Talisman Property Co (UK) Ltd v Norton Rose (A Firm)

Although I will need later to return to parts of this outline picture in greater detail, it may be convenient if I first sketch in the nature of the case before me. In July 2001 the Claimant, Talisman Property Co (UK) Ltd. (“Talisman”) acquired the freehold of business premises at Dukes Road, Park Royal which had, in 1982, been let for a term limited to expire on the 24^th December 2001. Prior to Talisman’s acquisition, but as Talisman knew, the person who, on the conveyancing or “paper” side of things was the tenant and who had been so since 1986, Lewis DMR Ltd (“Lewis”), had on the 1^st March 2001 served on Talisman’s predecessor a notice under section 26 of Part II of the Landlord and Tenant Act 1954 requesting a new tenancy, a notice which that predecessor had, on the 27^th April 2001, opposed only on ground (f) described in section 30 of the 1954 Act. That ground asserts that the landlord intends to demolish or reconstruct the premises as there more fully described. Opposition to a tenant’s notice only on ground (f) opens up a risk to a landlord that he may have to pay the tenant compensation (as it is called) under section 37 of the Act if the tenant quits. Such compensation can be substantial. As I shall explain, a landlord does not necessarily escape that risk by later abandoning his opposition to a new tenancy. Ground (f) can also offer a tenant, in some cases, a further attractive possibility, that of escaping liability for any want of repair or dilapidations; it would hardly be reasonable to require the tenant to repair (and, broadly speaking, the tenant is generally not required to repair) that which the landlord is about to demolish or reconstruct.

However, even though Talisman’s predecessor had deployed ground (f), it was not at all certain that Talisman was heading towards a situation in which Talisman would have to pay compensation, still less one in which it would also lose an ability to claim for the substantial dilapidations that were contemplated; Talisman knew it was unable to make good ground (f) so that that ground would not bar the claim for dilapidations. Moreover, even if nothing else barred a claim for section 37 compensation (for example, upon no one quitting the premises), there was a doubt as to whether another than Lewis was truly the tenant. It could have been that another company, a fellow subsidiary in the same group as Lewis, Wyko Industrial Services Ltd (“Wyko”), was at all material times the tenant. Accordingly, Talisman, to cover the possibility that Wyko was, indeed, the tenant, instructed its solicitors, the Defendant Norton Rose, to serve a section 25 notice on Wyko, a notice terminating Wyko’s tenancy but not opposing a grant to it of a new tenancy. On the 2^nd October 2001 Norton Rose served a section 25 notice on Wyko in form terminating its lease on 5^th April 2002 but (and this is at the very root of Talisman’s complaint) it unfortunately served one which opposed the grant of a new tenancy and did so on and only on ground (f).

Ultimately, well after Norton Rose had been replaced as Talisman’s solicitors, there was, by consent in County Court proceedings, a declaration made that, in effect, Wyko had at all material times been the tenant. Wyko vacated the premises and became entitled to section 37 “compensation” of some £179,000 which was set-off against its larger liability for dilapidations and repairs.

On the 12^th May 2004 Talisman, which appears by Mr Livesey Q.C., launched proceedings against Norton Rose in contract and in the tort of negligence. Norton Rose, which appears by Mr Halpern, does not dispute that it was negligent (in the sense of careless) or that Talisman is entitled to 40 shillings or its equivalent for breach of contract. But so far as concerns any greater award in contract and as a requirement before Talisman can complete a cause of action in negligence, Norton Rose assert that some loss appropriately consequential on the admitted carelessness has to be proved. Thus far is common ground. However, asserting that by way of the predecessor freeholder’s counter-notice to Lewis of the 27^th April 2001, Talisman would have suffered as it did even had an “unopposing” section 25 landlord’s notice been served on Wyko and hence asserting that Talisman suffered no relevant loss to complete its cause of action in negligence or to go beyond a nominal award in contract, Norton Rose by application notice now seeks summary judgment in its favour as to the whole of Talisman’s claim or alternatively a striking out of the whole of that claim. Talisman resists that and argues that the case should go forward to its trial, already fixed for 4 days in April. That is the dispute before me to which I must turn in greater detail but before I do so there are some matters which were uncontentious between the parties but which are necessary to explain in order that the scene may be more fully set.

It would be wrong to approach section 37 compensation, as the word “compensation” might ordinarily suggest, by looking to see what overall loss in some way connected with an assertion of ground (f) and a quitting of the premises a tenant shall have suffered and for which he was accordingly to be compensated. There are five situations in which section 37 compensation is payable, each requiring that the tenant shall have quit the holding. They are (i) where the Court is precluded from granting a new tenancy by way of ground (f) being upheld, where (ii) a landlord’s section 25 notice asserts ground (f) and the tenant makes no section 24 application for a new tenancy, where (iii) a landlord’s counter-notice under section 26 (6) asserts ground (f) and the tenant makes no such application for a new tenancy, where (iv) a landlord’s section 25 notice asserts ground (f) and the tenant’s section 24 application for a new tenancy is withdrawn and where (v) the landlord’s section 26 (6) counter-notice asserts ground (f) and the tenant’s section 24 application is withdrawn. The Act does not, in cases (ii) to (v) specify any causal link as required between the assertion of the ground and the tenant’s failure to apply or his withdrawal of an application or between the assertion and the quitting. Nor does the Act require any overall loss to be suffered upon the quitting of the premises; if the conditions of the Act are met and the tenant, even had this always been his undisclosed preference, moves out, at no cost to himself, to better and cheaper premises he is still entitled to claim “compensation” under the Act. In Lloyds Bank –v- City of London [1983] 1 Ch 192 C.A. Templeman LJ, giving the only reasoned judgment, with which Cumming-Bruce LJ and O’Connor LJ agreed, said at p. 203:-

“In my judgment, a landlord who serves a counter-notice opposing the grant of a new tenancy under (e), (f) and (g) presents the tenant with a choice between the doubtful possibility of a new tenancy or the certainty of compensation under section 37. Once such a counter-notice is served, the landlord has no right to recover the demised premises and to avoid payment of compensation. It is not right to treat the tenant as being in no different or worse position than he would have occupied if the landlord had never served a counter-notice.”

That was dealing with a case where a counter-notice had been served; there is no dispute between the parties before me but that the case where ground (f) is asserted in a landlord’s section 25 notice is indistinguishable.

The section 25 landlord’s notice served by Talisman in the wrong “opposing” form asserting ground (f) was followed in time by Talisman abandoning that ground (f), by Wyko making and later withdrawing an application for a new tenancy and by the premises being quit. There being no need to prove that the quitting was in consequence of the assertion of ground (f) (which would, in any event, have been at least difficult given that ground (f) was abandoned) the statutory compensation became payable by Talisman to Wyko, at any rate if Wyko had all along been the tenant.

Accordingly, Mr Halpern’s argument does not include his saying that the statutory compensation need not have been paid or that if it had to be paid it could have been in some lesser sum than it was; the Norton Rose case, rather, is that the compensation would have been payable even had the notice served on Wyko been in the “unopposing” form that it should have been in. That involves Norton Rose in emphasising that, properly examined, as Mr Halpern argues, it was Lewis that had asserted in its own notice that it was the tenant, it was against Lewis that, on the 27^th April 2001, the landlord (then Talisman’s predecessor) had asserted ground (f), it was Lewis that on the 14^th June 2001 had started proceedings for a new tenancy, it was Lewis’s section 24 application which was discontinued (on the 7^th November 2002) and, he has to continue, it was Lewis that quit the premises. If, indeed, Lewis was throughout properly to be regarded as the tenant, then one can see a strong even irresistible argument that statutory compensation was going to be payable even had Norton Rose served on Wyko a notice in the intended unopposing form. On that footing the Landlord’s Notice served by Talisman on Wyko on 2^nd October 2001 would not have been served on a tenant and would have been wholly devoid of effect. Its form would have led to no obligation on Talisman other than one it was already heading towards. Mr Livesey seeks to escape that argument in one or more of three ways but before I turn to those ways I need to focus on the nature of the case which Norton Rose here embarks on in its application notice.

The application notice of Norton Rose of the 21^st September 2004 which is before me seeks an order that Talisman’s claim in tort be struck out pursuant to CPR 3.4 (2) (a) or that it should be summarily dismissed under CPR 24.2 and that Talisman’s contractual claim should, by way of CPR 3.4.2 or 24.2, be confined to nominal damages. There is no claim that part only of Talisman’s pleading should be struck out or that the compensatory damages in the contractual claim should be limited to those in respect of part only of Talisman’s pleaded case. Norton Rose’s argument is thus framed on an all or nothing basis; if any way in which Talisman pleads its case is proper to go to trial then all of the case is to go to trial. As I have mentioned, Mr Livesey’s case for Talisman is put in three ways; he is entitled to say, and does say, in response to Norton Rose’s all or nothing basis, that if any of those three ways survive Mr Halpern’s attack then all should be allowed to go to trial.

Mr Halpern accepts that the thresholds which stand in the way of Talisman escaping a strike out or summary judgment are low ones but it is worth pausing to notice just how low they are.

Talisman can escape summary judgment against it if a real as opposed to a merely fanciful prospect of its succeeding on its claim emerges; it will survive a strike out if a reasonable ground is seen for its bringing its claim. Such issues at this stage in proceedings are generally determined, so far as their factual content is concerned, by looking at the pleadings and taking that which is alleged by the Claimant to be true. Here, though, there has been unopposed reference to a good deal of written evidence from both sides and to exhibits consisting, in particular, of the proceedings between Wyko and Talisman and passages of contemporary correspondence. That leads to two considerations.

Firstly, it has to be borne in mind as to the evidence that what is before the Court is chiefly a selection by Talisman from available material. There has, as yet, been no completed disclosure. Even without any supressio veri or suggestio falsi (and I suggest neither) there could well have been an element of self-serving or partisanship involved in the selection of which papers to put in evidence at this stage or in the giving of written evidence, especially as to matters difficult to rebut such as what, a party’s intentions were or, even more difficult for rebut, what hypothetically, they would have been at various stages in the unfolding story. Certainly the possibility exists that, if and when all material were to become available and if and when such as requires it were to be given oral explanation and was set in context, the picture finally to emerge could look different to that which is visible at this stage. Whilst I will refer at points in this judgment to matters as if truly of fact, nonetheless, save in the cases where they emerge from clear language in the pleadings or from unambiguous admission, they are, at this stage, more matters of initial impression from current incomplete and untested evidence than matters of fact properly so found.

The second consideration is this; where, without objection from the other, each side has referred to the written evidence in argument, it becomes artificial wholly to limit the Judge’s regard to fact to that alleged in the pleaded case which is sought to be struck out.

With those conditions in mind I turn to the Norton Rose defence and the way in which Talisman attempts to meet it.

Talisman’s answer to this, as argued by Mr Livesey, is three-fold:-

I will deal with each of these three somewhat related ways in which Talisman puts its case but in a different order.

I shall first deal with Talisman’s alleged loss of a chance of negotiating to avoid any prospect of paying compensation. I have in mind the reservations I have described as to “fact” in this case but there are in the present evidence grounds for findings that, as at late-2001, Talisman wished Wyko to be regarded as the tenant rather than Lewis. If Talisman chose to sell the premises it would be preferable to show that the tenant was not a dormant company, Lewis, but a live trading one, Wyko. If dilapidations were required to be pressed to be made good then a dormant company might not prove good for the expense of doing so; it could be that the Wyko group could, without real harm to itself, let the dormant company pass into insolvent liquidation without the dilapidations being paid for. There were thus sound reasons why Talisman should and did prefer Wyko to be the tenant. There were, moreover, indications, some of which Talisman was aware of, that the Wyko group and Wyko wished Wyko to be the tenant and believed and were advised that it was and that it, Wyko, wished to retain a tenancy of the premises. Conversely there is nothing to suggest any insistence by Lewis that it should be regarded as the tenant.

The written evidence includes that of Wyko’s Property Manager as follows:-

“I am asked what would have been our attitude had an “unopposed” section 25 notice been served on Wyko in October 2001, I believe that Wyko would have continued to maintain that it was the legal person entitled to a new lease and would have sought to negotiate to obtain a deal which allowed us to stay in the premises on as ideal terms as we could obtain. Alternatively, if we did not obtain terms that were satisfactory, we would have thrown in the towel and left. Which of those would have been the result I cannot now say, since the inability to secure compensation would have affected the financial balance that we had to strike.”

Wyko had earlier asserted in its 1954 Act proceedings with Talisman that the statement of truth that Lewis had completed stating that it was the tenant was made on incorrect advice and that the Solicitors responsible for it were no longer acting. The incoming Solicitors had asserted to Talisman that Wyko was the tenant.

Although any of these features could emerge as unfounded were the matter to go to trial there are grounds for believing that as at October 2001 a position could well have emerged in which Wyko was regarded on both landlord and tenant sides as the tenant, in which the Lewis notices were accordingly ignored or deprived of effect and in which, by way of service of an unopposing notice Talisman would have deprived the tenant’s side of any prospect of compensation and would hence not have given to the tenant’s side the incentive to quit which the opposing notice, by way of its opening of a route by which the tenant’s side could receive substantial compensation whoever proved to be the tenant, thus gave.

By reference to the authorities as to loss of chance, Mr Livesey argues that a monetary value has to be ascribed to what Talisman thereby lost and that that loss completes the tort of negligence, gives grounds for a substantial award in contract and in consequence avoids both summary judgment and a striking out.

Mr Halpern resists that by saying that the loss of a negotiating chance thus claimed does not appear in Talisman’s pleadings. He did not raise that argument until after Mr Livesey had sat down and so there was not an immediate application, as there so often is in this sort of case, for some consequential amendment of the pleading. However, although, in my view, Mr Halpern is entitled to say that the loss of a negotiating chance is not expressly spelled out in the existing pleadings, I cannot say that the existing pleadings are not wide enough to include such a claim. Paragraph 46 of the Particulars of Claim alleges that but for the Defendant’s failure and/or breaches the Claimant would have served on Wyko a section 25 notice stating that the Claimant would not oppose an application to the Court under Part II of the 1954 Act, with the alleged consequence that “no statutory compensation would have been payable to Wyko”. Paragraph 47 adds that the Claimant was deprived of an opportunity to avoid payment of statutory compensation. No Part 18 Request was served on Talisman asking it further to particularise those paragraphs. I do not regard the form of Talisman’s present pleading as debarring this way in which Mr Livesey puts Talisman’s case. In turn I feel unable to rule at this stage that this alleged loss of a negotiating prospect has no substance as a loss which both completes the tort and furnishes a ground for damages beyond nominal damages in contract. As I mentioned earlier, as Norton Rose have argued and as Talisman has responded on an all or nothing basis, Talisman’s success on this point bars, in my judgment, both a strike out and summary judgment. It thus becomes unnecessary for me fully to deal with the other two ways in which Norton Rose puts its case but it would be unfair to the parties to say nothing whatsoever about them.

As for Talisman’s case in estoppel as outlined in 14 (i) above, the originally pleaded case in estoppel, pleaded by Talisman with a view to denying any force to the Norton Rose view that the Lewis notices were effective and that the notice in the incorrect form to Wyko was thus ineffective, contemplated a situation in which by way of estoppel Talisman had become unable to assert that Wyko was not the tenant. The original pleading said nothing as to any estoppel of Wyko. It said that Talisman was “estopped from denying that Lewis … assigned the remainder of the lease to Wyko or alternatively granted to Wyko a new lease of the premises”. The only expressly pleaded reliance upon a pleaded representation was a reliance by Talisman.

During the course of argument Mr Livesey (who was not responsible for the Particulars of Claim) asked for leave to amend the pleading as to estoppel and Mr Halpern did not oppose that, although reserving his position as to costs. In the amended form the assertion that Talisman now makes is that both Talisman and Wyko were estopped from denying, inter alia, that Wyko was the tenant. But still the only expressly pleaded reliance is reliance by the Claimant.

Mr Halpern resists Talisman’s case as to such estoppel in two principal ways. First of all he draws attention to section 42 (2) of the 1954 Act which provides, so far as material, as follows:-

“(2)

Where a tenancy is held by a member of a group, occupation by another member of the group, and the carrying on of a business by another member of the group, shall be treated for the purposes of section 23 of this Act as equivalent to occupation or the carrying on of a business by the member of the group holding the tenancy; and in relation to a tenancy to which this Part of this Act applies by virtue of the foregoing provisions of this section:-

(a)

references (however expressed) in this Part of this Act and in the Ninth Schedule to this Act to the business of or to use, occupation or enjoyment by the tenant shall be construed as including references to the business of or to use, occupation or enjoyment by the said other member;

(b)

the reference in paragraph (b)[subsection (1) of] section 34 of this Act to the tenant shall be construed as including the said other member;

(c)

an assignment of the tenancy from one member of the group to another shall not be treated as a change in the person of the tenant.”

There are difficulties in a literal construction of parts at least of section 42 (2) – see Reynolds & Clark on the Renewal of Business Tenancies (2^nd Edition) paragraphs 1.4.5 and 1.6.3. This first argument, though, comes to this; the sort of changes described before the first semi-colon in section 42 (2) do not, by reason of section 42 (2), operate to change the identity of the tenant where both candidates are in the same group.

I can see that section 42 (2) is intended to operate where the sole question that arises is whether a tenancy is protected by or is subject to the provisions of Part II of the 1954 Act notwithstanding either or both of two factors, namely that it is not the “paper” tenant but its group fellow which in fact occupies the premises or where it is not the business of that “paper” tenant that is carried on at the premises but that of its group fellow. However, I do not see it as intended to have effect such as to bar such full taking into account of all factors which will generally be embarked upon where an estoppel is asserted which depends not on only those two factors but alternatively or inaddition wholly or in part on other factors such, as here, as an assertion by one party of its being the tenant and the non-contradiction by the other and by consistent and repeated demands for and acceptance of rent and insurance rental. I thus do not see section 42 (2) as barring altogether or as substantially weakening the estoppels asserted by Talisman in its amended pleading.

As for the other way in which Talisman asserts a material estoppel, Mr Halpern subjects a number of cases to careful analysis. He took me to Rodenhurst Estates Ltd –v- W.H. Barnes Ltd [1936] 2 All E.R. 3, First National Bank plc -v- Thompson [1996] 1 All E.R. 140, Bell –v- General Accident [1998] 1 EGLR 69, Brown & Root Technology –v- Sun Alliance [2001] Ch 733, Stratford-on-Avon Corporation –v- Parker [1914] 2 KB 562 and Williams & Heales (1874) LR 9 C.P. 177. Such, he says, are the strict requirements of an effective estoppel as illustrated by those authorities that the originally pleaded form of estoppel whereby it was alleged that Talisman was constrained to regard Wyko as having become tenant by way of either or both of only 2 relatively formal routes, namely by assignment or new grant to it, could not hope to be effective. However, the amended pleading (though still not proof against some attack) is intended, I apprehend, to include a looser averment that both Talisman andWyko were constrained to regard Wyko as the tenant and, moreover, that Wyko had become so not by any such formal route as previously asserted but by a long and consistent course of dealing.

At this juncture I make two points. Firstly, I do not see an estoppel as necessarily excluded by reason of the necessary representation, reliance and detriment not being specifically identified and so labelled in the pleading so long as there are pleaded facts from which they can fairly be inferred. Thus, for example, a demand to a person by a landlord for him to pay the rent under a lease can, as it seems to me, be taken, in appropriate circumstances, to be a representation by the landlord to that person that such a person is the tenant. That person’s payment of the rent to the landlord in response can, in turn, be taken to be a reliance upon the landlord’s representation and that person may thereby incur the detriment of finding himself saddled with the tenant’s responsibilities under the lease in question.

Secondly, as both sides have referred to the written evidence I do not feel barred from considering it, as could have been the case in a strict strike out. In the light of the pleaded facts and in the light also of written evidence not said to be in issue and not obviously likely to be undone were it to be examined at trial, which includes long occupation by Wyko, the long carrying on of a business by Wyko at the premises, the knowledge of the landlord of such matters, the assertion to the landlord by Wyko, uncontradicted by the landlord, of its being the lessee and all the other demands and acceptances already referred to, I would have felt unable, had I had to form a view on the issue, to say that Talisman’s amended Statement of Case discloses no reasonable grounds for its bringing such a claim of estoppel or that it has no real prospect of success upon it. Had I had to do so, I would have acknowledged Mr Halpern’s argument that estoppel was not expressly pleaded in terms of identification of its classic requirements of representation, reliance thereon and detriment suffered thereby but I would have seen room for inferences such as I have mentioned. I would not have concluded that Talisman’s case did not clear the low threshold which, at this stage, is all it has to; I would have sent it to trial. I should add that Mr Halpern does not assert that acts or omissions as between Wyko and Talisman’s predecessor as landlord cannot operate in estoppel so as to bind Talisman as successor.

As for loss of the chance of attaining a particular result in proceedings, I was referred to Allied Maples Group Ltd –v- Simmons & Simmons [1995] 1 WLR 1602, Stovold –v- Barlows [1996] PNLR 91, Harrison –v- Bloom Camillin [2001] PNLR 7, Barker –v- Mount Austin [1998] PNLR 493. Mr Halpern’s case is that there was at no time any realprospect of Lewis not being the tenant nor any real chance of the parties being constrained to recognise between themselves that Wyko was the tenant. Hence, he says, no compensation would have become payable other than by way of the notice by and counter-notice to Lewis. The loss of the chance of attaining some other conclusion in proceedings was thus negligible or merely speculative and accordingly no value could properly be ascribed to it. Even if I had had to rule on this argument, which I do not, it would not have been right for me to conduct some mini trial on the issue. It would only have been right for me to come to some conclusion on the issue at this stage had the matter been one wholly of law or, alternatively, where the factual element was plainly either only as pleaded or as agreed. However, the pleadings themselves leave gaps; for example, if compensation was to be payable by way of the notices by and to Lewis and upon Lewis’ quitting the premises, can one be sure that Lewis did quit the premises? It is admitted in the pleadings that Wyko quit the premises and that Wyko had occupied the premises but there is no pleading that Lewis had occupied the premises after 1997 or as to whether and, if so, when it quit them. If, after 1997, it was Wyko that occupied the premises, could Lewis have quit them in 2001? If it was not Lewis that quit the premises, would compensation have been payable under Lewis notices, as is central to Norton Rose’s case? Moreover, more generally, Mr Halpern’s argument diminishes the strength of the amended claim in respect of estoppel to a greater degree than, as this stage, I would think to be just. Had I had to decide the issue I would have held that the loss to Talisman of the chance of avoiding paying compensation by way of serving an unopposing notice on Wyko and of then proving Wyko to be the tenant was not a chance properly describable as without substance or negligible or merely speculative. Had it been necessary for me to approach this loss of chance aspect separately I would have let it, too, go forward to trial.

In conclusion, and for the reasons I have given I must dismiss Norton Rose’s application notice. The less I say about the law and the facts the better; the latter are to be found at the trial and the relevant law can then be considered, as is so much to be preferred, in the light of the facts as so found. It is, in my judgment, appropriate neither to strike out nor to give summary judgment against the Claimant’s Particulars of Claim as amended. That being so, it will be useful for me to consider with Counsel whether directions need to be given for steps to be taken in order that the matter is ready for trial in April of this year.