KPMG Llp v Network Rail Infrastructure Ltd

These proceedings raise two main issues, the construction of a tenant’s break clause and (depending upon how that issue is resolved) a claim to rectification of that clause. They arise out of the terms on which the claimant, KPMG LLP, occupies office premises at 1 Puddle Dock, London EC4. KPMG currently holds the property as sub-undertenant of the defendant, Network Rail Infrastructure Ltd, pursuant to a reversionary sub-underlease which is dated 11 July 1985 and was granted for a term of 31 years from 25 July 1998. The sub-underlease was made between British Railways Board (“BRB”) as landlord and Messrs P J Butler, R V J Chadder, T F L Webber and G Acher acting on behalf of themselves and the other partners in the accountancy firm then known as Peat Marwick Mitchell & Co (“PMM”) as tenant. The landlord’s reversionary interest has come to be held by the defendant, Network Rail, and the tenant’s interest by KPMG.

So far as it is necessary to state at this stage, the site at 1 Puddle Dock, which adjoins Blackfriars Bridge, was redeveloped in 1970s by the construction on it of office premises. This occurred as a result of a co-operative venture between the freehold owners who were BRB (as to a part) and King’s College, Cambridge (as to the remainder). The development was complicated by various third party interests, including those of the (then) London Transport Executive and the City of London Corporation. A particular problem was the presence at and under the site of Blackfriars Station of an underground line. The details of this do not matter.

The ultimate legal structure which was adopted was that on completion of the development by BRB and King’s College, a lease and underleases would be contemporaneously granted so as to result in BRB holding the premises as undertenant for a term of 99 years less 3 days on the footing that it would grant a 52 year sub-underlease of the premises to PMM. So far as PMM was concerned, the structure was reflected in an agreement for lease (the Agreement for Lease) dated 13 December 1974 and made between (1) BRB (2) King’s College and (3) partners representing PMM. The Agreement for Lease provided, among other matters, for the construction of offices (to be carried out in two stages) in accordance with certain plans and specifications, a provision for the calculation of the annual rent for the premises to be payable by PMM and the grant by BRB to PMM of a sub-underlease for a 52 year term commencing from the date of practical completion of stage two of the development and at the rent calculated in accordance with the earlier provision. By clause 10 the sub-underlease was to be in the terms set out in the form of the document annexed to the Agreement for Lease:

“… but with such modifications only as shall be agreed in writing by the parties hereto (a) in respect of any matter or thing they consider necessary following the completion of the Building to protect their mutual rights and interests hereunder or (b) relating to any further requirement of the [London Transport] Executive for the protection of their railway which extends beneath or adjoins the Site or some part thereof (c) relating to any further requirement of the City of London Corporation contained in [a] Lease of or relating to the said land and/or air space intended to be demised [to] King’s College by the said Corporation or (d) provisions relating to the City walkways either as agreed by the Developers with or as required by the City of London Corporation…”

The Agreement for Lease went on to set out when the sub-underlease should be granted. Clause 15 contained an agreement that the Agreement for Lease should not merge in the sub-underlease on its grant to PMM “in respect of any terms and conditions herein contained which are not fully complied with and shall after completion of such grant continue to have full force and effect”.

Practical completion of stage 2 of the development occurred in 1977. There was a considerable delay, however, in the formal grant of the various leasehold interests. A further eight years were to pass before they were granted.

In the meantime, King's College and BRB agreed between them a large number of amendments that they wished to make to the form of sub-underlease annexed to the Agreement for Lease (“the annexed sub-underlease”). Some were occasioned by the fact that the development had by then been completed (for example, the incorporation for use in connection with the operation of the rent review provisions of a schedule of floor areas on each floor level of the new building). Others were in the nature of drafting improvements. Yet others were changes which King's College and BRB wanted in their own interests as landlords and which on any fair reading of clause 10 of the Agreement for Lease went beyond what was contemplated by that clause (for example, the insertion of a provision restricting the extent to which the tenant would be entitled to underlet without the need for consent). Some of these amendments were agreed by PMM, some were not and some were agreed only after further amendments. Very much towards the end of this process, in order to accommodate PMM’s wish to achieve a saving of stamp duty, it was agreed by BRB and King's College that PMM’s 52 year lease would be split into two: (a) a sub-underlease (“the initial sub-underlease”) for 21 years from 25 July 1977 taking effect immediately in possession and (b) a 31 year reversionary sub-underlease (“the reversionary sub-underlease”) for the remainder of the 52 year term calculated therefore from 25 July 1998 and taking effect in possession on the expiry of the initial sub-underlease.

Eventually, on 11 July 1985, this was how the matter was completed. The two sub-underleases were granted. They incorporated the many amendments that had been made to the annexed sub-underlease resulting from the exchanges between the parties over the preceding years.

The break clause which has given rise to these proceedings is contained in the reversionary sub-underlease. (The initial sub-underlease contained no break clause.) The grant of the 31 year term from 25 July 1998 is subject “to the right for the Tenants to determine this lease as provided by paragraph 5 of Part II of the Fifth Schedule hereto …”. Part I of the fifth schedule contains the schedule of floor areas in the completed building to which I have already referred. Part II is brought into play in the reddendum to the lease which reserves, as the initial rent, a sum equal to the rent payable under and at the expiry of the initial sub-underlease. The rent is expressed to be payable quarterly in advance on the usual quarter days and is made “Subject to increase on review pursuant to the provisions contained in Part II of the said Fifth Schedule hereto…”.

Part II of the fifth schedule is in the following terms:

“PART II

(Provisions relating to the review of rent payable under this Sub-Underlease)

1.

The rent reserved by this Sub-Underlease shall be subject to reviews upwards only as follows:

(1)

The Landlords may give notice in writing not less than three months nor more than twelve months before the date of the expiration of the first year of the said term and of each successive period of five years thereafter (called "the date of review") throughout the said term requiring the rent payable from the date of review to be reviewed

(2)

the review of the rent will be to the then current open market value of the demised premises for rental purposes as at the date of review and "the current open market value" means the best rent at which the demised premises might be expected to be let by a willing Landlord without a premium on the open market having regard to:

(a)

the unexpired residue of the said term and on the basis that the demised premises are let to a single tenant

(b)

all other provisions of this Sub-Underlease other than rent

(c)

the current rental value of similar properties (if any) in the neighbourhood and assuming that vacant possession of the demised premises can be given

(d)

the floor areas set out in Part I of this Schedule

In calculating the current open market value there shall be disregarded (if applicable) the matters set out in paragraphs (a) (b) (c) and (d) of Section 34(1) of the Landlord and Tenant Act 1954 as amended by the Law of Property Act 1969 and the effect on value of the partitioning and doors erected and installed by the Tenants and indicated by a red line on the relevant floor plans

(3)

if the rent as reviewed (hereinafter called “the reviewed rent”) exceeds the rent payable before the date of review the reviewed rent shall as from the date of review become the rent reserved by the Lease and all arrears of such rent shall become due and payable on the rent day immediately following the date when the reviewed rent is ascertained PROVIDED that the rent payable after the review shall not be less than that payable prior to the review

2.

If the Landlords and the Tenants cannot agree within three months after the date of service of the review notice as to the amount of the reviewed rent the matter shall be referred to a single valuer who shall be a Fellow of the Royal Institution of Chartered Surveyors experienced in dealing with office buildings who shall be nominated (in default of agreement between the parties) on the application of either party by the President for the time being of the Royal Institution of Chartered Surveyors and such valuer shall act as an expert and not as an arbitrator whose decision shall be final and whose costs shall be payable as he may direct

3.

If the Landlords shall fail to exercise their right to require the rent payable hereunder to be reviewed within the relevant period prescribed in paragraph 1(1) hereof or in the event that by the relevant date of review the Landlords and the Tenants shall not have reached agreement and the valuer (if appointed) shall not have given his decision provided for in paragraph 2 hereof then the Tenants shall continue to pay rent at^-the rate of the rent payable before the relevant date of review on each day appointed by this Deed for payment of rent until agreement shall be reached or the said decision shall be made whichever shall first occur Within 14 days after such agreement shall have been reached or the said decision shall have been made (as the case may be) the Tenants shall pay to the Landlords as arrears of rent an amount equal to the difference between the new rent and the rent actually paid since the relevant review date together with interest thereon from the relevant review date until the date of payment thereof at the rate per annum from time to time of National Westminster Bank PLC base rate

4.

In the event that during the said term the amount of the rent which would otherwise be payable to the Landlords under this sub-underlease shall be subject to statutory regulation or control for any continuous or non-continuous period or periods so that rent thereby permitted to be paid shall at any time be less than that reserved by this sub-underlease (whether revised in accordance with the provisions of this schedule or not) then the rent payable hereunder shall automatically increase to the maximum amount (howsoever such an amount may be lawfully ascertained) permissible for the time being under or by virtue of such statutory regulation or control and such increase or increases shall initially be collected on the quarter day next following the permitted date of commencement thereof and thereafter be payable as part of the rent hereby reserved in the manner and on the days herein specified for the payment of rent

5.

If the Tenants shall be desirous of determining the said term hereby granted at any time after the expiration of the third thirteenth and twenty third years of the said term and of such desire shall give to the Landlords not less than six calendar months' notice in writing (such notice to expire on any quarter day and to be given within a period of six months following the determination of the reviewed rent to be payable from the expiration of the first eleventh and twenty-first years respectively of the said term and thereafter during the year immediately preceding the eleventh and twenty-first years respectively of the said term) then on the expiration of such notice as aforesaid the said term shall cease and determine but without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of covenant”

The dispute concerns the meaning of the words “and thereafter during the year immediately preceding the eleventh and twenty-first years respectively of the said term” to be found in the latter part of the parenthesis contained in paragraph 5. Those seventeen words, insofar as they are introduced by the phrase “and thereafter”, do not sit at all easily with the words which precede them in the parenthesis or with the wider structure of the paragraph.

Network Rail contends that this is because, when typing out the sub-underlease (in the course of King's College and BRB agreeing between themselves amendments to it before it was submitted, with the amendments, to PMM for the latter’s approval), certain words were erroneously left out. Those words, which for convenience I shall refer to as “the relevant words”, are as follows:

“but in the event only that such reviewed rent exceeds the yearly rent payable during the twenty-second year of the said term”

Those words appeared in paragraph 5 of the fifth schedule as it appeared in the annexed sub-underlease. The earlier paragraph 5 was in the following terms (italicised emphasis added):

“If the Tenants shall be desirous of determining the said term hereby granted at any time after the expiration of the twenty-fourth thirty-fourth and forty-fourth years of the said term and of such desire shall give to the Landlords six calendar months’ notice in writing (such notice to expire on any quarter day and to be given within a period of six months following the determination of the reviewed rent to be payable from the expiration of the twenty-second thirty-second and forty-second years respectively of the said term but in the event only that such reviewed rent exceeds the yearly rent payable during the twenty-second year of the said term and thereafter during the year immediately preceding the thirty-second and forty-second years respectively of the said term) then on the expiration of such notice as aforesaid the said term shall cease and determine but without prejudice to the rights and remedies of either party as against the other in respect of any antecedent claim or breach of covenant.”

When the relevant words are inserted into the parenthesis, paragraph 5 of the reversionary sub-underlease reads as follows (with the relevant words set out in italics):

“5.

If the Tenants shall be desirous of determining the said term hereby granted at any time after the expiration of the third thirteenth and twenty third years of the said term and of such desire shall give to the Landlords not less than six calendar months' notice in writing (such notice to expire on any quarter day and to be given within a period of six months following the determination of the reviewed rent to be payable from the expiration of the first eleventh and twenty-first years respectively of the said term but in the event only that such reviewed rent exceeds the yearly rent payable during the first year of the said term and thereafter during the year immediately preceding the eleventh and twenty-first years respectively of the said term) then on the expiration of such notice as aforesaid the said term shall cease and determine but without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of covenant”

Network Rail contends, for reasons I will come to later, that it is permissible as a matter of construction to read and construe the paragraph as if it contained the relevant words and that, if this is done, it is plain how the break clause operates. In such event it operates, and only operates: (a) if there has been a rent review of the rent payable at the expiration of the first, eleventh and twenty-first years respectively of the term, (b) if the particular rent review results, on determination, in an increase in rent payable, (c) if the tenant serves a written notice to break of not less than six months, (d) if the notice is given to expire on a quarter day and (e) if the quarter day falls not earlier than the expiry of the third year of the term (in the case of an increase in rent following a determination on a rent review taking place at the expiry of the first year of the term) or not earlier than the expiry of the thirteenth year of the term (in the case of an increase of rent following a determination on a rent review taking place at the expiry of the eleventh year of the term) or not earlier than the expiry of the twenty-third year of the term (in the case of an increase in rent following a determination on a rent review taking place at the expiry of the twenty-first year of the term). It is pointed out that the alteration in the relevant years of the term (comparing paragraph 5 as it appears in the reversionary sub-underlease with paragraph 5 as it appears in the annexed sub-underlease) is occasioned by the splitting of the 52 year term into two so that the twenty-fourth year of the term, as referred to in the annexed sub-underlease, has become the third year of the term in the reversionary sub-underlease, and so on in the case of the other years referred to.

In effect therefore Network Rail contends that the tenant has three, and only three, opportunities of breaking the lease, each of which is dependent upon the landlord activating the rent review machinery at the expiry of the relevant year of the term, and then only if the rent review results in an increase in rent.

KPMG contends that it is not permissible to construe paragraph 5 as if it contained the relevant words. It contends that the paragraph as it appears in the reversionary sub-underlease is quite capable of construction and that, fairly construed, it provides the tenant with five opportunities to break the lease. Three of them can only be exercised after a rent review has taken place and then only if the rent review in question is of the rent payable from the end of the first, eleventh and twenty-first years of the term. These break rights are not dependent upon the rent review resulting in an increase in the rent payable but if on the wording of the remainder of the fifth schedule it is the landlord alone which can invoke the right to have the rent reviewed, then the exercise of these rights is dependent upon the landlord electing to activate the rent review machinery by serving a rent review notice. The remaining two opportunities to break are, as it was described, “free-standing” in that they are not dependent in any way upon the landlord's actions. These further opportunities are (a) a right to break (by giving not less than six months’ written notice expiring on any quarter day) if served during the tenth year of the term and (b) a similar right if the written notice is served during the twentieth year of the term.

KPMG has a fall-back position. This is that part II of the fifth schedule should be construed as conferring (by implication) on the tenant a right to activate the rent review machinery.

Network Rail has two fall-back positions. The first is that, even if it is not permissible to read in the relevant words and the tenant does indeed have two additional break rights, those rights are, like the other three rights, dependent upon there having been a prior rent review. Network Rail’s final fall-back position, prompted by a passing remark from myself, is that the words from “and thereafter” to the end of the parenthesis in paragraph 5 can be ignored as meaningless.

The practical significance of the dispute on construction has been whether the tenant enjoys the two free-standing rights to break. This is because, subject to KPMG’s fall-back contention, the other rights to break depend upon the landlord choosing to activate the rent review machinery with the consequence that it is always open to the landlord to forego the right in order to deny the tenant the opportunity to break. That the landlord should choose not to activate the rent review machinery is far from fanciful. I am told that it chose not to serve a review notice at the end of the first year of the term. It will be open to Network Rail (or whoever the landlord may then be) to seek a rent review at the end of the sixth year of the term but that will not trigger any break right in the tenant (whatever the outcome of the rental determination) since the sixth year of the term, like the sixteenth and twenty-sixth years of the term, is not one to which any break right in the tenant is attached.

With that summary of the respective positions on construction, I now come to the parties’ detailed submissions. I begin with those of Miss Williamson QC who appeared with Mr Fowler, instructed by Linklaters, on behalf of KPMG and then come to those of Mr Driscoll QC who appeared with Mr Leech, instructed by Thomas Eggar, on behalf of Network Rail.

Miss Williamson submitted that, although not well drafted, the provisions of paragraph 5 as a whole, and the final seventeen words of the parenthesis in particular, are capable of sensible construction and that it would be quite wrong to dismiss those words as either surplusage (since they do not duplicate anything) or as devoid of effect (since it is perfectly possible to give them a sensible meaning). The starting point, she said, is the instrument, the reversionary sub-underlease itself, which contains the words in which the parties have chosen to express their bargain. This is particularly so where, as here, the parties have expressed their bargain in a legally drafted document.

She pointed to the so-called “five principles” set out in the speech of Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1WLR 896 which emphasise that a contract is to be construed objectively in the light of any relevant fact surrounding the transaction and known to the parties which a reasonable man would have in mind as shedding light on the parties’ meaning of the words used. But those facts, as Lord Hoffmann pointed out (see the third of the five principles), exclude, for reasons of practical policy, evidence of negotiations or of the parties’ subjective intentions which are only admissible in rectification claims. This is not least because it is a matter of speculation how far such negotiations or intentions were carried into effect.

To similar effect, she said, is the parol evidence rule which excludes evidence designed to add to, vary or contradict written terms of a contract made wholly in writing. This extends to an antecedent agreement, such as the Agreement for Lease and in particular the annexed sub-underlease, which, as occurred here, is superseded by the later agreement, here the initial and reversionary sub-underleases. Since the later instrument has superseded the earlier and it is impossible, without more, to say, to the extent that the two differ, that the parties have not intended to alter the terms of their earlier bargain, it follows that the terms, and a fortiori any arguable meaning, of an antecedent agreement are of no assistance and therefore of no relevance in construing the words of the instrument which the parties finally used to express their bargain. She referred me to the following passage from the judgment of Rix LJ in HIH Casualty and General Insurance Ltd v New Hampshire Insurance Co [2001] 2 Lloyds Rep 161 at paragraphs 81 to 84:

“81.

...Where it is common ground that one contract has been intended to supersede an earlier contract, it must follow that the parties' contract must be found exclusively in the later contract. Thus the earlier contract cannot be used to add to, or modify, the later contract.

82.

But does it follow that the earlier contract cannot even be looked at for the purposes of construing the later contract?

83.

In principle, it would seem to me that it is always admissible to look at a prior contract as part of the matrix or surrounding circumstances of a later contract. I do not see how the parol evidence rule can exclude prior contracts, as distinct from mere negotiations. The difficulty of course is that, where the later contract is intended to supersede the prior contract, it may in the generality of cases simply be useless to try to construe the later contract by reference to the earlier one. Ex hypothesi, the later contract replaces the earlier one and it is likely to be impossible to say that the parties have not wished to alter the terms of their earlier bargain. The earlier contract is unlikely therefore to be of much, if any, assistance. Where the later contract is identical, its construction can stand on its own feet, and in any event its construction should be undertaken primarily by reference to its own overall terms. Where the later contract differs from the earlier contract, prima facie the difference is a deliberate decision to depart from the earlier wording, which again provides no assistance. Therefore a cautious and sceptical approach to finding any assistance in the earlier contract seems to me to be a sound principle. What I doubt, however, is that such a principle can be elevated into a conclusive rule of law.

84.

Where, however, it is not even common ground that the later contract is intended to supersede the earlier contract, I do not see how it can ever be permissible to exclude reference to the earlier contract. I do not see how the relationship of the two contracts can be decided without considering both of them. In essence there are, it seems to me, three possibilities. Either the later contract is intended to supersede the earlier, in which case the above principles apply. Or, the later contract is intended to live together with the earlier contract, to the extent that that is possible, but where that is not possible it may well be proper to regard the later contract as superseding the earlier. Or the later contract is intended to be incorporated into the earlier contract, in which case it is prima facie the second contract which may have to give way to the first in the event of inconsistency. I doubt that it is in any event possible to be dogmatic about these matters.”

It may very well be that the fact that there was an antecedent agreement, in this case the Agreement for Lease, is an admissible background fact but, for the reasons explained by Rix LJ, that fact is of little if any assistance and the terms in which, in that earlier agreement, the parties have expressed themselves, of no assistance. Beyond that the only admissible background facts are (1) the nature of the property (commercial office premises) and (2) the fact that the reversionary sub-underlease follows immediately on from the expiry of the initial sub-underlease. Indeed, the initial sub-underlease is referred to in the reversionary sub-underlease for the purpose of identifying the initial rent payable under the latter.

Looking simply at paragraph 5 which alone sets out the tenant's break rights the right to break the lease arises if (1) the tenant is “desirous of determining … the said term … at any time after the expiration of the third thirteenth and twenty third years of the … term” but since the thirteenth and twenty-third years are necessarily “after the third” year of the term, the effective requirement is a decision to determine at any time after the third year of the term, (2) the tenant serves “not less than six calendar months’ notice in writing” and (3) the notice complies with the conditions set out in the ensuing parenthesis. If those three matters are fulfilled then, on expiry of the notice, the term ceases but without prejudice to accrued rights.

It is the conditions of the notice set out in the parenthesis that require close consideration. What are those conditions? They are (1) that the notice is given so as to expire on a quarter day which can be any quarter day and (2) that it is given either (a) “within a period of six months following the determination of the reviewed rent to be payable from the expiration of the first eleventh and twenty-first years respectively” of the term or (b) “during the year immediately preceding the eleventh and twenty-first years respectively of the said term” (ie, during the tenth and twentieth years of the term).

Miss Williamson accepted that this approach construes “and thereafter” as meaning “and otherwise” or “and after this availability” or “and separately” or, more simply, as “or”. She pointed out that, in context, the expression “and” can mean “or” (or the other equivalents just mentioned). She submitted that this approach was justified by reference to the expression “during” which follows “and thereafter”. “During” can only sensibly be a reference to a further occasion when a valid notice may be given; the draftsman is identifying when this separate right to break the lease arises. The word is pointing to a separate “block” of break rights. The first “block” begins to take effect after the first year of the term (conditional upon there being a rent review) but is not effective to determine the lease before the expiry of the third year of the term. The second (free-standing) “block” comes into play only at a rather later date, namely not before the tenth year of the term and hence “thereafter” as regards the inception of the first block. It is also to be noted, she said, that the tenth and twentieth years of the term are apparently unrelated to any rent review at the end of the first, sixth, eleventh, sixteenth, twenty-first and twenty-sixth years of the term. Another way of understanding the word “thereafter” she said is to read it as if it had been followed by the expression “respectively” so that the two further break dates (triggered by service of notices in, respectively, the tenth and twentieth years) are respective to the prior expiry of the first and third years of the term (in the case of the free-standing break right arising in the tenth year of the term) and to the prior expiry of the eleventh or thirteenth years of the term (in the case of the free-standing break right in the twentieth year of the term).

She went on to submit that there was nothing extraordinary about the tenant having two sets of break rights especially, given the initial sub-underlease, as the tenant is in occupation under what is effectively a 52 year term with the right to break arising, at the earliest, not before the expiry of the twenty-fourth year of the overall term.

She submitted that the words “and thereafter” cannot sensibly refer to and be dependent upon the antecedent rent determination. There is no sense in giving the tenant two break rights linked to the same rental determination. That apart, the words “and thereafter” more naturally relate to the inception of the first “block” of break rights than they do to the determination of the rent payable at the end of the first, eleventh and twenty-first years of the term.

She accepted that the result for which she contends could have been more simply expressed but, on any view, the paragraph is oddly worded. For example the expression “at any time after the expiration of the third, thirteenth and twenty third years of the said term” is unhappily worded (why refer to the thirteenth and twentythird at all and, in any event, how long after is “after”?). Likewise the expression “not less than six calendar months notice”. It invites the question: how much longer than six months may the notice be? Also the expression “the year immediately preceding the eleventh and twenty-first years … of the said term”. It could more simply have referred to the tenth and twentieth years. But that is how the parties have chosen to express themselves.

Miss Williamson's fall-back submission, which assumes that, and therefore only arises if, the sole right in the tenant to break the lease is dependent upon there having been a prior rent review, depends upon an implication by reason of business efficacy. She submitted that if the tenant’s break right (ex hypothesi dependent upon there having been a rent review) is not to be thwarted by the landlord foregoing a rent review in the relevant year (namely, at the end of the first, eleventh and twenty-first years), it is necessary as a matter of business efficacy to imply a right in the tenant itself to initiate a review. That can be achieved by construing the opening words of paragraph 2 of part II (of the fifth schedule) as if after “the date of” in the expression “within three months after the date of service of the review notice” the words “or for” had appeared so that the opening words should mean “if the Landlord and Tenants cannot agree within three months after the date of service of or for the review notice…”. It is permissible, she said, to do this since paragraphs 2 and 3 are more a matter of review machinery than of substance.

Moreover, it was to be noted, she said, that by paragraph 3 of part II - concerned with what rent is payable if the landlord fails to initiate the rent review machinery within the period permitted by paragraph 1 of part II or if by the relevant review date the parties have not agreed what the reviewed rent is to be and the valuer (appointed under paragraph 2) has not given his decision - it is apparently provided that the old rent should only continue to be payable until either an agreement has been reached on the reviewed rent or a determination has been made by the valuer. In short, paragraph 3 appears to envisage that even if the landlord does not exercise his right to initiate a rent review the old rent will continue to be payable but only until such time as there is an agreed rent or a decision by the valuer. This implicitly recognises that a mechanism exists to bring about a determination in the absence of a landlord’s notice triggering the rent review machinery. That can only sensibly be if the tenant can initiate the determination machinery. That gives force, she said, to the suggested implication.

Network Rail’s belief, said Mr Driscoll, is that in the process of transcribing the annexed sub-underlease the typist's eye wandered from the expression “the said term” where that expression occurs on the ninth line of paragraph 5 (as set out at paragraph 11 above) to the same expression where it next occurs in that paragraph missing out the words in between. (This phenomenon is technically known, it seems, as an homoeoteleuton.) The error was not picked up by those responsible for checking the draft and fed through into subsequent drafts and eventually into paragraph 5 in the executed reversionary sub-underlease. Mr Driscoll submitted that the omission of the relevant words was an obvious mistake and that the natural reading of the paragraph without those words makes no sense, commercial or otherwise. It was, he said, nonetheless an obvious mistake even though, as he accepted, many lawyers had failed over the years to spot it. In response to KPMG’s suggested construction, he asked why the parties would agree that the tenant could break the lease on three specific dates but only if there had been an increase in rent on review but at the same time agree that the tenant should have an unqualified right to break the lease that was not linked to any increase in rent but was (a) wholly independent (b) exercisable, apparently, “at any time after the third year” but (c) with its exercise postponed to the tenth year of the term and before any review at the end of the eleventh year. He submitted that when paragraph 5 as appearing in the reversionary sub-underlease is compared to the corresponding paragraph in the annexed sub-underlease it was obvious what had happened: two lines of text had been missed out in the course of retyping the draft.

He submitted that, if satisfied that the mistake occurred and is obvious and that paragraph 5 makes no sense without the relevant words or even if satisfied merely that it makes better sense with them, the court should correct the matter by reading the relevant words into the paragraph as a matter of construction. That was subject only to changing the dates set out in the relevant words so that they accord with the altered dates elsewhere in the paragraph consequent upon the division of the original 52 year term into the initial and reversionary sub-underleases. As so construed, paragraph 5 gives only three rights to break and operates in the way to which I have already referred (see paragraph 13 above).

Mr Driscoll accepted that even as originally drawn in the annexed sub-underlease paragraph 5 was not perfectly worded. He instanced the reference to six calendar month’s notice in writing (neither more nor less) in the fourth line of that draft and to the fact that a notice of that length would fall short of the minimum needed if the review rent should be agreed or determined at any time earlier than 18 months after the review date. He pointed also to the reference towards the end of the parenthesis to “during the year immediately preceding the thirty-second and forty-second years respectively …” which, he said, should have read “during the years immediately preceding the expiration of the thirty-second and forty-second years respectively …”.

Mr Driscoll’s primary submission was that in construing paragraph 5 it is permissible, contrary to Miss Williamson's submissions, to have regard to the wording of paragraph 5 as it appears in the annexed sub-underlease. He submitted not only that the Agreement for Lease with the annexed sub-underlease (including the very words of paragraph 5) was admissible “background” against which paragraph 5 of the reversionary sub-underlease falls to be construed but also that all subsequent negotiations, which it is common ground took place between the making of the Agreement for Lease on 13 December 1974 and the execution of the initial and reversionary sub-underleases on 11 July 1985, are inadmissible background and are to be wholly disregarded.

He submitted that authority justifies this conclusion. He referred to East v Pantiles Plant Hire Ltd [1982] 2 EGLR 111 at 112A in which Brightman LJ stated that two conditions had to be satisfied before a mistake in a written instrument could be corrected as a matter of construction without obtaining a decree in an action for rectification, namely “first, there must be a clear mistake on the face of the instrument; secondly, it must be clear what correction ought to be made in order to cure the mistake”. He submitted that the decision of the Court of Appeal in Holding & Barnes plc v Hill House Hammond Ltd [2001] EWCA Civ 1334 had carried the principle further in showing that the court will look at the same background facts to determine not just whether the two conditions referred to by Brightman in LJ in East v Pantiles are satisfied but also for the purposes of construction generally. In that case which concerned a landlord’s repairing covenant the Court of Appeal looked at six other leases executed contemporaneously with the lease in issue as part of the same overall transaction in determining (a) that the words of the particular covenant contained an obvious mistake (because as it stood the clause was nonsensical) and (b) what the mistake was. It did so by comparing the wording of the covenant it had to construe with the wording in the corresponding covenant in one of the other leases. In so proceeding, the court concluded that certain words in the covenant in question should be simply ignored.

He also referred me to the decision of the Court of Appeal in St Edmundsbury and Ipswich Diocesan Board of Finance v Clark (№ 2) [1975] 1WLR 468 at 476G, to a dictum of Lord Hope to like effect in Melanesian Mission Trust Board v Australian Mutual Provident Society [1997] 2 EGLR 128 at 129F, and to a dictum of Lord Steyn in Sirius International Insurance Co v FAI General Insurance Ltd [2004] 1WLR 3251 at paragraphs [18] to [19] emphasising the need to construe a commercial instrument not with a view to probing the real intentions of the parties to it but “to ascertain the contextual meaning of the relevant contractual language” in order to establish objectively “what a reasonable person, circumstanced as the actual parties were, would have understood the parties to have meant by the use of specific language” and thereby to endeavour to arrive at “a commercially sensible construction”. He also referred to an observation of Patten J in HSBC Bank plc v Liberty Mutual Insurance Co (UK) Ltd [2001] AER D 61 at paragraph [20] that:

“One does not ... readily or easily conclude that a mistake has been made. It is only when from the document itself, the surrounding circumstances, or the consequences of adopting a particular construction that it becomes apparent that something must have gone wrong that the court is entitled to abandon the dictionary and the grammar book and in effect to reconstruct or re-write the document.”

As an example of where the court was willing to construe a clause in an instrument as if certain words (not contained in the clause ) were included, Mr Driscoll referred me to the decision of the House of Lords in Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715. In that case there was an obvious gap in the wording of a so-called Himalaya clause contained in a bill of lading. The particular clause read as follows:

“(2)

Without prejudice to the generality of the provisions in this bill of lading, every exemption limitation, condition and liberty herein contained and every right exemption from liability, defence and immunity of whatsoever nature applicable to the carrier or to which the carrier is entitled hereunder shall also be available to and shall extend to protect every such servant or agent of the carrier [*] is or shall be deemed to be acting on behalf of and for the benefit of all persons who are or might be his servants or agents …” (asterisk added by Lord Bingham)

Lord Bingham said this (at paragraphs [21] to [23]):

“21

It is plain that the printing of this clause leaves something to be desired.”

Lord Bingham then gave an example and continued:

“It is also plain, and common ground, that there is some omission at the point where I have inserted the asterisk in square brackets.”

He then referred to the way in which the judge at first instance and the Court of Appeal had approached the matter, namely by interpolating “(who)” in the gap in the wording. Lord Bingham continued:

“22.

While acknowledging that there was no justification for inserting ‘who’ other than a need to correct an obvious grammatical solecism, Mr Milligan urged that, since it was not the function of the courts to make or rewrite the parties’ contracts, the interpolation to be made should be the least intrusive reasonably possible to make sense of the clause. Mr Gee contended (a) that it was clear what words had been omitted, and (b) that the omission was explained by the phenomenon, technically known as homoeoteleuton … As to (a), Mr Gee contended that the missing words were ‘acting as aforesaid and for the purpose of all the foregoing provisions of this clause the carrier…’ These are the words to be found in the Conline bill of lading form, on which clause 5 as quoted above has been closely modelled, although with some additions, deletions and changes of language. It is a form of bill in very wide use, and was the subject of judicial consideration in … [various cases are referred to]. After the square brackets the clause again picks up the language of the Conline bill. As to (b), Mr Gee submitted that the transcriber’s eye had wandered from “carrier” immediately before the square brackets to the same word at the end of the suggested interpolation.

23.

I take it to be clear in principle that the court should not interpret words into a written instrument, of whatever nature, unless it is clear both that words have been omitted and what those relevant words were … In the present case there is agreed to be an omission. It is also plain, in my opinion for the reasons which Mr Gee gave, what words were omitted and how they came to be omitted. I would accordingly construe the clause ‘acting as aforesaid and for the purpose of all the foregoing provisions of this clause the carrier’ appeared in place of the square brackets I have inserted.”

Agreeing, Lord Millett said this (at paragraphs [192] to [194]):

“192

… the clause does not make grammatical sense as it stands, and it is obvious that words have been omitted. The court must, therefore, supply the omission by implying at least the minimum necessary for the clause to make grammatical sense. This is what all the judges below did. But the authorities show that in a proper case the court will go further. Where it can see, not only that words have been omitted, but what those words are, then it is its duty to supply them. It is not necessary that the court should be certain precisely what words have been omitted; it is sufficient that it knows their gist. The process is one of construction, not rectification; this is evident from the fact that Court of Chancery not infrequently supplied omissions in wills at a time when it had no jurisdiction to rectify them. …

194.

It is obvious that the clause is not an original work of legal draftmanship but is taken from a precedent. Several versions of the clause are in circulation, and it is impossible to identify the particular precedent from which the defective clause in the present case was taken. But they all employ the same mechanism of agency to give legal efficacy to the clause; they all do so by identical or nearly identical words; and they all incorporate the mechanism at precisely that part of the present clause where words have been omitted. In my opinion this is a clear case where the court can and should supply the missing words.”

Mr Driscoll submitted that the fact that the reversionary sub-underlease (together with the initial sub-underlease) superseded the earlier Agreement for Lease did not mean that the earlier contract could not be looked at in order to construe the later document. He referred me to the same observations of Rix LJ in HIH Casualty and General Insurance Ltd v New Hampshire Insurance Co (see above) as Miss Williamson had cited. He also referred to other examples of where the court has looked at an earlier agreement to construe a later instrument between the same parties. Thus, in Ladbroke Group plc v Bristol City Council [1988] EGLR 126 the Court of Appeal stated that it was permissible and relevant to look at the terms of a draft lease (annexed to an agreement for lease) to ascertain the parties’ intention in providing in the lease for a period of delay before a rent review should take place. It did so in order to establish the date from which the period of delay was intended to start (and thus to ascertain the duration of the delay). In Peacock v Custins [2001] 1 EGLR 87 the Court of Appeal looked at an antecedent contract to ascertain the precise size and location of a right of way granted by a conveyance executed with a view to implementing the earlier contract.

Mr Driscoll’s first fallback submission, if his argument in favour of reading the relevant words into paragraph 5 should not succeed and the court must construe the words of paragraph 5 as they stand, was that there are indeed two additional break opportunities available to the tenant over and above the three which arise by giving a written notice within six months of the determination of the reviewed rent payable on expiry of the first, eleventh and twenty first years respectively of the term. However, like these other three, the two additional opportunities only arise if there has been a determination of a reviewed rent at the expiry of the first or, as the case may be, the eleventh years of the term. Since the court must construe the words as they stand, he accepted that there would not be the additional requirement (present if his preliminary submission succeeds and the relevant words are read into the paragraph) that the determination has resulted in an increase in the rent payable.

In support of this fall-back construction, he pointed to the fact that paragraph 5 appears in part II of fifth schedule which is otherwise exclusively concerned with rent reviews. He submitted that the break right was therefore probably intended to be linked to a rent review rather than to be free-standing or independent. The two additional break opportunities would comprise a break right exercisable in the tenth year (“… the year immediately preceding the eleventh …year[s]… of the said term …”) if but only if there had been a rent review in the first year of the term (which, it appears, there has not been) and a break right exercisable in the twentieth year of the term (“… the year immediately preceding the twenty-first year[s] … of the said term…”) if but only if there should be a rent review in the eleventh year of the term. This, he said, would enable some meaning to be given to the word “thereafter” in that the words “and thereafter” would relate back to the words “determination of the reviewed rent”. In other words and on this approach, the tenant may serve a notice terminating the lease after “the determination of the rent review to be payable from the expiration of the first, eleventh and twenty-first years respectively of the said term”.

He accepted that this construction made far from perfect commercial sense but submitted that it was preferable to Miss Williamson’s construction which in substance involved construing “and thereafter” as “or” and made less grammatical sense. He said that his construction also avoided having to ignore (as Miss Williamson’s construction required one to do) the reference to the eleventh and twenty-first years in the composite phrase “from the expiration of the first eleventh and twenty-first years respectively of the said term” or, depending upon which block of dates was referred to, to ignore the references to the thirteenth and twenty-third years of the term in the composite phrase “after the expiration of the third thirteenth and twentythird years of the said term”.

Mr Driscoll’s second fall-back submission, which like the first only arises if the court must construe the words of paragraph 5 as they stand, was that the last seventeen words of the parenthesis (ie all of the words in the parenthesis from “and thereafter” onwards) should be ignored altogether on the ground that the court cannot give any sensible meaning to them.

While I accept Mr Driscoll’s submission that the admissible background includes the fact that the parties entered into the Agreement for Lease (to which was attached the annexed sub-underlease containing paragraph 5 in a form which included the relevant words), I am not persuaded that it is open to me, without more, to read paragraph 5 of the reversionary sub-underlease as if the relevant words had been inserted.

As the authorities make clear, not least the citation referred to from the speech of Lord Bingham in Agrosin, it must be clear to the court of construction not only that words have been erroneously omitted but also what the words are (or at least their gist). I am willing to go along with Mr Driscoll in agreeing that something has gone wrong with the wording of paragraph 5 but I am far from persuaded, by doing no more than looking at paragraph 5 in the annexed sub-underlease, that the error is one of omission and that what is missing are the relevant words.

There are two reasons why I am not persuaded. The first is that it cannot be right simply to have regard to the Agreement for Lease (with its annexed sub-underlease) as a relevant background circumstance against which to construe the reversionary sub-underlease without also having regard to the fact, which in my judgment is also admissible background, that the parties thereafter set about negotiating amendments to the annexed sub-underlease (even if the court is not entitled to have regard to the precise course of those negotiations) between 13 December 1974 when the Agreement for Lease was entered into and 11 July 1985 when the initial and reversionary sub-underleases were executed. It is obvious from a comparison of part II of the fifth schedule (as executed) with the fifth schedule as it appeared in the annexed sub-underlease that several amendments (going beyond merely stylistic or cosmetic changes) had been made, not least to paragraph 5 itself. The court cannot be clear that there has been an erroneous omission of the relevant words. For all the court knows, the parties’ intention may have been to omit all of the words in the parenthesis from and after the words “but in the event only…” (as they appear in paragraph 5 in the annexed sub-underlease), alternatively the word “thereafter” may have been mistranscribed from an intermediate draft, alternatively some other words might have been intended but, in the course of typing, erroneously left out. Once one admits as a possibility that the parties may have agreed alterations to the wording of paragraph 5 (and a comparison of paragraph 5 as executed with paragraph 5 as it appears in the annexed sub-underlease shows that in other respects the parties do seem in fact to have agreed alterations) it is not possible to conclude that the omission is of the relevant words simply because that is how that part of paragraph 5 appeared in the annexed sub-underlease.

I should add that the fact that the alterations (or some of them), including the altered effect of paragraph 5 resulting from the omission of the relevant words, are not modifications to the annexed sub-underlease within the ambit of what clause 10 of the Agreement for Lease (set out at paragraph 3 above) permits – a point which Mr Driscoll deployed at one stage of his submissions – does not assist him since, irrespective of what clause 10 states, it was always open to the parties to agree any alteration they wanted to make to the sub-underlease (for example, splitting the single 52 year term into two consecutive leases) and signify that agreement by executing instruments which reflected those changes. The question is whether the altered form of paragraph 5 is one of the agreed changes and if not what it was that was agreed?

The second reason for rejecting Mr Driscoll’s submission is that the plain and obvious intention of the parties, at any rate to judge simply by looking at the Agreement for Lease and the subsequent execution of the initial and the reversionary sub-underleases, was that the latter should set out the terms of the leasehold relationship between the parties for the combined 52 years term to which they relate and that they were intended to do so to the exclusion of the terms set out in the annexed sub-underlease which the parties had earlier agreed should govern that relationship. Once that position is reached, the remarks of Rix LJ in paragraph 83 of HIH Casualty and General Insurance v New Hampshire Insurance (cited in paragraph 22 above) are in point, namely, that the parties’ contract must be found exclusively in the terms of the initial and reversionary sub-underleases and that the Agreement for Lease, in particular the annexed sub-underlease, cannot be used to contradict those terms.

It follows that, tempting though it is to adopt the course so eloquently advanced by Mr Driscoll as his primary submission and undertake the simple comparison of the draft and executed versions of paragraph 5, there is in my view no escape from having to examine the course of dealings between the parties from December 1974 until July 1985 to determine whether certain words were accidentally omitted from the paragraph and if they were whether the mistake is of a kind that can be put right by recourse to the equitable doctrine of rectification.

I should also add that I did not find the authorities to which Mr Driscoll referred me to be of any particular assistance. Over and above the various statements of general principle governing questions of construction and, in particular, setting out the circumstances in which a court may by construction correct a mistake in a written instrument, the closest analogy to the present case was the willingness of the House of Lords in Agrosin to read the Himalaya clause in that case as if certain relevant words had been included. But it is to be observed that it was agreed between the parties to that dispute that a mistake had occurred. In any event, a reading of the clause made it fairly obvious that there had been. In the result the only question was how the omission was to be corrected. As to that, the House had no difficulty in supplying the missing words from a form of clause “in very wide use” (according to Lord Bingham) and which (according to Lord Millett) had been taken from a precedent of which “several versions … are in circulation” but all of which “employ the same mechanism of agency to give legal efficacy to the clause”, “do so by identical or nearly identical words” and “incorporate the mechanism at precisely that part of the present clause where words have been omitted”. That, in my view, is a far cry from this case where the paragraph in question is, or would seem to be, one specially drafted for use in the sub-underlease. Of the other cases, Holding & Barnes turned on the acceptance by both sides that the other leases, all of which had been executed at the same time, were admissible in evidence (on the correctness of which Sir Martin Nourse preferred to express no concluded view: see paragraph 43) and the fact that of the other six leases one was, on the point in issue, in pari materia to the lease in dispute and enabled the court to reach the conclusion it did. In the Ladbroke Group case the court felt able to look at the earlier agreement because the lease was expressed to be granted pursuant to it and because the reference to a particular date in the lease was “quite inexplicable” (see page 128M) if read in isolation, ie without recourse to the earlier agreement. In Peacock v Custins the court was concerned to establish just what it was that had been granted by way of easement by the conveyance in question, for which purpose the antecedent contract, which was capable of shedding light on the matter, was an obvious port of call.

What then is the correct construction of paragraph 5 as it stands?

I reject Mr Driscoll’s second fall-back submission that the last seventeen words of the parenthesis are incapable of sensible meaning.

I also reject Miss Williamson’s fall-back submission that the tenant can initiate the rent review machinery. As to that, paragraph 1 states that the reviewed rent shall be subject to upwards only review “… as follows …”. What follows is the agreed mechanism for achieving the review. It is not permissible to imply some other mechanism for review (whether upwards only or otherwise). Paragraph 1(1) enables the process to be activated by the landlord serving a written notice. If the parties had intended that either party should have the right to give the notice or otherwise activate the review machinery, the clause could easily have so provided. That simple fact cannot, in my view, be sidestepped by reading in (as Miss Williamson would have me do) “or for” into paragraph 2. In any event, as Mr Driscoll pointed out, what falls to be agreed or determined is the “reviewed rent”. According to paragraph 1(3) the reviewed rent is the rent that falls to be reviewed following service by the landlord of a review notice in accordance with the earlier provisions of the paragraph. Nor does paragraph 3 assist Miss Williamson. That provision, fairly construed, merely provides for what should happen if either the landlord does not serve a review notice (ie there is no review) or he does but by the relevant review date the reviewed rent has not been agreed or determined. In either case the passing rent continues to be paid. It is true that the phrase “… until agreement shall be reached or the said decision shall be made whichever shall first occur” at the end of the first sentence in paragraph 3 is not happily worded since it omits the other possibility, namely that the landlord has failed to serve a review notice. But the intention in such event that the passing rent should continue to be paid is reasonably obvious. In my view, business efficacy (even in the event that Miss Williamson's primary argument on construction does not succeed) does not justify the implication which she urged.

How then is paragraph 5 as it stands to be construed? Neither of the rival constructions advanced in argument strikes me as particularly compelling from a commercial standpoint. Both involve some violence to the language used. Of the two I prefer that advanced by Miss Williamson. I do not regard it as inherently unlikely that the tenant should have a right to break independent of a rent review given, as I have concluded, that whether there is a rent review in the relevant years is entirely at the landlord’s discretion. The effect is that the tenant has the opportunity, independent of any rent review, to break the lease on a quarter day falling in the second half of, or after the expiry of, the tenth and, separately, the twentieth years of the term and, in addition, a right to break (if the landlord initiates the relevant rent review) on a quarter day falling after (and likely to be shortly after) the third, thirteenth and twenty-third years of the term. The fact that, on this view, the two additional free-standing rights to break are not linked to a rent review, notwithstanding that they appear in a schedule otherwise entirely concerned with rent reviews, is not, in my view, a sufficient factor to lead me to favour the construction advanced by Mr Driscoll. I accept that the construction involves construing “and thereafter” as “or”.

It follows that, subject to Network Rail’s Part 20 claim, I would be willing to make the first of the two declarations sought on the amended particulars attached to KPMG’s Part 8 claim form.

In view of my conclusion on construction, Network Rail’s rectification claim now falls to be considered. The claim is for rectification of paragraph 5 of part II of the fifth schedule to the reversionary sub-underlease by the insertion of the relevant words before “and thereafter”.

The foundation for the claim is that, as I have mentioned, the relevant words were left out by BRB in error. Network Rail believes that this happened accidentally in the course of transcription (the homoeoteleuton) when the annexed sub-underlease was re-typed with amendments in or about late 1978. Its case is that at no material time were BRB, King's College or their respective advisers (and in particular Simmons & Simmons, their solicitors) aware of the error.

The claim is put on three alternative bases. The first is that PMM did not become aware of the omission or of the effect of it but executed the reversionary sub-underlease intending and believing that paragraph 5 was in this respect the same as in the annexed sub-underlease. The second is that PMM did become aware of the omission but believed that the only effect of it was to remove the condition for exercise of the break right that the rent review at the end of the relevant year should result in an increase in rent. The third is that PMM did become aware of the omission, appreciated that this probably gave to it five rights to break and that the additional two were not dependent upon any rent review determination and, acting though a Mr Terence Webber, a salaried partner at the time of PMM, and a Mr Donald Amlot, a partner at the time of Stephenson Harwood & Tatham, knew that this was an error. The first two ways in which the claim is put rely on mutual mistake; the third relies on unilateral mistake.

If any of these bases of claim can be proved, it is contended that a sufficient case for rectification of the reversionary sub-underlease by the inclusion of the relevant words would be established since it would be unconscionable in such circumstances for KPMG (as PMM’s successor in title to the reversionary sub-underlease which it took with notice of the rectification claim) to object to rectification.

In considering a claim such as this, where the material events occurred so long ago, where some of the key participants have died and where some of the relevant documentation is missing, I remind myself of the well known observation of Brightman LJ in Thomas Bates Ltd v Wyndham’s (Lingerie) Ltd [1981] 1WLR 505 at 521 on the standard of proof in rectification claims that:

“The standard of proof required in an action of rectification to establish the common intention of the parties is, in my view, the civil standard of balance of probability. But as the alleged common intention ex hypothesi contradicts the written instrument, convincing proof is required in order to counteract the cogent evidence of the parties’ intention displayed by the instrument itself. It is not, I think, the standard of proof which is high, so differing from the normal civil standard, but the evidential requirement needed to counteract the inherent probability that the written instrument truly represents the parties’ intention because it is a document signed by the parties.

The standard of proof is no different in a case of so-called unilateral mistake …”

A major difficulty in this case is that the relevant events occurred for the most part in early to mid-1980. Several of the participants have since died, in particular Mr Douglas Benzie who was a senior equity partner in PMM at the time. Those who remain and who were called had, not surprisingly, very little independent recollection of the relevant events and no or practically no recall of any of the details. Another difficulty was that the only available files were those kept by the two firms of solicitors involved at the time, Stephenson Harwood & Tatham (to whom I shall refer simply as Stephenson Harwood which is how the firm is currently known) on behalf of PMM and Simmons & Simmons on behalf of BRB (and King's College). Neither PMM’s files nor those of BRB or King's College have survived. Nor has the travelling draft (or drafts) passing between BRB and King's College between December 1974 and March 1980. This culminated in a revised form of draft sub-underlease (based upon the annexed sub-underlease) which did not contain the relevant words and was sent to Stephenson Harwood under cover of a letter dated 3 March 1980 for consideration and approval by PMM. Much of the oral evidence was little more than an attempt to reconstruct events by reference to the available correspondence. There was a considerable element of “I would have done this or that” or “my practice was to do so and so” rather than recollection of what actually occurred.

The documentary evidence establishes that proposals for the joint redevelopment of the site at Puddle Dock went back to 1970, if not earlier, since by that date King’s College Cambridge, which owned a part of the site, and BRB (as it then was), which owned the remainder, were in negotiation with PMM, which was looking for new head office accommodation. The negotiation was with a view to PMM becoming the occupying tenant of the proposed new building. King's College was represented on the legal side by Simmons & Simmons and on the property side by Savills. BRB had its own in-house team of lawyers and property specialists. Prominent among them were a Mr Kersey, BRB’s chief solicitor, and his successor, a Mr Roberts. Both are believed to have since died. PMM was advised by Stephenson Harwood (from mid-1972 or so led by Mr Donald Amlot who was the firm’s senior property partner) on the legal side and by Jones Lang Wootton (“JLW”) on the property side. Mr Amlot was called to give evidence. As matters worked out, Simmons & Simmons, led by Mr John Calvert one of its partners, represented both King's College and BRB in the negotiations with PMM and its advisers. Mr Calvert has since died.

By March 1972 the three parties, King's College, BRB and PMM, were in negotiation over heads of agreement designed to set out the basis of their proposals for the site. In fact, heads of agreement, the terms of which were more or less finalised by late July 1974, were never signed. They were replaced by the Agreement for Lease (with the annexed sub-underlease) entered into by the three parties on 13 December 1974.

The negotiations contemplated, as ultimately reflected in the draft heads of agreement, the construction of a building of approximately 100,000 square feet together with private parking. The works of construction were to be carried out in two stages to agreed drawings and specifications. The negotiations also contemplated that PMM should take a 52 year lease from the date of practical completion of stage two at an initial rent of £8.60 per square foot of net useable office space (with a lesser rate for other types of space) to be on the terms of a form of agreement for lease with attached lease to be agreed (with a mechanism for settling the documents in the event of disagreement). The draft heads envisaged upward only rent reviews to open market rent at the end of the seventh year of the term and at the end of each subsequent fifth year.

The heads of agreement, as I have mentioned, were replaced by the Agreement for Lease entered into on 13 December 1974. Attached to it, as I have also mentioned, was the annexed sub-underlease for 52 years from the date of practical completion of stage two of the building works (in the event from 25 July 1977).

One matter which was a topic of considerable debate between King's College and BRB on the one hand and PMM on the other was how frequently PMM should be entitled to break its lease. By early July 1972, according to the correspondence, it had been agreed in principle that PMM’s right to break should be linked to a review of the rent (in that it should be exercisable within a given period of determination of the reviewed rent) but should only be exercisable (as it was put in a draft dated 29 June 1972) “in the event that such new rent exceeds the rent payable prior to such date of review”.

A sharp difference of opinion arose over the frequency of exercise of the right. In a letter dated 12 July 1972 from Savills to Mr Calvert of Simmons & Simmons, sent following a meeting between Savills and JLW, Savills reported that difference in the following terms:

“Here we have a substantial difference of opinion as to the intent which could cause a considerable discussion. We on our side were under the impression that the lessee required his term to have a break clause half-way in order that he could if necessary opt out of the remainder of the term. On the other hand the lessee understands that the break was to become operative as from the half-way mark and could be put into effect at any one of the subsequent review dates.

There is some room for doubt as to what was intended in the draft Heads of agreement which were prepared initially although looking further back it does seem that one of the letters from Jones Lang Wootton fairly clearly sets out their point of view. On the other hand it is our opinion that if such a clause is allowed to go through, it could seriously affect the value of the property from a value point of view… Our point is of course that if the lessee is prepared to take a view for 21 years now he should be prepared to do the same at the end of that term and not leave us with the situation that we have to go through the same agony every five years. Frankly, we do not think that this is acceptable.”

This resulted in Savills sending to JLW under cover of a letter dated 25 July 1972 a further draft of the heads of agreement in which the tenant’s right to break is exercisable only at the expiry of the twenty-fourth year of the term following determination of the new rent to be payable as from the expiry of the twenty-second year and then only “in the event that such new rent exceeds the annual rent payable during the 22^nd year of the term”.

This evoked a speedy response. By a letter dated 28 July 1972 JLW stated:

“I was frankly amazed to see two alterations to the previous draft which are as follows: … clause 5(2) - Determination of Lease - where it is suggested that the tenant’s right to break should operate at the 24^th year only, and not subsequently. Both these points are quite contrary to what was agreed at the meeting at my Client’s offices on 22^nd March, the main points of which were set out in the draft Heads of agreement forwarded … by me on 5^th April.”

By a further letter dated 9 August 1972 JLW wrote to Savills stating that:

“There can be no question of renegotiating matters of principle which were agreed months ago …”

By letter dated 10 August 1972 Savills replied to JLW acknowledging:

“… that there may have been some misunderstanding on our side. You for your part are quite clear in your own mind as to the proposal but we certainly had not interpreted it in the same terms. However, I think that again you must agree that it would be quite irresponsible for us to suggest to our Clients that it would be right for them to accept the situation where their investment could be disrupted at the whim of the tenant every 5 years without any certainty that it might happen at all. Indeed were one to attempt to finance a development on such a basis it is clear what the answer would be. On the other hand your Clients are taking a view about this property at the present time for a period of 21 years and I can see no reason why they should not do exactly the same when they come to the end of that period. Indeed it was originally intended that your Clients should be granted a lease of 42 years or more without break in order to protect the flexibility which they would have available to them by reason of a lease of the whole of the development.”

A further meeting took place in the course of that month. Further revisions to the draft heads of agreement followed. Among them, in the shape of an attached rider called “Rider C”, was a provision entitling PMM to break the lease at the end of the twenty-fourth year of the term and two years after each subsequent rent review date. The covering letter from Stephenson Harwood stated:

“Our Clients and their Agents do feel strongly that this reflects what was agreed at the preliminary meeting but this again is being discussed between the respective Agents at the moment.”

The story now moves forward a year to October 1973 when Stephenson Harwood sent the amended draft of the heads of agreement both to PMM (their client) and to Simmons & Simmons. The draft contained further amendments to Rider C. In their covering letter to PMM Stephenson Harwood stated:

“… We have now heard … that the matter is to proceed and accordingly we enclose a copy of the draft Deed of Agreement in the form we have now submitted to Messrs Simmons & Simmons … The determination clause 5(2) has been altered to provide that you are only entitled to determine the Lease on the expiry of the 24^th, 34^th and the 44^th years in the circumstances set out.”

This marks the point at which what was later to become paragraph 5 of the fifth schedule to the annexed sub-underlease became fixed as regards the essential terms of the tenant’s break right. More exchanges followed between the parties but, so far as can be seen, not on this issue. The relevant clause at this stage was as follows (I read from the draft sent by Simmons & Simmons to Stephenson Harwood under cover of a letter dated 15 March 1974):

“PMM shall be entitled to determine the Lease at the expiry of the twenty-fourth, thirty-fourth and forty-fourth years of the term by notice in writing to the Landlord given at any time within the period of six months following the determination of the new annual rent to be payable as from the expiration of the twenty-second, thirty-second and forty-second years of the term in the event that such new rent exceeds the annual rent payable during the twenty-second year of the term and thereafter during the year immediately preceding the thirty-second and forty-second years of the term.”

By letter dated 20 March 1974 Stephenson Harwood reported to PMM with a copy of the draft heads of agreement. Their comment on clause 5(2) was that it came from their amendments to the previous draft. Correspondence between the parties continued on other matters, including whether there existed any binding contract between them notwithstanding non-signature of the draft heads of agreement. Eventually, the form of the heads of agreement was agreed (it contained the tenant’s break clause in the form already referred to) but it was not executed. The likely explanation is that BRB was not prepared to enter into heads of agreement until the terms of a superior lease had been agreed.

Instead, in early October 1974, a draft form of Agreement for Lease was prepared by Mr Kersey, at the time chief solicitor to BRB. A draft of what was to become the annexed sub-underlease followed in early December. There appears to have been no discussion over the wording of the tenant’s break right (now to be found in paragraph 5 of the fifth schedule), at all events no discussion of which any documentary record survives. There was, it seems, some pressure on the parties for fiscal reasons to conclude the Agreement for Lease. Under cover of a letter dated 9 December 1974 Stephenson Harwood wrote to Mr Kersey enclosing a marked-up version of the annexed sub-underlease. The draft shows that the tenant’s break clause had been lifted from the draft heads of agreement with only minor changes in language and that Mr Amlot of Stephenson Harwood had no objection to it.

As I have mentioned, on 13 December 1974 the Agreement for Lease (with the annexed sub-underlease) was executed.

I can take up the matter again in 1978. In the meantime construction of the new offices had proceeded to practical completion and PMM had taken up occupation of the new building.

Between January 1978 and January 1980 the terms of the annexed sub-underlease were the subject of discussion and amendment between BRB’s solicitor, Mr Roberts (he had taken over from Mr Kersey), and Mr Alan Butler of Simmons & Simmons. It will be recalled that in communications with PMM and Stephenson Harwood, Simmons & Simmons represented both King’s College and BRB. But as between BRB and King’s College, they were the solicitors advising the latter. Mr Butler, a partner in Simmons & Simmons, had become involved in the transaction in about mid-1974 and by 1979 if not earlier was the principal partner with responsibility for the matter. He too was called to give evidence. There was no suggestion, at any rate in any of the correspondence that has survived, that paragraph 5 of the fifth schedule should be modified in any way. Its terms do not appear to have been the subject of any mention in the course of the communications between the parties over this fairly prolonged period.

In the minutes of a meeting which took place on 1 November 1978 between King’s College and BRB (it was one of a series of regular meetings on the matter that took place between them) with Savills and Simmons & Simmons present, it was recorded that the “draft lease, underlease and sub-underlease have been re-typed and are being circulated for checking”. This duly occurred. Thereafter further meetings took place and further correspondence passed between BRB and Simmons & Simmons to discuss and agree further amendments to the form of sub-underlease. The re-typed draft of that document became a new travelling draft. This continued over a period of many months. The process was described thus in a letter dated 24 May 1979 by Mr Butler to Mr Richard Arkwright, the Estates Bursar of King’s College:

“The basic draft is that which was the up-dated version of the draft attached to the original Agreement. Subsequently, I agreed with David Roberts various amendments in order to clarify one or two points and further to up-date the form of the draft.”

The process of amendment continued. As yet no version of the updated sub-underlease had been submitted to PMM or their advisers.

By October 1979 Mr Arkwright of King’s College was asking Mr Butler to arrange for clean copies of the draft sub-underlease to be circulated. By letter dated 12 October 1979 Mr Butler responded by stating that clean copies of the corrected draft were being printed and that he hoped to distribute them at the beginning of the following week. This duly happened and under cover of letters dated 17 October 1979 he sent clean copies of the draft sub-underlease to both King’s College and to BRB. In his letters to Mr Roberts of BRB Mr Butler invited him to make any appropriate amendments to the draft which arose out of his final revisions to it and to return the amendments to him “so that I can have these put onto the automatic typewriters …”

The process of further amendment continued however. By a memorandum passing between a Mr Chiverton of BRB’s Property Board and Mr Roberts yet further amendments to the draft were discussed and agreed and the resulting exchange passed to Mr Butler for incorporation into the draft. Mr Butler’s letter to Mr Arkwright of King’s College dated 27 December 1979 referred to the further amendments as “all trivial in the extreme” adding that “in order that we may finally resolve the draft document I have incorporated them into my copy.” By now a note of frustration was creeping into Mr Butler’s communications with King’s College over the propensity of those at BRB involved in the matter to suggest further amendments to the draft. Thus, on 9 January 1980, by which time the process of amendment to the draft had reached a conclusion, Mr Butler wrote to Mr Arkwright enclosing a copy of the further revised sub-underlease and expressing the hope that it was now “in its final form” but that:

“so as not to tempt providence I will not send a copy of this revised draft to David Roberts until I submit it to Stephenson Harwood”.

A few days later, Mr Amlot of Stephenson Harwood wrote to Mr Butler. He referred to having last heard from Simmons & Simmons on 10 April 1979 and asked whether Mr Butler was in a position to “make progress” adding that:

“Peats always understood that there would be some delay but it is now getting on for four years since practical completion.”

Mr Butler replied to this on 6 February in which he expressed the hope “to be able to let you have the updated drafted lease shortly” adding that so far as he, Mr Butler was aware, he only awaited copies of some plans.

Mr Butler was finally able to let Mr Amlot have a copy of the revised draft sub-underlease in early March 1980. Under cover of a letter dated 3 March, he sent two copies of the draft to Mr Amlot with a full set of plans. His letter stated:

“You will appreciate that the draft has been updated, and completed, in many places although none of the variations are of any substance.”

Unhelpfully from Mr Amlot’s standpoint (and therefore, from the point of view of PMM whom he was advising) the draft was, in effect, a clean copy; it did not show the extent to which it differed from the terms of the annexed sub-underlease. In fact, it did so in over 40 different respects. Nor, in my view, was it altogether correct for Mr Butler to have written that “none of the variations are of any substance”. At least two of them and arguably others were.

Mr Amlot arranged for someone in his office to compare the new draft with the annexed sub-underlease of which, of course, he had a copy. The differences were highlighted in red on the new draft. The document has survived and a copy of it was in evidence. Whoever it was who carried out the exercise, although he highlighted in red the point at which the relevant words had been left out (although he did not indicate what the relevant words were) and noted changes elsewhere in the schedule, nevertheless missed at least three other changes in the schedule, one in paragraph 2, another in paragraph 4 and the third in paragraph 5 itself.

Armed with the results of this comparison exercise, Mr Amlot then sent a detailed letter to Mr Benzie of PMM identifying a number (but not all) of the changes. At the time Mr Benzie was, as I have mentioned, a senior equity partner of PMM and member of an internal PMM committee, called the Accommodation Committee, which had the responsibility of managing the firm’s transfer to its new accommodation. Mr Amlot’s letter which was dated 21 March 1980 ran to just over four pages. It began by referring to a recent conversation with Mr Benzie and enclosed a copy of the new draft of the sub-underlease together with Mr Butler’s covering letter. Mr Amlot’s letter continued:

“We have compared the new draft with the draft attached to the Agreement [for Lease] in detail and all of the variations are marked on the enclosed draft.”

If the “enclosed draft” was the same as the marked-up draft in evidence it is plain that not all the variations had been noted.

Mr Amlot then proceeded to “comment on the amendments”. In some he expressed himself in clear terms. Thus, in reference to one amendment he noted: “the word ‘not’ has been omitted. I am sure this is just a typing error.” In another he noted: “the following words have been omitted where indicated.” The words in question are then set out followed by a comment introduced by the words “it may well be that …”. Of another (an indemnity) he commented: “this is completely new … to require an indemnity from you seems unnecessary.” Of yet another (relating to various exceptions) he stated: “these have been amplified but seem within the spirit of the original Agreement”. Of another he noted: “the Landlords have in fact slightly reduced what they require to except and reserve.” Of another he noted: “A new right has been added … on the face of it there is no objection to this and seems within the spirit of the Agreement.” One alteration which had been made was to the covenant relating to assignments and under-letting. Its scope had been widened to BMM’s detriment. Mr Amlot’s comment was that:

“The alterations that have been made are, I think, the most serious alterations to the original deal and I think are quite unacceptable and do not fall within the scope of any amendments that it was always understood would be required. It was never envisaged that the basic commercial terms would be altered …”

When it came to the fifth schedule, Mr Amlot noted that part I (the schedule of accommodation) was new. He said that the implications of it must be very carefully considered with JLW. Coming to part II he noted that, as was the fact, certain words had been added to the end of paragraph 1(2) which “seemed to be to your advantage”. He did not comment on the amendment, which had been noted in red, to paragraph 2 but commented at some length on the re-worked version of paragraph 3 (it contained an interest payment provision which Mr Amlot advised PMM to resist).

As regards the highlighted omission of the relevant words from paragraph 5, Mr Amlot commented simply:

“The original draft provided that you only had the right to determine if there was an increase of rent. This now seems to have been dropped, which would appear to be in your favour.”

Mr Amlot concluded his letter by stating that he was enclosing a copy of his letter and of the new draft stating that he imagined Mr Benzie would want to forward them to JLW. He added:

“I would suggest when you have had a chance of considering the amendments, we have a meeting to agree what can be accepted and also those points upon which we shall have to go back to Simmons & Simmons.”

On the same day that he was reporting to Mr Benzie, Mr Amlot wrote to Mr Butler. He said this:

“I have now been through the draft and compared it with the form of Underlease attached to the Agreement. I have reported to Peats in full and do not wish to comment until I have instructions except to say that while I can see that many of the amendments reflect the incorporation of the plans and the arrangements that have been made in particular with the LTE and the City Corporation, there do seem to be some amendments of substance which I would have thought my Clients would find it difficult to accept.”

He then gave an example and continued:

“It was never the intention that the fundamental financial terms should be re-negotiated.”

Mr Butler replied to Mr Amlot four days later (on 25 March) stating:

“Let me say immediately that it is not my clients intention to attempt to re-negotiate terms which were agreed some years ago and I would not like to think that either you or your clients have gained the impression that this was in our minds when revising the draft documents. Where changes have been proposed they have arisen out of lengthy discussions and are merely an attempt to rationalise and perhaps improve on some of the drafting.”

The reference to “lengthy discussions” was to discussions between King’s College and BRB. I consider (in agreement with Miss Williamson) that this response was somewhat disingenuous: BRB/King's College, through Mr Butler, were plainly hoping to secure changes of substance to the lease terms.

At the same time, he reported to Mr Arkwright at King’s College. He enclosed a copy of Mr Amlot’s letter to him of 21 March together with a copy of his reply. He then stated:

“I think we probably anticipated that some comments would be made about one or two of the more fundamental alterations and we shall just have to see how far Peats want to take them.”

This comment makes abundantly clear that, in some respects at least, the amendments which, through Mr Butler, BRB/King’s College had put forward were significant in nature and went beyond what was envisaged by clause 10 of the Agreement for Lease.

That same day, 25 March 1980, Mr Benzie of PMM wrote to Mr Amlot to thank him for his letter of 21 March (reporting on the revised draft) together with copies of that draft and of Mr Butler’s covering letter. He stated that:

“As soon as we have had a chance of digesting the enclosures we will come back to you.”

On 28 March Mr Amlot acknowledged Mr Butler’s letter of 25 March and welcomed Mr Butler’s assurance set out in that letter. He sent copies of the exchange to Mr Benzie who acknowledged them a few days later and repeated his earlier promise to let Mr Amlot “have our comments in due course”.

For a while there was no further response from PMM. On 23 June 1980 Mr Amlot wrote to Mr Benzie to enquire: “whether you are yet in a position to discuss the form of lease”. He went on to say that a Mr Roger Chadder of PMM (the partner in PMM who chaired PMM’s internal Administration Committee in succession to Mr Benzie) had been in touch and that, in the light of what Mr Chadder had said, it seemed important to get the lease agreed as soon as possible. Three days later Mr Benzie replied to say that he had “asked Terry Webber to hurry the matter along” adding that he believed Mr Webber would be “seeing Chris Peacock [of JLW] that week”. At the time Mr Webber was a salaried partner of PMM and a member of PMM’s Accommodation Committee, and Mr Peacock was the partner in JLW who was advising PMM in the matter. Mr Webber and Mr Peacock were both called to give evidence.

At some time between 25 June and 11 July 1980 a meeting between Mr Amlot and Mr Webber took place. Mr Peacock may also have attended. There is no note of the meeting. Mr Webber believed he would have prepared a written report which would have gone to Mr Benzie. If there was one it has since been destroyed or otherwise lost as has all of PMM’s internal file on the matter. This is not a criticism of PMM since they were only alerted to the existence of a difficulty over paragraph 5 in late 1999. That was almost 25 years after the Agreement for Lease had been entered into and over 14 years after the initial and reversionary sub-underleases had been granted.

Under cover of a letter dated 11 July 1980, Mr Amlot returned the travelling draft (ie the clean copy of the revised draft sub-underlease) to Mr Butler. It was marked up in red with Mr Amlot’s amendments. In his letter he commented on certain of them and on certain other points. In some cases the amendment was agreed; in others it was returned with further amendments. Yet others were struck out as “unacceptable” (or the like) or on the basis that the original wording was to stand. When, towards the end of his letter, Mr Amlot came to the fifth schedule, he indicated that part I was being considered by PMM’s surveyors (ie JLW), that the original wording of paragraph 1(2)(c) of part II had to stand and that certain additional words at the end of paragraph 1(2) were being considered. He referred to the small amendment to paragraph 2 that had been noted stating that it was not accepted. He commented on an amendment which he, Mr Amlot, had made to the paragraph. He commented on the radical reworking of paragraph 3 stating:

“We understand our Clients are prepared to accept part of the additional wording that you have added but there was nothing about interest in the agreed draft and therefore we have deleted the words.”

He made no comment on the only other amendment to the fifth schedule that his office had noted, namely the omission of the relevant words. His letter concluded by repeating PMM’s anxiety “to make progress” and stated his willingness to attend a meeting if that was thought useful “to go through the various points”.

At the same time, 11 July, Mr Amlot wrote to Mr Webber. In that letter Mr Amlot referred to their meeting, enclosed a copy of the draft sub-underlease in the form in which it had been returned to Simmons & Simmons, and of his covering letter to them and stated that “I trust that I have amended the document as agreed between us”. He stated that he had sent copies to Mr Peacock.

Mr Amlot followed up his letter of 11 July to Mr Butler with a further letter expressing PMM’s wish, for stamp duty reasons, to have a sub-underlease and reversionary sub-underlease (running from July 1977) rather than, as envisaged by the Agreement for Lease, a single sub-underlease of 52 years. It was a matter which had been first raised (then not pursued) as early as October 1974. This wish was to be overlooked yet again until it was revived four years later in September 1984.

Over the following months Mr Amlot’s amendments were sent to Mr Roberts of BRB (but only those parts of the revised drafts containing manuscript amendments), meetings on both sides took place to discuss them and Mr Butler and Mr Amlot were in correspondence about them. There was a considerable debate in the correspondence concerning Mr Butler’s attempt to tighten the alienation provisions in the draft but Mr Amlot stood firm in resisting them. In a letter he wrote to Mr Webber he stated that the alienation provisions had been “one of the most fiercely negotiated clauses” (ie, negotiated in the period leading up to the Agreement for Lease in December 1974).

The matter dragged on. By September 1982 Mr Butler was reporting to Mr Calvert that, apart from one of two outstanding points, all of the documentation was agreed. Still the matter dragged on. Other issues were raised, for example over the maintenance of certain walkways. A meeting between the parties and their representatives took place to discuss this. By February 1984 issues had arisen over the length of the head lease (with which PMM was not concerned).

By now under the terms of the annexed sub-underlease (and of the travelling draft) a rent review was due. There was an issue over whether, in the absence of an executed lease, BRB was entitled to call for one. Eventually PMM backed down on the point. In the meantime, the issue over the length of the head lease was resolved and further last minute corrections to the travelling draft, mostly of a very minor nature, were identified and dealt with.

Just when it seemed that all was in place to complete the matter and execute the sub-underlease, Mr Amlot suddenly recalled PMM’s wish that, in order to save stamp duty, the fifty-two year term should be split into two by the grant of an initial twenty-one year sub-underlease and, at the same time, by the grant of a reversionary thirty-one year sub-underlease to take effect on the expiry of the initial sub-underlease. The matter was raised by him with Mr Butler. Obtaining approval to this from BRB and King’s College took some time.

While the matter was being considered and in order to save time Mr Butler sent to Mr Amlot:

“… the relevant pages of the draft sub-underlease which I have amended to convert it to a sub-underlease and reversionary sub-underlease – you will see that my amendments are made in manuscript in red ink on the top copy of each set of pages.”

He asked for Mr Amlot’s confirmation that the proposed amendments were acceptable. The draft of what was to become the initial sub-underlease contained no paragraph 5 in its fifth schedule. On the other hand, the corresponding page in the proposed reversionary sub-underlease contained manuscript alterations to the dates referred to in paragraph 5. That was to make the dates correspond in the overall calculation of time with the dates appearing in paragraph 5 to schedule 5 of the annexed sub-underlease. There was also an alteration made to the date in paragraph 1(1). Copies of the proposed alterations under similar covering letters were sent to Mr Arkwright of King’s College, to Mr Roberts of BRB and to Savills.

By the end of 1984 BRB, although initially opposed to the split in the term, was willing to agree the proposal. The revisions to, inter alia, the fifth schedule were checked by a Mr Foster in Mr Amlot’s office. No objections were raised by anyone to the amendments to the fifth schedule.

The matter dragged on into 1985. This was in part because of a delay in executing the head lease. Eventually, in mid-July 1985, the matter was completed and the initial and reversionary sub-underleases (as by now they had become) were granted. They were dated 11 July 1985.

At no stage and despite the very many communications passing between the two parties to the transaction (and among the advisers on each side of it) was any mention made of the omission of the relevant words from paragraph 5 apart from that one reference in Mr Amlot’s letter to Mr Benzie dated 21 March 1980. The matter simply did not feature.