’s Particulars of Claim in the second action).

Mr. Morgan sought assistance from the example given, in a different context, by Oliver J. in Midland Bank Trust Co. Ltd. v Hett, Stubbs & Kemp [1979] Ch. 384 at pp. 434,5 of the carpenter employed to supply and put up a good quality oak shelf. There that judge said:

“If he fixes the brackets but fails to supply the shelf or if he supplies and fixes a shelf of unseasoned pine, my complaint against him is not that he has failed to exercise reasonable care and skill in carrying out the work but that he has failed to supply what was contracted for. He may fix the brackets and then go away for six months, but unless and until I accept that conduct as a repudiation, his obligation to complete the work remains.”

So here, Mr. Morgan argued, the obligation on the lessee to carry out and complete the Works remains in the absence of acceptance by the landlord of the lessee’s conduct as repudiatory.

Mr. Morgan pointed out that if, as the judge held, the breach of the covenant was a once-and-for-all breach committed in 2001, Mr. Tamimi as assignee would not be under any obligation in respect of the Works, and yet the judge, in para 34 of his judgment, referred to the fact that the assignment to Mr. Tamimi “would secure performance of the obligation to complete the Project”.

Mr. Morgan also took an additional point on the definition of “the Works”. In November 2001 ACP applied for, and on 7 November 2002 obtained, planning permission for a sixth penthouse, but did not take any steps to construct it during the period before the commencement of the second action. He says that this breach of contract, occurring after the waiver on 10 September 2002, entitled CHAPS to forfeit the Lease in respect of that breach.

Attractively though those submissions were advanced, I am not able to accept them essentially for the reasons given by Mr. Dutton in his arguments before us. The question is one of construction of the particular language of the Lease. It is not in dispute that it is appropriate to read the obligations in the Lease in the context of the Preliminary Agreement pursuant to cl. 5 of which the Lease was granted. In particular cl. 12 of the Preliminary Agreement, imposing time constraints, is relevant. This provided for ACP to commence the development of the penthouses within 15 months of 7 March 1996, and that consequent upon the commencement of the development ACP should use all reasonable endeavours to progress such development in accordance with a specific time scale. That time scale included the conclusion of all works by no later than 7 September 2000, but subject to variations including the extension of time as a result of any delays arising due to circumstances beyond ACP’s control or in exercise of a discretion granted to Britel. The obligation to complete the works by the specified time was plainly a once-and-for-all obligation and it would be surprising if the Lease imposed an inconsistent obligation in the absence of some explanation (and there has been none) for the change.

I derive some assistance from the approach of the courts in other cases. It is well-established and not in dispute that a repairing covenant is one which imposes a continuing obligation. It is also clear from the decision of this court in Farimani v Gates [1984] 2 EGLR 66 that if the covenant is one to do something by a particular date, including a covenant to repair by such a date, that is a covenant which can be broken only once, and that the same applies to a covenant to do something within a reasonable time.

In my judgment the relevant obligation in the Lease is closer to that considered in Farimani than a covenant to repair throughout the term of a lease. In the present case it is possible to point to a time by which the Works, if carried out and completed as expeditiously as possible, should have been completed. I have already referred to CHAPS’s acceptance of this in its pleading.

I am not able to obtain much assistance from Oliver J.’s example of a carpenter, whose contract, as Mr. Dutton pointed out, would have been subject to an implied term that the work should be completed within a reasonable time, and so, on the basis of Farimani, it would not have been a continuing obligation.

The judge’s words in para. 34 of the judgment do not betray any inconsistency with his conclusion that the breach was a once-and-for-all breach committed prior to any waiver. The judge was explaining why CHAPS’s ground for refusing consent based on breach of the covenant to carry out and complete the Works expeditiously was bad. That was because CHAPS knew that neither ACP nor FP had the means to complete the Works whereas Mr. Tamimi had ample funds and the will to complete the development. It was in that context that the judge made the comment that the assignment would secure performance of the obligation to complete the development. As he said in the same paragraph:

“It is clear that the existence of the breach of covenant was not of itself a ground …. for refusing consent, for the proposed assignment secured the effective remedy of the breach.”

The further point taken by Mr. Morgan on a further breach relating to the sixth penthouse once planning permission had been obtained on 7 November 2002 does not avail CHAPS. If the covenant was one providing for a once-and-for-all breach, that on CHAPS’s own pleaded case admitted for the purposes of trial had already occurred and it is not open to CHAPS now to argue for a breach occurring later.

For these reasons I conclude that the appeal on this first point must be rejected. In the light of this conclusion it is unnecessary to deal with a further point raised by Mr. Dutton by a Respondent’s Notice as to the need for a fresh notice under s. 146, if the obligation to complete the Works was a continuing obligation.

The background to this issue is complex, but I must attempt to summarise the relevant events.

The Preliminary Agreement was a combination of a development agreement and an agreement for a lease to enable the development to be carried out by ACP. ACP was given the right to call for the Lease at a nominal premium of £1 and a nominal ground rent of £1 per annum. ACP was permitted to grant sub-leases of the penthouses which it was to build for a period of not less than 150 years. By cl. 9 it was to pay Britel 22.5% of the aggregate net proceeds of sale of the penthouses up to a maximum of £5.4 million. It was prohibited by cl. 5.2 from charging the Lease other than to a commercial lender from whom it could borrow up to £1.5 million. By cl. 14 it was prohibited from assigning the Lease prior to practical completion and thereafter without the prior consent in writing of Britel, such consent not to be unreasonably withheld.

By cl. 9.5 of the Preliminary Agreement Britel had the right to require a second charge to be executed in respect of the lease (ranking behind any mortgage up to £1.5 million to a commercial lender pursuant to cl. 5.2) as security for the payments to be made to Britel out of the net proceeds of sale of the penthouses. On completion of the disposal of each penthouse Britel also had the right to serve notice on ACP requiring that ACP’s lease in respect of that penthouse be surrendered to Britel so that Britel should become the direct lessor of the underlessee to whom ACP had underlet that penthouse.

Cl. 12.4 provided (so far as material): “…. in the event of ACP being in breach of its obligations in respect of the provisions of paragraph 12.2.5 then: …. 12.4.2 [Britel] shall have the right to serve a written notice upon ACP calling for and requiring a development sub-lease to be granted back to [Britel] in respect of such part of the Roof Space of the Property which has not been developed by ACP….” The clause then went on to provide for the terms of that sublease, including the nominal consideration and rent.

On the same date as that on which the Preliminary Agreement was executed, 7 March 1996, ACP entered into an Introduction Agreement with Meretz Investments NV (“Meretz”). This provided that ACP, as developer of the Roof Space, should pay Meretz by way of commission a percentage of the net proceeds of sale of the penthouses so far as they exceeded £5.4 million.

Again on 7 March 1996 by a Guarantee (“the Guarantee”) FP guaranteed to Britel the performance by ACP of its obligations under the Preliminary Agreement.

On 17 May 1996 Britel, by a Deed of Assignment, assigned to NUBBH the benefit of the Preliminary Agreement by way of security for sums due from Britel to NUBBH .

Pursuant to the Preliminary Agreement Britel granted the Lease to ACP on 4 November 1996.

By a Charge dated 11 August 1997 (“the FP Charge”) ACP charged the Lease to FP to secure sums due from ACP to FP. Although FP was not a commercial lender within the meaning of the Preliminary Agreement, it is common ground that that breach was waived by a Deed of Priorities dated April 1999 (“the 1999 Priorities Deed”).

By a Charge dated 19 September 1997 (“the Meretz Charge”) ACP charged the Lease to Meretz to secure all sums due to Meretz under the Introduction Agreement.

By a Charge dated 23 December 1997 ACP covenanted to pay NUBBH all sums due to Britel under the Preliminary Agreement and charged the Lease by way of second mortgage to secure payment of those sums.

The 1999 Priorities Deed was entered into in the following circumstances. Varlet International Ltd. (“Varlet”) was the proposed purchaser of a penthouse being built. It agreed to pay the purchase price ahead of completion on the security of a charge on the Lease (“the Varlet Charge”), provided that it ranked ahead of all other charges. By the 1999 Priorities Deed to which FP, NUBBH , ACP, Meretz , Britel and two others were parties as well as Varlet, it was provided in cl. 1 that so long as any sum remained owing to Varlet under the Varlet Charge, that charge should be regarded as substituted for and replacing the FP Charge and rank as a first charge with priority over all other charges over the Lease, and in cl. 2 that on discharge of the Varlet Charge the FP Charge should once again come into full force and take effect and automatically be reinstated as the first charge.

By Heads of Terms and Side Letters dated 5 October 1999 and made between ACP, FP, Britel and Meretz the commission payable to Meretz was varied and Meretz and Britel agreed that a further apartment (“the Loft”) to be constructed in the Roof Space should be excluded from the profit-sharing arrangement in the Preliminary Agreement and the Introduction Agreement.

On 29 October 1999 Britel agreed to sell the freehold of the Property to Albert Court. The transfer was on 17 May 2000. That day Albert Court granted the Overriding Lease to CHAPS. By a Deed of Acknowledgement dated 19 September 2002 CHAPS acknowledged that it held, and continued to hold, the Overriding Lease on trust for an associate company and for NUBBH , Britel and Meretz .

By 17 May 2001 the Varlet Charge had been discharged. On that day another Deed of Priorities (“the 2001 Priorities Deed”) was entered into between the same parties save that in place of Varlet was National Westminster Bank (“the Bank”) to enable ACP to grant a charge in favour of the Bank to rank ahead of all other charges. Again the FP Charge was to come into full force and take effect once the charge to the Bank had been discharged. It was so discharged.

On 27 May 2002 Meretz obtained final judgment against ACP for £373,000 commission due under the Introduction Agreement.

By a Transfer dated 19 July 2002 NUBBH transferred the benefit of the NUBBH Charge to FP. As the judge noted in para. 22 of his judgment:

“The effect of this transfer was that, from 19th July 2002 such sums as might fall due under clause 9 of the Preliminary Agreement were charged to FP, and the only persons with a direct financial interest in the late completion of the Project under the Preliminary Agreement were ACP (as the developer) and FP.”

On 19 July 2002 FP as mortgagee of ACP entered into a contract for the sale of the lease to Mr. Tamimi. In an action (“the Injunction Action”) commenced by Britel and Meretz against FP and ACP, Britel and Meretz applied for an injunction to restrain FP from proceeding with the sale. His Honour Judge Seymour Q.C., sitting as a judge of the High Court, on 25 July 2002 dismissed the application on the ground advanced by FP that neither Britel nor Meretz had any cause of action against FP. On 7 August 2002 this court (Chadwick and Jonathan Parker L.JJ.) dismissed the application by Britel and Meretz for permission to appeal against Judge Seymour’s judgment.

In the meantime on 22 July 2002 FP applied to CHAPS for permission to assign the Lease to Mr. Tamimi. On 29 July, 16 August and 22 October 2002 in reply to the application made on 22 July and others to the like effect, CHAPS refused a licence unless Mr. Tamimi agreed to accept and be bound by the obligations assumed by ACP under the Preliminary and the Introduction Agreements. Mr. Tamimi refused to accept those terms. Both he and FP considered that consent was being withheld unreasonably and they proceeded to complete the agreement for the sale of the lease. Mr. Tamimi became the registered proprietor of the lease on 11 March 2003.

Lightman J. (in para. 25 of his judgment) recorded that it was common ground that the consequences of the assignment of the Lease to Mr. Tamimi were that all charges ranking behind the FP Charge, including the Meretz Charge, were discharged, that ACP was no longer liable under the terms of the Preliminary and Introduction Agreements to complete the development or to grant the development sublease pursuant to cl. 12.4.2 and that Mr. Tamimi was not bound to make payments to Meretz on further sales of penthouses nor to grant the development sublease.

The state of the development at the date of trial was as follows. Three penthouses had been completed by 5 December 2000 and sublet. Contracts for a fourth penthouse were exchanged on 8 January 2001 between FP and Mr. Tamimi, but this transaction had not been completed for some time and there was litigation between Mr. Tamimi and FP over this and other issues. On 23 April 2002 ACP agreed to sell the Loft to FP but this sale has not been completed and on 25 July 2003 Mr. Tamimi let the Loft to the Sixth Defendant in the second action.

The reasons, which at the hearing before the judge were maintained by CHAPS and had not been abandoned, for the refusal by it of consent to the assignment of the Lease to Mr. Tamimi were those set out in paras. (3) and (4) of a notice dated 16 August 2002. By para. (3) CHAPS stated that ACP as tenant was in serious breach of the covenant in cl. 2 (ix) in respect of the Works. It is then alleged that the tenant had failed to carry out the Works and/or had failed to complete the Works expeditiously or at all. By para. (4) it was stated that CHAPS held the reversion upon trust for its associated company and for Britel, NUBBH and Meretz and that the purported assignment would seriously prejudice the interests of CHAPS and/or the beneficiaries. Three reasons are then given. By the first, reference was made to the right of Britel to call for a development sublease if ACP failed to complete the Works by 7 September 2002 and that CHAPS or Britel (as entitled to the benefit of cl. 14 of the Preliminary Agreement) or NUBBH (as assignee of the benefit of the Preliminary Agreement) would seek to rely on cl. 12 of the Preliminary Agreement. Reference was also made to the fact that cl. 12 is not binding on an assignee and it is said that as Mr. Tamimi was not prepared to undertake the burden of the Preliminary Agreement, CHAPS or Britel or NUBBH would lose a valuable right to obtain a development sublease. By the second, reference is made to the Introduction Agreement and to the commission payable thereunder by ACP to Meretz on the sale of the remaining two penthouses to be developed. It is said that because the Introduction Agreement is not binding on an assignee Meretz would be prejudiced by the proposed assignment and that Mr. Tamimi as assignee would obtain a collateral advantage not available to the tenant. By the third, CHAPS repeated that Mr. Tamimi refused to undertake the burden of the Preliminary and the Introduction Agreements.

The judge said of para. (3) of the notice that it added nothing to what was stated in para. (4). That has not been challenged on this appeal.

The judge in para. 35 of his judgment posed the question whether the fact that the assignment to Mr. Tamimi would be effective to defeat or override the right under cl. 12.4.2 of the Preliminary Agreement to the development sublease and the right of Meretz to payment of its commission under the Introduction Agreement was sufficient grounds for the refusal of the assignment and, as a corollary, whether CHAPS was entitled to require as a condition of giving consent that Mr. Tamimi should personally assume obligations to the like effect.

The judge then set out (in para. 36) three overriding principles, which he extracted from the decision of the House of Lords in Ashworth Frazer v Gloucester City Council [2001] 1 WLR 2180 and which apply in determining whether or not a landlord has unreasonably withheld consent. As those principles are indubitably correct, I repeat them:

“i.) a landlord is not entitled to refuse his consent to an assignment on grounds which have nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the lease;

ii.) it is not necessary for the landlord to prove that the conclusions which led him to refuse to consent were justified, if they were conclusions which might be reached by a reasonable man in the circumstances;

iii.) in each case it is a question of fact, depending on all the circumstances, whether the landlord's consent to an assignment has been unreasonably withheld.”

The judge then considered the grounds put forward by FP, supported by Mr. Tamimi, for challenging the reasonableness of CHAPS’s refusal.

The first was the effect of the 1999 Priorities Deed. The judge referred to the decision of this court in refusing Britel and Meretz permission to appeal in the Injunction Action. He said (in para. 38):

“The Court of Appeal in the Judgment pointed out that Britel as owner of the freehold reversion on the Lease and Meretz as holder of a mortgage securing its entitlement under the Introduction Agreement were parties to the 1999 Deed of Priorities and that deed expressly provided that (whatever may have been its effect in this regard otherwise) the FP Charge on the subsequent discharge or redemption of the Varlet Charge should come into full force and take effect. The Court of Appeal held that this provision was totally inconsistent with the provisions of the Introduction or Preliminary Agreements in favour of Meretz and CHAPS restricting the full and unfettered exercise by FP as mortgagee of the power of sale conferred by the FP Mortgage. The issue raised before me is whether the 1999 Deed of Priorities likewise precludes CHAPS as successor in title to the reversion upon the Lease from exercising the power to refuse consent to an exercise of the power of sale on the ground that it will defeat the rights in question. In my view the answer is clearly in the affirmative. Since the 1999 Deed of Priorities conferred on FP as mortgagee the right to override the rights of CHAPS and Meretz in question, it cannot be reasonable for CHAPS as landlord to refuse consent to an assignment by FP to Mr Tamimi on the grounds that the assignment will have this overriding effect and to require as a condition of giving consent that Mr Tamimi confer equivalent rights on CHAPS and Meretz. CHAPS by taking this position was not protecting or preserving existing rights but attempting to create new ones. To allow CHAPS to take the position which it has taken is to set at nought the provision in the 1999 Deed of Priorities and a refusal of consent on these grounds and the insistence on these conditions are in fundamental derogation from the rights conferred on FP by the 1999 Deed of Priorities. Whilst the 1999 Deed of Priorities left it open to CHAPS to object to an assignment on other grounds (e.g. the character or worth of the assignee), it precluded objections in principle to an assignment on the grounds that it would have the legal effect contemplated and provided for by the 1999 Deed of Priorities. I accordingly hold that the refusal of consent was unreasonable on this ground.”

The second ground put forward by FP and Mr. Tamimi was whether the connection between the ground of refusal and the relationship of landlord and tenant was sufficient, leaving aside the relevance and effect of the Landlord and Tenant (Covenants) Act 1995 (“the 1995 Act”). The judge noted CHAPS’s argument as to the close relationship and linkage between the Preliminary and Introduction Agreements and the Lease and that the provisions of those agreements were directed to ensuring that Britel and Meretz should receive shares of the profits from the development. He referred to the further argument that it was reasonable for CHAPS, in deciding whether consent should be given, to take account of the adverse consequences of the sale upon CHAPS as successor in title to Britel, entitled under the Preliminary Agreement to a development sublease, and upon Meretz with its rights under the Introduction Agreement, particularly since both Britel and Meretz were beneficiaries under CHAPS’s trusteeship of the Overriding Lease. However the judge said this (in para 41):

“I accept that circumstances can exist where a landlord trustee may be entitled to take into account the consequences of an assignment on the beneficiaries under the trust if the consequences have something to with the relationship of landlord and tenant in regard to the subject matter of the Lease. In my view the fundamental objection to the approach adopted by CHAPS in this case is that the considerations relied on have nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the Lease: they are totally collateral to that relationship. I therefore hold that the grounds relied on afford no basis for the refusal of consent unless reinforced by the provisions of the 1995 Act.”

The third ground related to the 1995 Act on which both CHAPS and FP supported by Mr. Tamimi relied. It is sufficient to say that the judge held that the 1995 Act did not assist CHAPS and Mr. Morgan has taken no point on it on this appeal.

Mr. Morgan attacks each limb of the judge’s reasoning (apart from that relating to the 1995 Act).

He refers to the 1999 Priorities Deed as indicating that there was no intention that FP could exercise its rights as chargee of the Lease in disregard of its obligations as guarantor under the Guarantee. On the contrary, he says, cl. 13 of the 1999 Priorities Deed, which contains an agreement by Britel to extend the time limits in paragraphs 12.2.3 to 12.2.5 of the Preliminary Agreement, ends:

“AND First Penthouse acknowledges that this Variation shall not in any way affect its guarantee dated March 7, 1996, given to Britel in respect of the obligations of ACP under the Agreement.”

Mr. Morgan says that this court in the Injunction Action does not appear to have had its attention drawn to cl. 13. He argues that the 1999 Priorities Deed left FP’s obligations under the Guarantee unaffected, the effect of the Guarantee and the 1999 Priorities Deed being that FP had the benefit of its charge over the Lease but was not free to disregard its obligations as guarantor under the Guarantee.

He suggests that this court in the Injunction Action may have decided the case on points which were not advanced by the parties. Whether that is right or not does not seem to me to matter. He says more pertinently that this court was wrong in the view which it formed and that in any event the citation of the judgments in this court in that case contravened paras. 6.1 and 6.2 of the Practice Direction (Citation of Authorities) [2001] 1 WLR 1001, which states that a judgment on an application for permission to appeal may not be cited unless it clearly indicates by an express statement that it purports to establish a new principle or to extend the present law.

Mr. Dutton went so far as to say that this court’s decision was binding on this court as being a decision on the construction of the 1999 Priorities Deed. I do not think that that can possibly be right, particularly in view of the Practice Direction to which I have referred. However, in my judgment the decision of two experienced members of this court in a case in which it had heard argument from counsel on both sides on the effect of the same deed as that under consideration here and when this court was saying that neither Britel nor Meretz had any cause of action by reason of the effect of that deed, can properly be taken into account by this court. Indeed it seems to me close to an abuse of process for Britel and Meretz through its trustee CHAPS to have another go at the effect of the 1999 Priorities Deed, having failed in their argument in 2002. Be that as it may, I regard the earlier judgments as persuasive.

Nor am I persuaded that they are wrong. Jonathan Parker L.J. at para. 47 pointed out that the Preliminary Agreement expressly contemplated the possibility that ACP might mortgage the Lease (albeit to a commercial lender), and that inherent in that was the possibility that the mortgagee might exercise the power of sale, thereby rendering the completion by ACP of the development impossible. He read the 1999 Priorities Deed as acknowledging in cl. 2 that on the discharge of the Varlet Charge the FP Charge, by once again coming into full force and taking effect and automatically being reinstated as the first charge, was effective to create a valid security over the Lease according to its terms, and held that a submission on behalf of Britel and Meretz that FP was unable to exercise its security under the FP Charge was flatly inconsistent with the terms of the 1999 Priorities Deed. Chadwick L.J. expressed himself similarly in his judgment, saying in para. 65: “to execute a deed which confirms the full force and effect of [the FP Charge] is quite inconsistent with [Britel’s and Meretz’s] contention that the power of sale under it could never be exercised while the development remained uncompleted.”

I do not accept that the reference to the Guarantee in cl. 13 of the 1999 Priorities Deed has the wide effect which Mr. Morgan suggests. The variation referred to in the tailpiece of the clause was merely to the extensions of time referred to earlier in that clause.

In my judgment the judge reached the right decision for the right reasons on this point.

I turn to the sufficiency of connection between the ground for refusal and the relationship of landlord and tenant. Mr. Morgan submitted that the reasoning of the judge in para. 41 of his judgment was untenable. He argued that CHAPS was properly concerned to secure the performance of the right conferred by cl. 12.4.2 of the Preliminary Agreement to bring about a grant of a development sublease of the premises demised by the Lease itself, so as to enable the proceeds of the sale of the penthouses to be shared in accordance with cl. 9 of the Introduction Agreement.

The difficulty with that argument is, as Mr. Dutton pointed out, the conclusion (which is not challenged) which the judge reached in para. 22 of his judgment and which I have cited in para. 40 above. In reality no one other than ACP and FP is interested in those proceeds.

In my judgment on this issue too the judge was right for the reasons which he gave.

For these reasons I would dismiss this appeal.

I agree.

I also agree.