Prudential Assurance Co Ltd. v Exel UK Ltd & Anor

The dispute in this case arises from a notice which was served with a view to breaking a lease. Both Defendants were tenants under the lease. The landlord maintains that the notice was served without the authority of either or both Defendants, and that in any event it was invalid because it was expressed to be given on behalf of only one. The Defendants dispute these contentions and say further that the landlord is estopped (by promissory estoppel or estoppel by convention) from denying the validity of the notice.

The lease is dated 22^nd July 2002 (“the Lease”) and was granted by the Prudential Assurance Company Limited (“Prudential”) as landlord to Tibbett & Britten Limited (“T&B”) and Tibbett & Britten Consumer Group Limited (“Consumer”) as Tenant. The Lease was of a rail-linked warehouse at Hannah Close, Brent Park, Neasden, North London (“the Wembley Warehouse”). The Lease was for a 10 year term commencing on 5^th April 2002 and expiring on 4^th April 2012. The annual rent was £996,330, subject to review on 25^th March 2007.

The Lease, by clause 1.1, contained a number of definitions including one of “the Tenant” which was to “include the successors in title permitted assigns and Personal Representatives of the Tenant”. Clauses 3.48 to 3.54 contained prohibitions against assignment without the prior written consent of the landlord. Clause 3.48, subject to clause 3.49, prohibited an assignment of the whole of the demised premises. Clause 3.49, subject to clause 3.50, provided that the Tenant might assign the whole of the demised premises once only during the Term. Clause 3.50, subject to clauses 3.51 to 3.53 (the terms of which are not material to this case) provided that the Tenant was not to “assign the whole of the Demised Premises without first obtaining the written licence of the Landlord which shall not be unreasonably withheld or delayed and not in any event to assign the whole of the Demised Premises to a company which is in the same group undertaking (within the meaning of section 259 of the Companies Act 1985) as the Tenant or any associated company of the Tenant …”. Clause 7.2 provided for a break right in favour of the Tenant:

“The Tenant can determine this Lease on 24^th March 2007 by giving to the Landlord not less than 9 months’ prior written notice and provided that:

(a)

the Tenant has paid the rents reserved up to the date of expiry of such notice; and

(b)

on the expiry of such notice the Tenant must deliver up the Premises with vacant possession;

THEN on the expiry of such notice the Term will end but without affecting the rights of either party against the other in respect of any previous breach of covenant.”

Clause 7.3 provided that time was of the essence as to all dates and periods referred to in paragraph 7. T&B and Consumer are and always have been in the same group of companies. In August 2004 the Exel Group of companies acquired the Tibbett & Britten Group of companies including T&B and Consumer. On 29^th December 2004 T&B’s name was changed to Exel UK Limited (“Exel”). Consumer’s name was not changed. In December 2005 the Exel Group was acquired by the Deutsche Post AG Group of companies and is now known as the DHL Group. (I shall hereafter refer to T&B/Exel and Consumer collectively, as the Defendants.)

Consumer is, and always has been, a wholly owned subsidiary of Exel, as it is now known. At all material times Consumer has been a dormant company, as its filed reports and accounts disclose. It has the same registered office as Exel. The Lease is not shown in Consumer’s balance sheet as an asset or a liability. Since the takeover of the Tibbett & Britten Group by the Exel Group, Exel and Consumer have had a common director in Exel Nominee No. 2 Limited. The company secretary for both companies is the same, Exel Secretarial Services Limited. Exel has at all material times been a substantial trading company concerned in transportation and distribution services to the manufacturing and retail industries. This information is publicly available.

Following considerable correspondence (which I consider more fully below) on a number of topics with the solicitors acting for Prudential, Messrs CMS CameronMcKenna LLP (“CMS”), Messrs Kimbells LLP (“Kimbells”), solicitors, purporting to act under the break clause sent a notice dated 13^th June 2006 (“the Notice”) to Prudential, and a copy to CMS. It was in the following terms:

“Dear Sirs

RE: A Rail linked Warehouse situated at Hannah Close, Brent Park, Neasden, North London (“the Property”); and

a lease dated 22 July 2002 between The Prudential Assurance Company Limited (1) and Tibbett & Britten Limited and Tibbett & Britten Consumer Group Limited (2) (“the Lease”)

We act for Exel UK Limited, the company formally known as Tibbett & Britten Limited. As the solicitors and authorised agents of Exel UK Limited we HEREBY GIVE YOU NOTICE pursuant to clause 7.2 of the Lease to determine the term granted by the Lease on 24 March 2007.

We are sending a copy of this letter to your solicitor, Ross Berridge, at CMS CameronMcKenna LLP.

Yours faithfully

Kimbells LLP

cc: CMS CameronMcKenna LLP”.

The author of the Notice was Mr Neil Lyon, a partner in Kimbells, which firm has acted for both Exel and Consumer in these proceedings. Mr Lyon gave evidence in the course of the trial. He said, and I accept, that the first draft of the Notice was prepared by him the day before the Notice was despatched.

The issues in the case are:

At trial it was agreed between counsel (Mr Andrew PD Walker for Prudential and Mr Michael Driscoll QC for the Defendants) that the case should be opened on behalf of Exel and Consumer. Although in closing submissions this was reflected in that Mr Driscoll QC replied to Mr Walker’s submissions, when describing the parties’ respective submissions, I shall first deal with those made by Mr Driscoll because Exel and Consumer shoulder the burden of establishing that a valid break notice was served, and Mr Walker was, despite the order of closing speeches, responding to a case developed by Mr Driscoll.

On behalf of the Claimant evidence was given by Mr Lyon and by Mr Ian Cameron, who is now the Vice-President for Real Estate UK and Ireland for DHL Global Business Services. Mr Berridge, an assistant solicitor employed by CMS, who dealt with much of the correspondence with Kimbells, gave evidence on behalf of Prudential. Each of the witnesses provided two witness statements which they adopted when giving evidence. I found all of the witnesses to be honest (though as I explain below I have concluded Mr Lyon was mistaken in his evidence as to how he came to draft the Notice as he did), and I accept that each of them did his best to try to assist the Court in accordance with his recollection.

In the course of the trial close attention was paid to whether Kimbells were instructed, with the authority of Exel and Consumer, to serve the Notice. The case for the Defendants was that within their Group, a Property Department was established which had authority to give instructions on behalf of both companies concerned, and that the Property Department instructed Kimbells, who accordingly were authorised to serve the Notice. (The Property Department was referred to by various different names in the course of the case, sometimes as the Property Department, sometimes as the Property Team, and sometimes as Group Property Services.)

Mr Cameron’s evidence was that 1997 he was the UK Property Director of Exel Europe Limited, a subsidiary of Exel plc. He said that in his current position, and since the Tibbett & Britten Group was acquired by Exel plc in August 2004, he has had responsibility for the Wembley Warehouse.

Mr Cameron said, when giving evidence in Court, that his department managed some 650 properties. He explained that all property dealings for Group companies were dealt with by the Property Department and that it was responsible for all dealings with any Group company property and the management of that property, save that minor repairs would be dealt with at a local operational level. The Property Department would handle matters concerning the exercise of any break clauses affecting leases held by any Group company.

Mr Cameron said that all property interests held by any company which were formerly in the Tibbett & Britten Group, including Exel and Consumer, were handled from August 2004 until December 2005 by the Property Department of Exel plc and after December 2005 by a division of Deutsche Post AG known as DHL Real Estate; whichever was the ultimate parent company, the arrangements with the Property Department continued.

Mr Cameron’s evidence was that all property issues were dealt with on the basis of guidelines published by the end of 2004 (“the Guidelines”) which remain in force today. He produced these Guidelines in evidence. In his second witness statement he said that every company in the Group including Consumer was expected to give effect to the Guidelines. They are headed “Exel Property EMEA – Introduction to Property Role and Range of Services”. The Guidelines set out the functions of the Property Team and state a Property Policy. Within the Property Policy the following passage occurs:

“The general assumption is that Exel will always exercise a break option to terminate a lease early. Indeed, notional capital authorities in project approvals are always calculated on this basis. Therefore specific authority has to be obtained to not exercise a lease break, and the Sector must be able to demonstrate a commercial case for remaining in the property until the earliest of the next break option date or the lease end.”

Another part of the Guidelines is headed “Project Process” which contains the following passage:

“The Property Team will conduct all necessary property negotiations and instruct lawyers in respect of the preparation and agreement of all relevant documentation”.

When giving evidence Mr Cameron said that the Guidelines were produced following consultation with senior people in the Group’s business, and these Guidelines were then circulated to senior people and operational directors. Mr Cameron said that copies of the Guidelines were sent to Mr G Inglis, Mr J S Turney, and Mr S A Young who were directors of Exel. According to the Annual Report and Accounts for the company, they were appointed directors during the year ending 31 December 2004. Mr Cameron said that Mr Inglis was business director in the United Kingdom, and Mr Young the chief finance officer in Exel.

As for Consumer, Mr Cameron was asked about various of the directors who were mentioned in the Annual Report and Financial Statements for the year ending 31^st December 2005. These included Mr Bumstead, who was appointed on 12^th April 2006, Mr Austin, who resigned as a director on 12^th April 2006 and Mr Ellis, who resigned as a director on 31^st March 2005. Mr Bumstead was a Strategy Director in Exel, Mr Austin a former T&B Legal Director who, Mr Cameron said, knew that all property dealings were dealt with by the Property Department. Mr Cameron was not able to say whether the Guidelines had been sent to these individuals.

Mr Cameron said that the Property Department kept information in respect of break clauses on its database and monitored key forthcoming events. It also took steps to determine the intentions of the business units concerning the properties. He said that in 2005 the Department dealt with eight lease breaks for Exel and in 2006 it dealt with four or five such breaks. Solicitors were used on each occasion.

When cross-examined about the role of Property Department, Mr Cameron said that the database for the Group went back as far as 1989 and that the old Tibbett & Britten Group information was transferred over to the Exel system. He said that all key information, rent reviews, size of premises and tenant identities were stored. He said that without checking he would not be able to say what records were kept about tenants’ identities. Mr Cameron said that Kimbells did not have access to the database, but when a lawyer was instructed to send a break notice, a deed packet would be despatched to the lead lawyer concerned.

In re-examination Mr Cameron said that there would have been no-one in the Group at a senior level who would not have known of the Property Department.

In his second witness statement Mr Cameron explained that a contract with Danone Waters, which was dealt with at the Wembley Warehouse, was due to expire on 24^th March 2007. He said that the lease of the Wembley Warehouse had been taken in order to service a contract which the DHL Exel Supply Chain had with Danone Waters.

He said that Danone Waters had decided to consolidate two of its operations into one warehouse in the Midlands; for this reason a decision was taken to break the lease. Mr Cameron said that through Mr Hugh Basham, the Managing Director of the Exel Consumer Division, he was made aware that the break option was to be exercised if there was no business case for not exercising it. Mr Basham was responsible for the business unit with financial accountability for the business operated at the Wembley Warehouse.

In his first witness statement, Mr Cameron referred to internal DHL Group e-mail correspondence concerning the breaking of the lease at the Wembley Warehouse.

On 27^th March 2006, Mr Guy Farrow, a regional surveyor, who reported to Mr Cameron, sent an e-mail to Mr Andy Devere concerning the Wembley Warehouse. It was copied to Mr Tretis, who was Exel’s local manager also responsible for running the facility of the Wembley Warehouse and Mr Cameron. Mr Devere was the Exel member of staff responsible for running the Danone contract. Mr Farrow’s e-mail made reference to a dispute with “L&B” (to which I shall refer below), and the e-mail continued in the following terms:

“… In the meantime, the deadline for serving the lease break is fast approaching. This must be served not later than 24/6/06, otherwise the opportunity to do so will be lost. The break would then take effect on 24/3/07. Nick has intimated in the past that it is your intention to serve the break, but may I have your firm instructions to do so? If there is a possibility that you will not serve the break, your business unit will be required to prepare a project, which freshly justifies the business case for committing to the lease for a further 5 years.”

The reference to “Nick” was to Mr Tretis. Mr Devere responded promptly to Mr Farrow’s e-mail on the same day:

“Please accept this as confirmation to break the lease at Hannah Close.”

In his first witness statement Mr Cameron said that subsequent to that correspondence he contacted Mr Basham to ensure that the decision had his authority, and this was verbally confirmed.

In his second witness statement Mr Cameron said that throughout the period from June 2004 to September 2006 Consumer was a dormant company which did not trade. He said that as a matter of practice it was not possible for Consumer to act independently of Exel in respect of property matters, or for it to refuse to give effect to any decision made or taken by Exel in relation to property. In cross-examination Mr Cameron said that these statements were based on what he had been told, but at the same time that in the absence of a business project, it would be a nonsense not to break the lease.

Cross-examined about the Guidelines, and in particular, the property policy, Mr Cameron said that the decision to make premises non-operational was a business and not a property decision. He confirmed that the Property Department was there to support the business concerned.

Mr Lyon gave evidence about Kimbells’ dealings with the Property Department. He said that his firm began acting for the Tibbett & Britten Group in the early 1990s, and that the firm always took instructions from the Group’s Property Services Division. Following the takeover of the Tibbett & Britten Group in August of 2004, he said that Kimbells continued to take instructions from the Property Department and subsequently from DHL Real Estate. He said that when his firm was first instructed in relation to the Wembley Warehouse, it was the 142^nd instruction from the Tibbett & Britten Group and from Group Property Services. His understanding, which he recorded in his first witness statement, was that all property matters relating to companies in the Tibbett & Britten Group were dealt with by agreement between the companies by Group Property Services.

Mr Lyon’s evidence as to the receipt of instructions, contained in his first witness statement, was that Kimbells were first instructed to advise Tibbett & Britten Group in respect of a possession claim against a company called L&B Haulage and Civil Engineering Contractors Limited (“L&B”) which was allegedly trespassing on part of the Wembley Warehouse property. (I shall refer to this matter as “the L&B dispute”). On 23^rd June 2004 a letter was sent by Tibbett & Britten Group, by Mr Ian Taylor, its Group Property Director to Mrs Valerie Warman at Kimbells. Mr Taylor enclosed a copy of the deeds pack relating to the Wembley Warehouse, and invited Kimbells to liaise with Mr Nigel Bayes of Group Property Services with regard to L&B’s alleged illegal occupation.

On 23^rd March 2006, in a letter to Mr Farrow dealing with progress in the L&B dispute, Kimbells reminded Mr Farrow that the break notice under the Lease had to be served by no later than 24^th June 2006. Mr Farrow forwarded the progress report by e-mail to his colleague Mr Devere under cover of his e-mail of 27^th March mentioned above.

Mr Lyon’s evidence was that Mr Farrow instructed him, on 27^th March 2006, that a notice was to be served breaking the Lease. He also said that on 31^st March 2006, he spoke to Mr Tretis who told him that Karen Mordaunt of Prudential had asked him to find out whether or not a break notice was to be served. I accept this evidence.

For the Defendants Mr Driscoll relies on all of the matters which I have described above with regard to the Property Department and its functioning. He submits that the evidence before the Court clearly established that:

All of this, Mr Driscoll argued, led inevitably to the conclusion that the Property Department was authorised by the Defendants to instruct Kimbells to serve a break notice on behalf of the Tenant. Mr Driscoll submitted that there was in the circumstances, either express authority given by those whom the Defendants allowed to run the business from the Wembley Warehouse, or implied authority.

As to implied authority, Mr Driscoll referred me to paragraph 2-030 of Bowstead & Reynolds on Agency, 18^th Edition, which is in the following terms:

“Agreement between principal and agent may be implied in a case where one party has conducted himself towards another in such a way that is reasonable for that other to infer from that conduct assent to an agency relationship”.

With regard to the assent of the principal, Bowstead states at paragraph 2-032:

“This may be implied when he places another in such a situation that, according to ordinary usage, that person would understand himself to have the principal’s authority to act on his behalf: or where the principal’s words or conduct, coming to the knowledge of the agent, are such as to lead to the reasonable inference that he is authorising the agent to act for him”.

Mr Driscoll relied also on paragraphs 2-001, 2-003 and 2-031 to 2-033 of Bowstead.

Mr Walker submitted that it was clear that the Defendants could not establish a decision of the board of either company, or of the duly authorised director, officer or employee, to serve the Notice or to authorise Kimbells (or anyone else) to serve the notice on behalf of either company. He submitted also that the Defendants could not establish an explicit instruction to Kimbells to serve the Notice on behalf of Consumer. It was unclear, he maintained, whether Kimbells were instructed explicitly to serve the Notice on behalf of Exel, or whether Kimbells just sought, or understood, their instructions in that way.

In developing these submissions, Mr Walker maintained that it took several attempts by CMS to obtain any explanation from Kimbells as to whether, or how, it was suggested that Kimbells had authority to give the Notice on behalf of Exel and Consumer. Thus, he drew attention to Kimbells’ letter of 28^th September 2006, suggesting that Exel had been acting as an agent of Consumer, and contrasted that with the case advanced in Kimbells’ letter of 14^th February 2007 which dealt with the proper construction of the Notice. He argued that the explanations given in the earlier correspondence differed from the case now pursued by the Defendants.

Mr Walker submitted that the evidence upon which the Defendants sought to rely did not go far enough to prove that the Notice was properly authorised on behalf of either of them. He argued that first there was no evidence that the Defendants were bound contractually by the Guidelines. He argued both in his written submissions and his closing submissions in Court, that the Guidelines did not give the Property Department authority to exercise any break notice and that even if the Defendants were obliged to act in accordance with the Guidelines, that would not justify a finding that the Defendants had necessarily acted in accordance with the Guidelines. Secondly he contended that the suggestion pleaded in the points of defence to the effect that the Defendants were “expected to abide by” the Guidelines was necessarily weaker than the case based upon contract and therefore must fail for similar reasons.

Dealing with the authorities, Mr Walker submitted that the circumstances were different from the case of Procter & Gamble Technical Centres Ltd v Brixton plc [2003] 2 EGLR 24, where Mr Justice Neuberger, as he then was, had found authority to give a notice was established. There was an issue in that case as to whether there had been delegation of authority to serve a notice in respect of a break clause. Mr Walker drew my attention in particular to the following passages in that case:

“23.

I turn to the first requirement: did the tenant, that is TC and no one else, have the relevant desire. In my view it did. I appreciate that one should not be cavalier about running together companies in the same group and treating them as one, even if they have the same ownership and are run by the same individuals. Two companies are two different persons and are to be regarded by the court and by the law generally as such. If this sometimes leads to technical problems for the two companies, then the short answer is that those who live by the sword of choosing to set corporate structures, often to take advantage of company and revenue law, sometimes die by the sword.

24.

However, it seems to me unrealistic, indeed counter-factual, in the present case to conclude that TC did not have the necessary desire to determine the lease at the time the Notice was served. In effect, the various companies in the Procter & Gamble Group, including TC, deputed to Cincinnati, the headquarters of the Procter & Gamble Group, the power to make strategic decisions, and deputed to EMEA to decide what to do, as a result of those decisions, in relation to the various property interests of the various Procter & Gamble companies in this country.

25.

I see no reason why a tenant company, which is a member of a group of companies, cannot delegate its desire to determine a lease to another company in the same group. An emotional desire may not be capable of delegation, but I do not see why a commercial desire, of the sort contemplated by Clause 7.1 of the lease in the present case, should not be capable of delegation. In those circumstances I think that Mr Jonathan Brock QC, who appears on behalf of TC, is right in his contention that, on the facts of this case, the necessary desire of TC has been established.

26.

I turn to the second question, that is whether the Notice was served with the authority of TC. In this connection there is no doubt that it was not TC who drafted or sent the Notice; it was the solicitors, Stevens & Bolton. That in itself would not invalidate the notice. Not only a desire to serve a notice, but, even more clearly, the giving of a notice, can be delegated, provided it was delegated by the person who is required to give the notice.

27.

Accordingly, the question is: was the giving of the Notice delegated to the solicitors by TC? I find that a more difficult question. However, despite Mr Lewison's submissions, I have come to the conclusion that the solicitors did have the authority of TC to serve the Notice. I revert to the evidence from which I have quoted. Decisions as to what to do about property owned by companies in the Procter & Gamble group, and in particular whether to serve the break notice under the lease, were effectively delegated to EMEA by each company within the group which owned property. For this purpose it does not seem to me unrealistic to treat the Procter & Gamble Group as having made a collective decision, imposed on them by Cincinnati, that decisions to serve notices and other decisions relating to English property, and in particular the decision whether to serve the break notice in relation to the subject property, would be dealt with by EMEA.

28.

Even ignoring the fact that the letter of instruction to the solicitors was on TC writing paper and was written by Mrs McGregor, who was, I am satisfied, an employee of TC, it seems to me that the instruction to the solicitors to serve the Notice came from the group member, EMEA, to which the relevant decision has in practice been delegated by TC. The fact that nobody within the group had given his mind to the identity of the tenant does not seem to me to invalidate this conclusion. There was, in effect, a general view of all the companies in the group that EMEA would make the decision: it did so, and it instructed the solicitors to serve the Notice.

29.

I think it can fairly be said that EMEA took that course on behalf of TC. In terms of commercial common sense, any other conclusion would appear to me to be perverse, given that only TC could serve the Notice.

30.

Mr Lewison eloquently suggested that the correct analysis is, nonetheless, that it was left to Miss Taylor to decide for whom she was acting, and that she wrongly decided that it was the original tenant, H&B, as is indicated by the fact that she put its name in the Notice. Therefore, he says, it was H&B which was her client, and the Notice was served on behalf of H&B, and was therefore a bad notice, because it was not served on behalf of the tenant, TC.

31.

That is an attractive argument but I do not think it is right. I suppose it is possible for a group of companies to appoint an agent, leaving it to the agent to decide which company in the group is the agent's principal. However, the argument does strike me as involving pulling oneself up by one's own bootstraps, on the facts of this case.

32.

It seems to me that the solicitors were instructed by EMEA, who were acting on behalf of the tenant, whoever that was. EMEA was therefore acting on behalf of the tenant, who was in fact TC, when EMEA instructed Miss Taylor, and it was therefore TC which was Miss Taylor's client. Miss Taylor put the wrong name into the Notice. That does not mean that, unwittingly acting contrary to her instructions, she was changing the identity of her principal. She simply got the name of her principal wrong when she put it in the Notice. The fact that they letter of instruction for Stevens and Bolton was sent on TC writing paper by a TC employee reinforces this conclusion.”

Mr Walker emphasised that at paragraph 27 of his judgment Mr Justice Neuberger was able to identify a delegation of decision making on behalf of the tenant. Evidence in the present case, he argued, did not establish such a delegation.

The Defendants’ case, Mr Walker submitted, was undermined by their own case on estoppel since, he argued, Mr Lyon could not have drafted and served the Notice on behalf of Consumer when he believed that he was doing so only on behalf of Exel, whom he had identified as his client. Unlike in the Proctor & Gamble case, he argued, this was not a one-off misidentification of his client by the solicitor drafting the notice; it was very much more fundamental.

He submitted, invoking what Mr Justice Neuberger said at paragraph 23 in his judgment, that those who set up company structures must stand or fall by them. The boards of the two companies could have resolved either to delegate decisions appropriately or to serve a break notice, but they did neither.

Mr Walker relied on the decision of the Court of Appeal in Lemmerbell Ltd & anr v. Britannia LAS Direct Limited [1998] 3 EGLR 67. This case I shall refer to below in relation to the Construction Issue, but it is convenient to deal with its facts at this stage. In that case, two leases were held by the tenant, LAS Direct Limited (“Direct”) in respect of separate premises. Both leases contained a break clause which enabled the tenant to determine the respective terms on 28^th September 1995 upon giving 6 months’ written notice. In 1992 solicitors acting for Direct informed the landlord’s solicitors that they acted for the Life Association of Scotland (“Life”) and that Life would use the premises. They said that Life and Direct were wholly owned subsidiaries of LAS Holdings Limited. There was never a request for consent to assign, and in fact no assignment took place. In October 1994 notices were served on behalf of “the Life Association of Scotland Limited, successors in title to … Direct …” with a view to determining both of the leases in accordance with the break provision. Mr Justice Rattee, at first instance, held that Life had acted as a general agent for Direct since July 1991 so that the break notices were valid.

The Court of Appeal reversed Mr Justice Rattee’s decision. The judgment of the Court was delivered by Lord Justice Peter Gibson who said at page 70 of general agency:

“A general agency is an unusual commercial relationship, particularly where a tenant is the principal, the agent having authority to do anything in relation to the subject-matter of the agency, even to the extent of destroying that subject-matter, without reference to the principal. The inference of such an agency, in the absence of express authority creating the agency, requires clear evidence to support it. The mere payment of rent coupled with occupation does not necessarily indicate that the payer has the tenant's authority to terminate the estate: see Dun & Bradstreet Software Services (England) Ltd v Provident Mutual Life Assurance Association, June 9 1997 (Editor's note: Reported at [1977] EGCS 89.).”

The learned Lord Justice then referred to a number of propositions advanced by leading counsel for the landlord of which the third proposition was as follows:

“If the notice is given by somebody other than the lessee/lessor without stating that that person is acting as an agent, it will be valid if:

(a) the giver was in fact duly authorised to give it; and

(b)

the circumstances are such that the recipient can act upon the notice safely in the knowledge that it will be binding on the principal of the giver ...”

Lord Justice Peter Gibson then continued a little later at page 70:

“Proposition (3) is the crucial proposition in the present case. The court can draw the inference in appropriate circumstances that the giver of the notice had due authority to give it as a general agent, but the circumstances must be such that the recipient can act on that notice safely, knowing that the principal will be bound.”

Lord Justice Peter Gibson then reviewed the material which was alleged to justify the conclusion of general agency. This included new material which had not been before the trial judge. This new material demonstrated that “the Life Association of Scotland” was a blanket designation for companies in the group headed by LAS Holding Limited.

In rejecting the submission that Life was the general agent of Direct and that in such capacity it served valid break notices, Lord Justice Peter Gibson said at page 71:

“... I cannot see how the plaintiffs could act upon the notices safely as being notices that were in fact, or that they had reason to believe were, binding on Direct. They would have been aware that no consent had been given to any assignment by Direct, but that was not inconsistent with there having been an effective assignment. Without the production to them of an assignment, they could not know if Life was the right person to be giving the notices. If Life was not, they could not know from the notices that Direct desired to give and gave (if it did) the break notices. True it is that the plaintiffs were very slow to take the point, but the fact that the point was for a long time not taken does not show that there was no point to be taken, given that only the actual lessee could operate each break clause.

I would therefore hold that there was insufficient material from which it could properly be inferred that Life was the general agent of Direct with authority from Direct to give the break notices. Nor for that matter do I think that there is evidence to support the inference that Mr Lines [a director of the landlord company] knowingly dealt with Life as the tenant. On the contrary, the plaintiffs could not act on the break notices safely in the knowledge that they were binding on Direct. It follows that the break notices served on Life's behalf were not valid.”

Mr Walker relies on these passages in Lemmerbell for his submission that the Guidelines did not give the Property Department authority to exercise the break provision. He maintains that the evidence in the case simply does not justify such findings.

Mr Walker also relied on the final part of Mr Justice Hart’s judgment in the case of Havant International Holdings Ltd v Lionsgate (H) Investment Limited [2000] L&TR 297, to which I shall also refer again below in relation to the Construction Issue, but again I deal with the facts of that case at this point. In that case, Havant International Holdings Limited (“HIHL”) was the tenant of commercial premises under two leases granted in 1986 for terms of 24¾ years from March 25^th, 1985. Both of the leases contained a break provision entitling HIHL to determine the respective terms on the December 1999 quarter day upon giving not more than 18 months’ and not less than 12 months’ written notice. The leases stipulated that the right to surrender should be personal to HIHL. On 3^rd December 1998, notices were served on the landlord purportedly pursuant to the break provisions, but both of the notices were given in the name of Havant International Limited (“HIL”) and not HIHL. HIL was a wholly owned subsidiary of HIHL, and the main operating company in the group in which HIHL was the ultimate holding company. Both notices were expressed to be signed by a director of HIL, a Mr Nahajski, who was a director of HIL, but not HIHL. In the circumstances the landlord maintained that the notices were bad as not having been given by HIHL. The case for HIHL was first that the notices could and should be construed as having been given by HIHL, but alternatively that the notices were good as having been given by HIL as agents for HIHL.

Mr Justice Hart construed the notices as being valid (as I shall explain more fully below), but rejected HIHL’s alternative submission that, assuming the notices on their true construction to be notices by HIL, the landlord could safely act on them knowing that HIHL would be bound by the notices from HIL. He said at page 306:

“A similar argument was run (successfully at first instance but unsuccessfully in the Court of Appeal, which had further evidence adduced before it on the question) in Lemmerbell. The evidence relevant to the issue in the present case (largely given by Mr Wilkie the chief executive of both HIHL and HIL) was to the effect that HIHL had taken a decision at its Board meeting on 20th January 1998 to break the Leases and had then instructed Mr Allington (an employee of HIL) to take the steps necessary to implement that decision. HIHL had no employees of its own (apart from two of its directors who were remunerated at the level of HIHL). Mr Allington (in common with other employees of HIL) was only dimly aware of the existence of a separate board of HIHL and had no idea that the leases were vested in HIHL as opposed to HIL. Mr Allington in due course handed the task of instructing solicitors to act in relation to the notices to Mr Atkinson, another HIL employee. Mr Atkinson was not conscious of there being any distinction between HIHL and HIL. So far as he was concerned he was an employee of Xyratex, which was the trading name of the group, but he had no idea of the group structure. He simply supplied the solicitors with a bundle of the relevant deeds, and (given his ignorance of the group structure) had no reason to suppose that the notice was not correctly drafted in the name of HIL. No one (from Mr Wilkie down) ever had an intention that HIL as such should act as HIHL's agent for the purposes of serving the notices. Nor was there any evidence in the dealings between HIHL and Lionsgate G from which it would have been possible for Lionsgate G safely to conclude that HIL had general authority to act for HIHL in relation to the leases. In fact it did not. The fact that Lionsgate G might have deduced, from its actual knowledge of HIHL's intentions, that HIHL would never in practice seek to disown the notices does not mean that it was legally safe to act on the assumption that it would not. Accordingly, had I found against HIHL on the construction issue, I would have been unable to uphold the validity of the notices on this alternative ground.”

Mr Walker submitted that in this case also there was no basis for finding such general authority in favour of the Property Department, and that here also there was no more than a general expectation as to how Group companies would respond to its actions.

I accept Mr Cameron’s evidence as to the manner in which instructions were taken and given concerning the Wembley Warehouse, and as to the functioning of the Property Department, and the dissemination of the Guidelines. I accept also Mr Lyon’s evidence as to the manner in which he and his firm were instructed in relation to this and previous transactions.

In my judgment, whilst there is no evidence of a formal resolution by the board of directors of either of the Defendants to confer authority upon the Property Department to exercise the break provision, there is ample evidence from which to infer, as Mr Driscoll submitted, that either express authority had been given to the Department, or that there was assent to an agency relationship. I accept Mr Driscoll’s submissions to the effect that the evidence demonstrated the facts which he enumerated, and which I have mentioned above. The evidence shows that the Property Department was a well established feature within the Group of companies of which Exel and Consumer were members, and that its existence, operation and responsibilities were well known among senior management. The experience of Mr Lyon, alone, for Kimbells, demonstrates a well established practice on the part of Group companies giving instructions to solicitors through the Property Department. There was not a suggestion in the case that the propriety of giving instructions through the Property Department had ever been questioned by a Group company. The way in which this particular instruction to Kimbells was dealt with was entirely consistent with there being an implementation of the Guidelines through the Group, and an assumption that matters would be dealt with in accordance with the Guidelines. Thus those concerned with the running of the Wembley Warehouse were told, in accordance with the Guidelines, that they would have to make out a business case to retain the unit, and that case would have to justify the non-exercise of the break provision. Those consulted did not in any way challenge this approach, but gave instructions accordingly. It is, I think, noteworthy (but of course not decisive) that long after the Notice had been served in this case, that the directors of Exel and Consumer cooperated in executing the Deed of Release which was a necessary step in resolving the L&B dispute. This is consistent with an acceptance that authority had been conferred on the Property Department, and through it, upon Kimbells to deal with the property issues affecting Group companies as the Guidelines suggest.

It is helpful to have regard to what Mr Justice Neuberger, as he then was, said in the Proctor & Gamble case. The arrangements made between the Group companies, and the giving of instructions to solicitors, in the present case, closely resemble the “collective decision” taken in the Proctor & Gamble Group of Companies that decisions to serve notices and other decisions relating to property, and decisions as to the serving of break notices, would be dealt with by a group organisation established to handle matters of that kind. It is true that when the instruction was given to Kimbells, it does not appear that the Property Department specifically said that the instruction was being given on behalf of Exel and Consumer, but as Mr Justice Neuberger said at paragraph 28 in the Proctor & Gamble case, the fact that nobody within the group in that case had given his mind to the identity of the tenant, did not invalidate the conclusion that the instruction to the solicitor to serve the break notice came from the group member to which the relevant decision had in practice been delegated.

The Notice itself stated that Kimbells acted for Exel. If the Notice is to be construed as having been served on behalf of the Tenant, that is both Defendants, then it seems to me that Kimbells must be taken to have been claiming to act for both Defendants so that there would have been a breach of warranty of authority on the part of Kimbells if they did not have such authority. Provided therefore that Kimbells had the necessary authority to serve the Notice, as I find they did, it does not matter that by the time that Mr Lyon prepared the Notice, he failed to apply his mind to the true identity of the Tenant. Again I am reinforced in my conclusion by Mr Justice Neuberger’s finding in the Proctor & Gamble case, in particular at paragraph 32. To adopt and paraphrase his reasoning in that paragraph, Kimbells had been instructed by the Property Department which was acting on behalf of the Tenant, whoever that was. The Tenant was in fact Exel and Consumer which was therefore Kimbells’ client. By putting the wrong name into the Notice it did not mean that Kimbells changed the identity of their principal.

I do not consider that the passage at pages 306-7 of Mr Justice Hart’s judgment in the Havant case, in which he rejected the alternative case based upon HIL’s agency for HIHL, assists Prudential on this point. Those passages dealt with a case of agency but, on the basis that the construction issues were to be resolved against HIHL. What was crucial in Mr Justice Hart’s rejection of the alternative submission was that no one in that case ever had an intention that HIL should act as HIHL’s agent for the purpose of serving the notices and there was no evidence in the dealings between HIHL and the landlord from which it would have been possible for the landlord safely to conclude that HIL had general authority to act for HIHL, which in fact it did not. In the present case, for the reasons given above, Kimbells had the relevant authority to serve the Notice on behalf of both Defendants. That, of course, does not decide whether the Notice, drafted in the terms it was, validly constituted a notice from the Tenant for the purposes of the break provision, and it is to that issue that I now turn.

In the course of the trial both parties have examined in detail the correspondence and other dealings between the parties and their respective solicitors. Mr Driscoll submits that these communications are relevant in interpreting the Notice, as they set it in its contextual scene. Mr Walker, whilst disputing the relevance of much of this material, also submits that it assists Prudential’s case in showing that Prudential could not safely have relied on the Notice.

Given the issues as to the construction of the notice, and as to estoppel, it is necessary to review these communications in some detail.

Following receipt of the instruction to act in respect of the L&B dispute, Mr Lyon dealt with the matter for Kimbells. Initially his correspondence was with L&B, but, as will become apparent from the history which I mention below, correspondence soon involved CMS and Prudential.

On 27^th July 2004 Kimbells wrote to L&B. Their letter referred to the property concerned and then continued:

“We act for Tibbett & Britten Limited and for Tibbett & Britten Consumer Group Limited, which both hold a lease of the land edged red on the attached plan.

It has been brought to our clients’ attention that you have been occupying part of the land shaded in red on the attached plan. Our clients are not aware that you have any licence, consent or authority to occupy this land”.

The letter then raised a number of questions and concluded by saying that if the recipient was in any doubt as to its legal position, then Kimbells recommended that the matter be referred to solicitors immediately. L&B responded on 6^th August 2004, to the effect that the relevant person was on holiday and would deal with the matter on his return. Subsequently L&B instructed Messrs Pinsents, solicitors in London, who wrote to Kimbells on 8^th September 2004 alleging that L&B had been in continuous occupation of the disputed land since shortly after August 1987.

On 10^th September 2004 Mr Bayes writing on the notepaper of Tibbett & Britten Group plc, wrote directly to Karen Mordaunt at Prudential, enclosing copies of the correspondence sent by Kimbells to L&B together with the reply from Pinsents dated 8^th September. In his letter Mr Bayes said that if L&B’s allegations as to occupation were correct, then it would follow that its occupation would have taken place prior to the grant of the lease to “Tibbett & Britten”, so that this “effectively draws the landlord into the dispute as well”. Mr Bayes invited Prudential to discuss the matter with its solicitors and then Kimbells “who are acting for us and then agree a joint strategy for taking this matter further”.

By September 2004, Prudential itself was therefore in possession of a letter from Kimbells which recorded that Kimbells acted for both companies which constituted the Tenant of the Wembley Warehouse.

Mr Lyon said, and I accept, that on 23^rd September 2004, he received a telephone call from Mr Pranai Karia of CMS who told him that he had been instructed to act for Prudential. Mr Karia referred to the L&B dispute and the assertion that L&B had been in occupation of part of the Wembley Warehouse property since 1987. He invited Mr Lyon to provide various copy documents, and provided, by e-mail, his contact details. As requested, and on 24^th September 2004, Mr Lyon forwarded to Mr Karia at CMS copies of all relevant papers from Kimbells’ file. In his covering letter, he offered to be of further assistance.

On 4^th October 2004, Mr Karia in a letter to Pinsents, said that CMS acted for Prudential in connection with the Wembley Warehouse, and stated that CMS had a copy of Pinsents’ letter to Kimbells dated 8^th September 2004. The letter requested evidence of L&B’s title, copies of any relevant leases and assignments, and made specific reference to Kimbells’ correspondence alleging trespass by L&B.

On 14^th October 2004 Mr Lyon informed Mr Karia by letter that he had been instructed not to undertake any further work at that stage as his “client” did not wish to incur further legal costs. The letter stated that it was his “client’s position that the onus is on your client and not our client to regularise the position with L&B Haulage. It may prove to be the case that our respective clients would have to enter into a Deed of Variation to reflect the fact that the parcel of land being occupied by L&B Haulage should not have been included within the land demised by your client to our client dated 22 July 2002, and the rent should be adjusted accordingly”. This letter was prompted by an instruction from Mr Bayes given on 13^th October 2004. Mr Bayes informed Mr Lyon that further costs should not be run up without prior instructions from Exel. Those instructions were recorded in an attendance note prepared by Mr Lyon.

On 15^th October 2004 Mr Karia replied by letter to Mr Lyon. He expressed some surprise at Mr Lyon’s “client’s position” and continued:

“As you may be aware, your clients have been a tenant of this property from before July 2002, and of course were fully aware of the title/occupation position since before then.

It may well be that if adverse possession has been obtained, my clients will need to look at the terms of the previous lease to your clients as well as the existing lease”.

In the light of Mr Lyon’s evidence, with which I deal below when considering the Estoppel Issue, it is very likely that the gap of several months before correspondence resumed led to the error on Mr Lyon’s part when he drafted the Notice, and indeed to the other errors on his part which preceded the sending of the Notice.

On about 26^th April 2005 Mr Tretis and others had a meeting with Prudential’s representatives, Karen Mordaunt and Gary Streets. They discussed, amongst other things, the dispute concerning the Wembley Warehouse. On the following day Mr Tretis forwarded a note of this meeting by e-mail to Prudential’s representatives. A copy was also forwarded to Mr Lyon. The note of the meeting recorded the following matters:

“… Only Exel can challenge the occupancy (encroachment of the land) since it is the Leaseholders’ responsibility. Exel’s solicitors need to challenge them and have them prove adverse possession – and if L&B can prove it, Prudential may not penalise Exel (at least for the time being). KM expressed concern over the length of time its (sic) taken to pursue this matter. It is not a matter for the Prudential to resolve.

…

Exels (sic) solicitors must have a copy of the original lease signed 7 years ago to see who signed it and K&M checked that the Pru were the landlords when the lease was signed. In which case there must be a file somewhere! …”.

On 27^th April 2005 Karen Mordaunt forwarded to Mr Tretis an e-mail that she had received from CMS confirming the L&B dispute. The e-mail (later forwarded by Mr Farrow to Mr Lyon) contained the following passage:

“[Prudential] have no direct claim to the Land at present due to the leasehold interest of Tibbet & Britten. Any approach to L&B should ideally come from Tibbet & Britten”.

It was not until 1^st June 2005 that Mr Lyon contacted CMS further. On that day, by letter, he stated that Kimbells were instructed to progress the matter concerning the Wembley Warehouse. The letter dealt with a number of points, the first of which was confirmation that Kimbells acted for “Exel UK Limited (known until 29 December as Tibbet & Britten Limited)”. After dealing with a number of other points concerning the history of the site and interest in connection with it, in paragraph 7 the letter stated:

“On 27 July 2002 your client granted a new lease of the land to our client for a term of 10 years commencing on 5^th April 2002 …”.

On 10^th June 2005 Mr Ross Berridge, an assistant solicitor with CMS who had taken over dealing with the matter in place of Mr Karia, responded to Kimbells’ letter of 1^st June 2005. Having dealt with a number of points, the last substantial observation made in CMS’ letter was as follows:

“Your client may wish to consider issuing possession proceedings against L&B if only to force L&B to provide evidence of occupation since August 1987. Even if L&B has been in occupation of the land in question since 1987 (which, as you suggest, is perhaps unlikely), it may not be able to demonstrate that the extent of its occupation was sufficient to gain it any rights”.

On 23^rd September 2005 Kimbells sent a letter to L&B complaining of L&B’s occupation of part of the Wembley Warehouse site. This letter incorrectly stated that Kimbells acted for Exel. No mention was made of Consumer at all. The letter was copied to Pinsent Masons, as Pinsents had by this time become. The letter stated that L&B had no right to occupy the land concerned, and that if any occupation had been permitted (which was not admitted) then any licence to occupy was terminated and delivery up of possession was required by 14^th October 2005.

On 5^th October 2005 Pinsent Masons replied to Kimbells’ letter of 26^th September 2005, seeking to refute the case advanced by Kimbells. On 5^th October 2005 Kimbells forwarded a copy of this letter from Pinsent Masons to CMS. Kimbells’ letter gave a brief history of the progress that had been made in connection with the L&B dispute. Mention was made of a statutory declaration which had been provided by Mr Colin Bailey, a former employee of TPD (London) Limited (“TPD”). (According to Kimbells’ letter of 1^st June 2005 to CMS, TPD had been the original lessor of the Wembley Warehouse to the Defendants in 1997 but on 9^th February 1998 TPD had granted an overriding lease to Prudential). Kimbells’ letter stated that the statutory declaration asserted that L&B was not in occupation of any part of the site concerned when Mr Bailey began working on the site in 1992, though at some time between 1992 and 1996 TPD had allowed L&B into occupation of part of the site (“the red land”) as licensee. Kimbells’ letter continued:

“It would appear that L&B were allowed onto the red land by TPD and not by our client. The red land should have been excluded from the land demised to our client by TPD in our client’s first lease dated 1 July 1997. It would also appear that the red land occupied by L&B should therefore have been excluded from the land demised to our client by your client pursuant to the lease dated 22 July 2002”.

On 29^th November 2005 CMS responded to Kimbells’ letter of 10^th October 2005, expressing the view that, in the light of the then recent decision of the European Court of Human Rights in JA Pye (Oxford) Ltd v United Kingdom (2006) 43 EHRR 3, L&B’s claim was doomed to fail. The letter asked “Does you client propose to issue possession proceedings in the light of comfort provided by Pye v UK?”. Kimbells responded on 30^th November 2005 stating, amongst other things, that Counsel had been instructed to advise and that they aimed to be in a position to issue possession proceedings against L&B within the next 14 days. They expressed doubt as to whether the decision in Pye was completely destructive of L&B’s claim.

Possession proceedings against L&B were commenced in the name of Exel alone on 15^th December 2005. They were originally issued in the Barnet County Court but subsequently were transferred to the Willesden County Court. The Particulars of Claim stated that the Exel’s interest in the land was “as lessee holding the residue of the term granted by a lease dated 22 July 2002 and made between the Prudential Assurance Limited as landlord and Tibbett & Britten Limited and Tibbett & Britten Consumer Group Limited as tenants”.

Mr Lyon’s witness statement in support of the possession application also referred to Exel as the lessee, but identified both of the Tenant Defendants as other parties to the lease. No explanation was given for why the proceedings were commenced only in the name of Exel although the change of company name was explained. Proceedings were served on 4^th January 2006. Pinsent Masons served a Defence and Counterclaim on 27^th January 2006, but this pleading also asserted that Exel was the lessee of the relevant land. The Defence and Counterclaim pleaded a case based upon exclusive possession in favour of L&B and sought declaratory, injunctive and other relief.

Kimbells served a Reply and Defence to Counterclaim on 10^th February 2006. It disputed L&B’s claim to have acquired a possessory title in relation to the disputed land. This pleading continued on the premise that Exel was the sole lessee under the lease.

On 27^th January 2006 CMS by letter to Kimbells again expressed the view that the decision in Pye destroyed L&B’s claim. When responding to this letter on 13^th February 2006, Kimbells forwarded copies of all the pleadings in the L&B action to CMS. The letter concluded:

“We should however make clear that we formally reserve our client’s rights against your client in the event that L&B succeeds in establishing a possessory title against our client’s leasehold title.”

On 24^th February 2007 Pinsent Masons served a Reply and Defence to Counterclaim on behalf of L&B. Nothing in this pleading identified the absence of Consumer as a proper or necessary party to the litigation. A copy of this pleading was forwarded by Kimbells to CMS under cover of a letter dated 28^th February 2006.

On 20^th March 2006 Pinsent Masons by letter informed Prudential of its Part 20 claim seeking rectification of the Land Register to register L&B as proprietor of the disputed land. The letter requested confirmation that Prudential was prepared to consent to L&B’s being registered as proprietor of the disputed land. It stated that in the event that Prudential was not so prepared, then L&B intended to issue an application to join Prudential as a Part 20 defendant. A copy of this letter was forward by Pinsent Masons to CMS on 20^th March 2006.

During March 2006 there were exchanges of correspondence between CMS and Pinsent Masons with regard to the L&B ligitation.

By late March 2006, Mr Lyon was mindful of the fact that, under the terms of the Lease, a break notice had to be served no later than 24^th June 2006. As he explained in his first witness statement, the dispute with L&B presented potential problems in this regard. This was because under the terms of the Lease the Tenant had to give vacant possession, but with L&B in possession of part of the land, the Tenant could not do so. With this in mind, on 31^st March 2006, Kimbells wrote to CMS, referring to the dispute concerning L&B and continuing:

“As your client will be aware, pursuant to clause 7 of its lease, our client may determine the lease on 24 March 2007 by giving not less than 9 months’ prior written notice provided that, inter alia, our client gives up the site with vacant possession. We are aware that Karen Mordaunt of your client has been seeking from our client’s site manager, Nick Tretis, confirmation as to whether or not our client will be exercising the break. It is arguable that our client will be unable to exercise the break if it has failed to obtain an order for possession against L&B by 24 March 2007, in which case our client will issue possession proceedings against your client alleging, inter alia, derogation from grant.

We question whether there is any value to your client in the disputed land. Both your client and our client face the likelihood of becoming embroiled in costly and protracted litigation, fighting over a tiny parcel of land of minimal, if any, commercial value to your client. It would make sense if your client were to accept that our client may validly exercise the break clause notwithstanding that our client is unable to deliver up vacant possession of the disputed land. If this point can be clarified shortly, our client will then be in a position to decide imminently whether or not it will be exercising the break, which will then give your client the commercial certainty it is seeking”.

CMS replied to Kimbells by letter on 3^rd April 2006 stating that they awaited Prudential’s instructions. The letter continued:

“We note, however, that you view the land as having minimal, if any, commercial value. We assume therefore that if our client was to give your client the comfort sought in relation to the break clause, your client would confirm, by way of consideration, that it would bring no claim against our client arising out of or in connection with L&B’s occupation of the disputed land. We look forward to receiving clarification”.

Kimbells responded by letter of 11^th April 2006:

“(1)

We can confirm that, if your client were to give our client the comfort it seeks in relation to the break clause, then our client would confirm, by way of consideration, that it would bring no claim against your client arising out of or in connection with L&B’s occupation of the disputed land save for points 2 and 3 below.”

Points (2) and (3) in the letter dealt with issues of costs in connection with the L&B litigation. The letter raised the question of indemnity in respect of any costs claim raised by L&B and a contribution towards “our client’s litigation costs”. It mentioned a further problem in respect of the break notice, namely, that Ikea had taken over part of the land for the purpose of access to its nearby unit. The letter concluded:

“For the avoidance of doubt our client seeks comfort from your client that it may validly exercise the break clause notwithstanding that Ikea appears to have taken over control of part of its demised land as described above.”

On 25^th April 2006 CMS replied to Kimbells’ letter. The response merely noted what had been said in respect of seeking comfort in relation to the exercise of the break clause in connection with L&B’s occupation of the disputed land. A costs indemnity as to L&B’s costs and a contribution to “your client’s costs” were declined. However the letter specifically confirmed that “your client may exercise the break clause validly notwithstanding Ikea’s right of access over part of the demised land. However, if your client decided not to exercise the break, it will be expected to regularise the issue by entering into any necessary deed of variation”.

In the course of April and May 2006 there was further communication between Kimbells, CMS and Pinsent Masons with regard to the L&B dispute. This led to a meeting on 18^th May 2006 at the Wembley Warehouse. The meeting was attended by Mr Lyon, Mr Farrow and Mr Tretis, who was the site manager of the Wembley Warehouse. Prudential was represented by Mr Berridge of CMS and Karen Mordaunt. L&B were represented by Mr Joe Murphy of Pinsent Curtis and a director and another. Both Mr Berridge and Mr Lyon prepared attendance notes in relation to this meeting. It is clear from both of these notes that no concluded resolution of the issues in relation to the disputed land was achieved, but progress was made to the point that it was anticipated that a draft Tomlin Order could be prepared.

According to Mr Lyon’s note of what happened at the meeting, following the departure of Mr Murphy and the other L&B representatives, there followed a discussion with Mr Berridge and Karen Mordaunt. Mr Lyon’s note records that:

“I then asked Karen whether there are any issues that we need to be aware of/any other reasons why Exel may not be able validly to exercise the break clause. She said she could not think of anything, so long as we have complied with all covenants as at that date, including compliance with any schedule of dilapidations. I pointed out that the break is conditional only on us giving up vacant possession and it is not conditional on anything else. She was not aware of this. She confirmed that she could not think of any other reason why we cannot exercise the break. Ross made no comment”.

I accept this note as an accurate reflection of what occurred.

There followed further communications on behalf of the various parties with a view to resolving issues concerning the disputed land and the related litigation. I should add that all of these communications, beginning with Kimbells’ letter of 31^st March 2006, were conducted on a “without prejudice” basis. However, as I shall explain below, the dispute and related litigation were eventually concluded, and no objection was taken in the course of the trial to my considering these “without prejudice” communications.

On 7^th June 2006 Mr Lyon sent an e-mail to Mr Berridge in the following terms:

“Ross – further to our site meeting on 18.05.06 can you confirm when the draft Deed of Variation will be available for me to consider? I am conscious that my client’s claim against L&B is listed for a CMC on 14.06.06, and that any Break Notice then must be served prior to 24.06.06”.

Mr Berridge responded on the same day:

“I thought the view had been taken at the meeting that if your client was going to break its lease there would be no deed of variation. My client would simply agree to take no issue regarding L&B and Ikea’s occupation.

Do I take from this that your client is definitely seeking to determine its lease?”

On 9^th June 2006 Mr Lyon sent a further e-mail to Mr Berridge in the following terms:

“Ross – thanks for your e-mail of 07.06.06. You have given me the assurance I need in respect of Ikea (para. 4 of your letter of 25.04.06), but you have not yet given a similar assurance in respect of L&B. I requested that assurance by letter dated 11.04.06 (para. 1).

If you can give me that assurance, I am likely to be able to clarify my client’s instructions on the break imminently”.

On 13^th June 2006 Mr Berridge informed Mr Lyon by e-mail that he was sure that the assurance would be given and that he was just waiting for client confirmation. Later that same day, he sent Mr Lyon an e-mail in the following terms:

“My client confirms it will take no point, should your client seek to break its lease, in respect of L&B’s occupation of the disputed land or Ikea’s access. For the avoidance of doubt, your client will otherwise be required to meet the terms of the break provision”.

My Lyon said in his first witness statement that with that assurance he was able to consent to the imminent Case Management Conference which was due to take place in respect of the L&B litigation being adjourned to enable a settlement to be concluded. I accept that evidence. Arrangements were duly made for an adjournment of that hearing. On the same day Mr Lyon forwarded to Mr Farrow the e-mails received from Mr Berridge on that day and advised Mr Farrow:

“This is the comfort we have been seeking. On this basis I am serving the break notice today: I attach a copy”.

In the same e-mail Mr Lyon reminded Mr Farrow that the exercise of the break was conditional on making all due payments and delivering up vacant possession. He concluded that he would be “running everything past Counsel”. In fact, as Mr Lyon confirmed in cross-examination, he did not “run anything” past Counsel. On 13^th June Mr Lyon forwarded the Notice to Prudential and copied it to CMS under cover of a letter of the same date. This letter referred to Mr Berridge’s e-mail and continued:

“In reliance on the assurance given in that e-mail by your client, we are today serving the Break Notice on behalf of our client. The original has been sent to your client at its registered office address: we enclose a copy.

Please acknowledge safe receipt, and please confirm that this Notice is accepted by your client as validly served”.

CMS did not respond to Kimbells’ request for confirmation until 25^th September 2006.

Negotiations continued during the summer of 2006 with a view to compromising matters connected with the L&B litigation. By early July there was sufficient common ground between the parties concerned that letters were sent by their respective solicitors to the Court in terms therein suggesting an imminent compromise of the case, and inviting an adjournment of the Case Management Conference until some time after 31^st July that year.

By early July 2006, it was anticipated that a term of the compromise would be a partial surrender of the Lease in relation to the disputed land so that Prudential would be able to transfer that part to L&B. This was reflected in an e-mail sent by Mr Ziad Mantoura of CMS to Valerie Warman of Kimbells. Mr Mantoura’s e-mail of 4^th July 2006 stated:

“I am happy with Exel UK Limited granting a partial surrender of the land edged green on the attached plan.

As your client will be surrendering the land, please can you prepare an appropriate Deed of Surrender and sent it to me by return”.

It is apparent from this exchange that even by early July no one had specifically addressed the need for Consumer to be party to the compromise. When a draft deed of partial surrender was prepared by Kimbells on about 5^th July 2006 the error had still not been identified; the draft described Consumer as a surety in respect of the Lease. The error was detected shortly thereafter, and a later draft deed, prepared on about 11^th July, identified Consumer as one of the tenant companies. The error appears to have been detected by Mr Mantoura shortly before that draft was prepared.

After further correspondence between the various interested parties, a Consent Order was finally agreed and signed on 20^th September 2006. It provided that all further proceedings be stayed upon the terms set out in the Schedule thereto save for the purposes of enforcing the terms contained therein with liberty to apply for such purpose. It provided that there be no order as to costs. The Schedule to the Order provided that Prudential would transfer its freehold and leasehold interests in relation to land shown edged red on the attached plan to L&B within 14 days of the date of the Order. Exel relinquished any rights to possession of the land to be transferred. The Schedule made provision in respect of other consequential matters.

Further on 20^th September 2006, a deed of partial surrender was executed by Prudential, Exel and Consumer. This provided that Prudential and the Defendants respectively released each other from the covenants, agreements and conditions relating to the “Released Premises” (namely those shown edged green on an attached plan) and from all costs, claims, demands and other liabilities arising in respect of any breach, or non-observance or non-performance of those covenants, agreements and conditions relating to the Released Premises. In consideration of that release, the Defendants assigned and surrendered to Prudential all of the Wembley Warehouse premises and released their estate and rights in the Released Premises to the intent that the term created by the Lease and all the Defendants’ estate, interest and rights in the Released Premises should merge and be extinguished in the reversion immediately expectant on the Lease.

Thus on 20^th September 2006 a compromise of the L&D dispute between all affected parties, and documents necessary to give it effect, was concluded. The Court approved the Consent Order on 13^th October 2006.

On 25^th September 2006 CMS responded to Kimbells’ letter of 13^th June 2006 and the request for confirmation that the Notice was accepted as having been validly served. CMS asked why the Notice had been served in the name of Exel alone, pointing out that the Lease had been made between Prudential and the two Defendants. The letter continued:

“Did your client take the view that it was unnecessary for Tibbett & Britten Consumer Group Limited to exercise the break? If so, please could you explain why? We note that the surrender of the lease dated 20 September 2006 was entered into by Tibbett & Britten Consumer Group Limited as well as by your client”.

On 28^th September 2006 Kimbells responded stating that Consumer was a wholly owned subsidiary of Exel and was a dormant company. The letter continued:

“As you are aware, in all dealings relating to this lease, Exel has been acting on behalf of and representing the interests of both tenants. In so doing, Exel has been acting as agent and with the authority of [Consumer].

The break notice was given by Exel on behalf of both tenants with the authority of [Consumer].”

Correspondence followed between CMS and Kimbells. On 14^th February 2007 Kimbells, having taken Counsel’s advice, set out the position which was that the Notice properly construed was a notice served on behalf of both Defendants. The letter specifically left aside any separate questions of agency or estoppel. Thereafter CMS and Kimbells argued their respective cases in correspondence.

Both Mr Driscoll and Mr Walker made reference to a number of authorities, upon which they relied in common, dealing with the construction of break notices. Before I turn to their individual submissions it is convenient to deal with those authorities. The starting point in considering the issue of validity is the decision of the House of Lords in Mannai Investment Co Ltd v. Eagle Star Life Assurance Co Ltd [1997] AC 749. Lord Steyn said at page 767G to 768H:

“(2)

The question is not how the landlord understood the notices. The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And in considering this question the notices must be construed taking into account the relevant objective contextual scene. The approach in Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen (trading as H. E. Hansen-Tangen) [1976] 1 W.L.R. 989, which deals with the construction of commercial contracts, is by analogy of assistance in respect of unilateral notices such as those under consideration in the present case. Relying on the reasoning in Lord Wilberforce’s speech in the Reardon Smith case, at pp. 996D-997D, three propositions can be formulated. First, in respect of contracts and contractual notices the contextual scene is always relevant. Secondly, what is admissible as a matter of the rules of evidence under this heading is what is arguably relevant. But admissibility is not the decisive matter. The real question is what evidence of surrounding circumstances may ultimately be allowed to influence the question of interpretation. That depends on what meanings the language read against the objective contextual scene will let in. Thirdly, the inquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind. It follows that one cannot ignore that a reasonable recipient of the notices would have had in the forefront of his mind the terms of the leases. Given that the reasonable recipient must be credited with knowledge of the critical date and the terms of clause 7(13) the question is simply how the reasonable recipient would have understood such a notice. This proposition may in other cases require qualification. Depending on the circumstances a party may be precluded by an estoppel by convention from raising a contention contrary to a common assumption of fact or law (which could include the validity of a notice) upon which they have acted: Norwegian American Cruises A/S (formerly Norwegian American Lines A/S) v. Paul Mundy Ltd. [1988] 2 Lloyd's Rep. 343 . Such an issue may involve subjective questions. That is, however, a different issue and not one relevant to this appeal. I proceed therefore to examine the matter objectively.

(3)

It is important not to lose sight of the purpose of a notice under the break clause. It serves one purpose only: to inform the landlord that the tenant has decided to determine the lease in accordance with the right reserved. That purpose must be relevant to the construction and validity of the notice. Prima facie one would expect that if a notice unambiguously conveys a decision to determine a court may nowadays ignore immaterial errors which would not have misled a reasonable recipient.

(4)

There is no justification for placing notices under a break clause in leases in a unique category. Making due allowance for contextual differences, such notices belong to the general class of unilateral notices served under contractual rights reserved, e.g. notices to quit, notices to determine licences and notices to complete: Delta Vale Properties Ltd. v. Mills [1990] 1 W.L.R. 445 , 454E-G. To those examples may be added notices under charter parties, contracts of affreightment, and so forth. Even if such notices under contractual rights reserved contain errors they may be valid if they are 'sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate:' the Delta case, at p. 454E-G, per Slade L.J. and adopted by Stocker and Bingham L.JJ.; see also Carradine Properties Ltd. v. Aslam [1976] 1 W.L.R. 442, 444. That test postulates that the reasonable recipient is left in no doubt that the right reserved is being exercised. It acknowledges the importance of such notices. The application of that test is principled and cannot cause any injustice to a recipient of the notice. I would gratefully adopt it.”

Lord Hoffmann also adopted a test of whether “the notice clearly and unambiguously communicated the required message” (see page 776C). With regard to the interpretation of notices, he said at page 779F-H:

“In the case of commercial contracts, the restriction on the use of background has been quietly dropped. There are certain special kinds of evidence, such as previous negotiations and express declarations of intent, which for practical reasons which it is unnecessary to analyse, are inadmissible in aid of construction. They can be used only in an action for rectification. But apart from these exceptions, commercial contracts are construed in the light of all the background which could reasonably have been expected to have been available to the parties in order to ascertain what would objectively have been understood to be their intention: Prenn v. Simmonds [1971] 1 W.L.R. 1381, 1383. The fact that the words are capable of a literal application is no obstacle to evidence which demonstrates what a reasonable person with knowledge of the background would have understood the parties to mean, even if this compels one to say that they used the wrong words. In this area, we no longer confuse the meaning of words with the question of what meaning the use of the words was intended to convey. Why, therefore, should the rules for the construction of notices be different from those for the construction of contracts? There seems to me no answer to this question.”

Lord Clyde took the same approach at page 781H-782F. Speaking of the inaccuracy in the notice concerned he said :

“Whether that inaccuracy in the notice is fatal or not depends on the proper construction of the notices. The formulation propounded by Goulding J. in the Carradine case, at p. 444, was 'Is the notice quite clear to a reasonable tenant reading it? Is it plain that he cannot be misled by it?' Delta Vale Properties Ltd. v. Mills [1990] 1 W.L.R. 445 concerned a vendor's notice to complete which was in condition 23 of the conditions of sale, but I see no reason why any different principle of construction should apply. Slade L.J. observed, at p. 454:

'In my judgment, notices to complete served under condition 23, if they are to be valid, must be sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate.'

The standard of reference is that of the reasonable man exercising his common sense in the context and in the circumstances of the particular case. It is not an absolute clarity or an absolute absence of any possible ambiguity which is desiderated. To demand a perfect precision in matters which are not within the formal requirements of the relevant power would in my view impose an unduly high standard in the framing of notices such as those in issue here. While careless drafting is certainly to be discouraged the evident intention of a notice should not in matters of this kind be rejected in preference for a technical precision.

The test is an objective one. In circumstances where an estoppel might arise the actual understanding of the recipient may be relevant, but in general the actual understanding of the parties is beside the point. That the test is an objective one was recognised in Micrografix v. Woking 8 Ltd. [1995] 2 E.G.L.R. 32 . It was held there that the landlords would not have been misled by the references to a wrong date both in the notice to terminate the lease and in the covering letter. Each document was expressly written pursuant to the particular break clause in the lease. The recipients would have observed the errors because they would be familiar with the terms of the lease and would have known that the only date of determination had to be 23 June 1995. They would know that there was no requirement to specify any date in the notice. They would see that the tenant wanted to leave. It was held that the notice was valid.”

At page 783A Lord Clyde too adopted a “sufficiently clear and unambiguous” test in expressing the view that no reasonable landlord would be misled, in the circumstances of that case, by the incorrect statement of a date.

Lord Goff of Chieveley and Lord Jauncey of Tullichettle delivered dissenting speeches holding that the notices concerned were invalid because the errors contained in them meant that the notices failed to comply with the requirements of the break provision.

In Lemmerbell, the facts of which I have dealt with above, the Court of Appeal held that the notices concerned could not be construed as being given by the tenant. Lord Justice Peter Gibson said at page 71:

“On the face of each notice, Life was said to be the tenant as successor in title to Direct, and that, if true, could only have come about as a result of an assignment without consent. But such an assignment would be effective to make the assignee the lessee for the purposes of clause 7(x). The reasonable recipient could not know, in the absence of proof of the assignment, whether Life was the lessee: it might have been. If Life was not in fact the lessee but Direct was, the reasonable recipient could not know whether Amery-Parkes [the solicitors who served the notices] were authorised by Direct to act for it and to serve the break notice, contrary to the express terms of the notice. To my mind, because it is not obvious from each notice that there was an error in the name of the lessee nor is it obvious who the actual current lessee was nor whether Amery-Parkes were duly authorised by anyone other than Life, it is impossible as a matter of construction to cure what we now know to be the defect by substituting Direct for Life as the person on whose behalf Amery-Parkes were giving each notice.”

In Havant, with the facts of which I have also dealt above, Mr Justice Hart referred to the decision in Mannai and said (at page 303) that in his judgment it was quite clear that the Mannai test was an objective one. He continued:

“In Mannai itself the “objective contextual scene” which was allowed to play that role was limited to the terms of the leases. I am unable to read the words “circumstanced as the actual parties were” as admitting evidence the sole function of which is to demonstrate what the parties actually would have thought. This is to make a nonsense of the approach being described as objective and would render invalid the analogy with the construction of commercial contracts.”

He continued at page 304:

“That conclusion highlights the importance of deciding whether or not the actual existence of HIL as a separate entity, with a director called Mr Piotr Nahajski who was not a director of HIHL, should be admitted as part of the objective contextual background. Without that additional piece of the jigsaw, the reasonable recipient of a notice expressed to have been given by HIL, would not have been in a moment's doubt that he had received a notice from HIHL. The only reasonable explanations for the reference to HIL would have been either that HIHL had changed its corporate name, or that there had been a simple error in the description of HIHL. The idea that some completely different entity was purporting to exercise for its own benefit a contractual right which it did not and could not enjoy, would have been far-fetched.

Once, however, one has identified that HIL is a separate entity and that Mr Nahajski was a director of HIL but not of HIHL, the first of these explanations is displaced as a possible one by another, namely that the reference to HIL throughout the notices was deliberate. This does not remove all ambiguity from the notices since they continue to contain the reference to clause 7(1) of the leases (which can only be a reference to HIHL), but it raises the possibility that an unlawful assignment to HIL had taken place, and that HIL had mistakenly taken the view that the consequence of this was that it, HIL, now enjoyed the right to serve break notices.

I cannot see why one should exclude the evidence of HIL's separate identity in construing the notices or the fact that Mr Nahajski was a director of HIL and not HIHL. Such evidence does not suffer from the vice of being evidence of subjective intention. It is evidence which was (unlike evidence as to whether or not an unlawful assignment had in fact taken place) publicly available. The fact that the relevant Lionsgate G personnel did not know these facts seems to me irrelevant to an objective construction. The question therefore is whether (given this fact) the notices can and should be construed as notices from HIHL.”

Mr Justice Hart held that the Lemmerbell case was to be distinguished because in that case an assignment would have been effective to make the assignee the lessee for the purposes of serving a break notice:

“Life, rather than Direct, might have been the lessee with the right to serve the break notice; and this was precisely what was asserted by the terms of the purported notice. The passage cited gives some grounds for supposing that, but for that fact, the Court of Appeal might have been disposed to accept the submission made on behalf of Direct that it was obvious that the solicitors were in error in stating that the notice was served on behalf of Life rather than Direct. In the present case, while HIL could conceivably have been the lessee, there were no conceivable legal circumstances in which it could have asserted a right to serve either of the break notices.”

Having thus distinguished the Lemmerbell case, Mr Justice Hart continued at page 306:

“The question therefore resolves to this. Would the reasonable recipient assume that there had been a mistake in the description of the company giving the notice? Or would he entertain, as a matter giving rise at least to a reasonable doubt, the possibility that HIL had taken an unlawful assignment and had done so in the mistaken belief that it had thereby become entitled to the benefit of HIHL's personal right? Without claiming to find the answer altogether easy, I have concluded that the latter construction of the notice is not one which would have been seriously entertained by a reasonable recipient. The reasonable recipient would, rather, conclude that a mistake had been made in not naming HIHL as the giver of the notice. The personal nature of HIHL's right (emphasised by the express declaration in the leases as to the avoiding effect of an assignment to any one other than IBM) makes that the only explanation of the notice which carries conviction. If that is correct, the reasonable recipient would also have concluded that the notices had been signed by Mr Nahajski, a director of HIL, because he had been authorised by HIHL to do so. In so far as the recipient might have been in doubt as to Mr Nahajski's authority in this respect, it would have been entitled to seek proof of that authority from HIHL (which would have been forthcoming).”

Later at page 306, Mr Justice Hart specifically rejected the submission to the effect that an error as to the identity of the person serving the notice was so gross as to be incapable of being overlooked. He said:

“I do not consider that the mere fact that the ambiguity in the notice goes to the question of who is purporting to give it puts it into some special category. The question in every case is whether, on a fair construction of the notice, it is quite plain that the reasonable recipient cannot be misled by it. For the reasons which I have given, I do not think that a reasonable recipient would have been misled in the present case into thinking that it was HIL rather than HIHL which was purporting to exercise the right.”

In Procter & Gamble a lease granted in 1995 to Procter & Gamble Health & Beauty Care Ltd (“H&B”) contained a break clause in favour of the tenant. Following a series of permitted assignments, in 1998 the lease was vested in another Procter & Gamble company, Procter & Gamble Technical Centres Ltd (“TC”). In 2000 a rent review memorandum was said to be executed by the landlord and the tenant, but the identity of each was wrongly stated; H&B was identified as the tenant. In 2002 a solicitor for Procter & Gamble, relying on the memorandum purported to serve a break notice, but did so in the name of H&B. Mr Justice Neuberger held that the notice was invalid:

“39.

Mr Lewison contends that the reasoning [in Lemmerbell] applies here, while, of course, he accepts that each case must be determined on its own facts, and that there is the point that in the notice in that case, the wrong person, Life, was specifically described as “successors in title to the original tenant”. Nonetheless, he says that this case is at least as strong as that case from the landlord's point of view, and that, in those circumstances, I am effectively bound by the reasoning in Lemmerbell to determine that the notice in the present case is invalid.

40.

Despite Mr Brock's argument to the contrary, I have, with some reluctance, concluded that that argument is indeed correct and that the notice is invalid on this ground. I accept that I have to be very careful of relying on another case, because in each case the question is whether a particular document would have been unambiguously understood to be an effective notice by a reasonable recipient, and that is a question which turns very much on the terms of the particular break clause, the terms of the particular notice, and the particular contextual factors. It would be wrong to rely on the outcome of another case, as opposed to the approach or principles to be extracted from another case. It is clear from the decision in Havant that Mr Justice Hart was well aware of this. He held that a notice with a similar defect was valid, on the basis that, in that case, the clause giving the right to serve the notice was limited in clear terms only to the original tenant, and only if there had been no assignment of the lease. In those circumstances he was able to hold that a notice served in the name of the wrong person could not have been misunderstood by the landlord: the reasoning of Lord Justice Peter Gibson in Lemmerbell did not apply to the notice, and the reasoning of the majority of the House of Lords as to the wrong date in Mannai did apply to it.

41.

In the present case, however, to my mind, the facts show it to be at least as strong from the landlord's point of view as Lemmerbell . It is trite law that a lease can be effectively assigned by the tenant without the landlord's knowledge or consent, even if the lease contains provisions such as clause 2.21 in the present case. I accept that in Lemmerbell there was reference in the notice to the fact that Life was the successor in title to the original tenant. However, the fact remains that the notice was served on behalf of somebody who the recipient of the notice could reasonably have assumed was the person in whom the lease was vested, and that it was therefore the person entitled to serve the notice. That conclusion appears to me to apply equally if one looks at the first paragraph of the Notice, but it does not stop there.

42.

There had been a rather complex series of transactions in 1998-1999, to which I have referred. It is by no means inconceivable that, after those transactions, there had been one or more other transactions relating to the property which had accidentally not been communicated to the landlord. In particular, it is not as if H&B had nothing more to do with the property other than being original tenants because they, of course, were one of the two joint tenants under the under lease of 15^th February 1999.

43.

Furthermore, there is the third sentence of the Notice. It showed that the writer had carefully considered the rent review memorandum executed in 2000, and had appreciated that the landlord had apparently been wrongly identified as the nominee companies, and that this seemed to be a mistake, because the defendant, to whom the notice was sent, was still the landlord. The, or at any rate a, natural deduction of a reasonable recipient of the Notice would have been that, if the tenant's own solicitors had taken sufficient care to read the memorandum and noticed that it wrongly identified the landlord, then a fortiori they must have considered, whether it wrongly identified the tenant, their own client. It seems to me that that third sentence of notice is therefore another factor which at least could reasonably have reinforced the view of a reasonable recipient that the Notice was indeed intentionally being served by the person on behalf of whom it was stated to be served, namely H&B.

44.

Additionally, in this case, unlike in Lemmerbell , the person on whose behalf the notice was stated to be served, was the original tenant. There is therefore, as Mr Lewison points out, the additional possibility that a reasonable person in the defendant's position could not have ruled out, that the Notice was being served on behalf of someone who had good reason for wishing to put an end to the lease, but in fact had no right to do so. That is not a fanciful idea, because as Mr Brock says, albeit only by a week or two, the lease was not subject to the Landlord and Tenant Covenants Act 1995 and therefore H&B, as the original tenant, remained liable on the tenant's contracts, despite the subsequent assignments in 1998 and 1999.

45.

I note that, in Lemmerbell, the solicitor who served the notice, Amery Parkes, would have been known by the defendant to have been acting for the actual tenant, Direct, because they had written previously to the landlord on its behalf. Accordingly, it could have been said that at least the landlord would have had reasons to believe that the notice might well have been authorised by Direct. No such point could be advanced here: there is no evidence to suggest that Stevens and Bolton had acted for TC to the defendant’s knowledge prior to the service of the Notice.

46.

In these circumstances, in light of the reasoning in Lemmerbell, it seems to me that the Notice was not valid. Notices of this sort, particularly if served near the last minute, as happened in this case, have to be clear and unambiguous because the recipient is entitled, and may need, to make dispositions in the faith of such notices, i.e. on the basis that such notices can be confidently relied on. If such a notice contains a mistake then, while any mistake which cannot possibly mislead a reasonable recipient should not stand in the way of validity, a mistake which could reasonably mislead a reasonable recipient cannot fairly be overridden.

47.

Mr Brock raises another argument, namely that of general agency, which was the primary argument raised in Lemmerbell. As the analysis, I hope, has so far demonstrated, the mere fact that the solicitors had authority to serve the notice does not of itself validate the notice. It has to be good on its face. Reliance on Mannai is the primary way in which Mr Brock puts his case on validity, although it was the secondary argument advanced in Lemmerbell. The primary point advanced by the tenant in Lemmerbell was an extension of the agency argument. It was that there was a general agency. A general agency is one where the agent is entitled to carry out the functions of his principal in the agent's own name. That argument, although successful at first instance in Lemmerbell was rejected in the Court of Appeal .

48.

The Counsel's opening argument was advanced in the present case on the basis that the solicitors, Stevens and Bolton, were the general agents for TC. However, Mr Brock realistically accepted, in closing, that this argument faced substantial difficulties. I think that those difficulties are insurmountable. The analysis of Lord Justice Peter Gibson in Lemmerbell at 70B—C of the requirements of the general agency, and the principles he accepted and set out at 70D—F, indicate the very strong facts required before a general agency can be established.

49.

I do not see how, on the facts of this case, TC can get within shouting distance of establishing that the solicitors acted as general agents on their behalf. In any event it seems to me that it would be necessary for TC to establish that H&B, not the solicitors, were general agents for TC.

50.

In those circumstances I conclude that the notice was ineffective to determine the lease.”

I draw attention to what Mr Justice Neuberger said in paragraph 47 of his judgment to the effect that authority to serve a notice will not of itself validate it; it must be good on its face (in the light, of course, of proper construction). Thus whatever authority Kimbells, or the Property Department, may have had to serve the Notice, unless it was good on its face, in the sense explained, it will not be a valid notice.

In Lay v. Ackerman [2005] 1 EGLR 139, tenants served a notice on the landlords, PFCS Trustees, seeking a new extended lease of premises under the Leasehold Reform, Housing and Urban Development Act 1993. The landlord’s counter-notice wrongly identified the landlords as the PFCS Trustees. In proceedings to determine the validity of the notice, the trial judge held that it was invalid. The Court of Appeal (Arden and Neuberger LJJ) reversed this decision. Lord Justice Neuberger, as he then was, said:

“37.

... the decisive factor which caused the judge to reach his conclusion was that a reasonable recipient in the position of the respondents receiving the Counter-Notice would (or could) have thought that the reference to the PFCS Trustees as the landlord was deliberate, and this was determinative of the issue. While it appears attractive at first sight, I do not consider that that can be the correct approach. It is, on analysis, an unhelpful test, inconsistent with Mannai , and, above all, not appropriate under the 1993 Act.

38.

So far as unhelpfulness is concerned, it appears to me that the answer to the question whether the mis-identification of the landlord was “deliberate” or not depends on how one puts the question. If one were to ask whether the solicitors who prepared the Counter-Notice intended to identify the landlord in the Counter-Notice as the PFCS Trustees, the answer would be in the affirmative. To that extent the mis-identification was deliberate. On the other hand, if one was to ask whether the solicitors had intended to identify someone other than the actual landlord as the landlord, the answer would be in the negative. To that extent the mis-identification was a mistake.

39.

The unhelpfulness of the test can also be demonstrated by reference to the facts in Mannai . The landlord who received the two notices could well (and indeed probably would) have believed that the identification of the termination date as 12 January was deliberate, on the basis that was apparently the date on which the tenants (albeit mistakenly) thought that the two leases would come to an end. On the other hand, if one asked whether the landlord believed the tenant intended to put in the correct date of termination, and that therefore the reference to 12 January was a mistake, the answer would be in the affirmative.

40.

For this reason, it also appears to me that the test applied by the learned judge cannot have been the test applied in accordance with Mannai . The correct approach on the basis of the decision and reasoning in Mannai is as follows. One must first consider whether there was a mistake in the information contained in the notice (as there was as to the date in Mannai , and there was as to the landlord, in the present case). If there was such a mistake, one must then consider how, in the light of the mistake, a reasonable person in the position of the recipient would have understood the notice in the circumstances of the particular case. Finally one must consider whether, as a result, the notice would have been understood as conveying the information required by the contractual, statutory or common law provision pursuant to which it was served.

The proper approach

41.

The Counter-Notice was a notice purportedly served pursuant to a statutory provision, and the validity must therefore be assessed, by reference to, and in the context of, Chapter II of Part 1 of the 1993 Act, and s45 in particular. That appears to me to be the correct approach as a matter of principle, ...”

The learned Lord Justice then referred to authority and continued:

After considering further authority, his lordship continued:

Lady Justice Arden delivered a concurring judgment, stressing that the tenants were not misled by the counter-notice.

In my judgment the essential point of distinction between Lay v. Ackerman and the other authorities under consideration is that it was a case concerned with a statutory counter-notice, in circumstances where the tenants could not be in any real doubt that it was served on behalf of the actual landlord. This is what was emphasised by Lord Justice Neuberger at paragraphs 61-62 of his judgment. It is important to keep this distinction and reasoning in mind when having regard to the observations made in that case as to the approach to be taken to construing the notice with which it was concerned.

With these principles in mind I turn to the submissions made on behalf of the parties.

Mr Driscoll took as his starting point, and was clearly right to do so, the provisions of the Lease. He emphasised that the right to determine provided in clause 7.2 is one only available to “the Tenant”. He maintained that the only person that could exercise the break provision was the original tenant, namely Exel and Consumer, because the Tenant for the purposes of the break provision could not change without Prudential’s first giving its consent to any change, and it had not been asked to do so, nor had it done so. Mr Driscoll emphasised that the definition of the Tenant in the lease at clause 1.1 confined the expression to “permitted assigns”. He maintained that for the purposes of clause 1.1 unlawful assignees could not be “successors in title”, otherwise this would render meaningless the reference in the definition to “permitted assigns”. He submitted that because of the provisions of clause 3.50 of the Lease, an assignment to Exel alone was absolutely prohibited, or was subject to the requirement of consent on the part of the landlord. If therefore there had been an unlawful assignment either to Exel or, to Exel and another, or another entity all together, such assignee would not be “the Tenant” for the purposes of the break provision. Thus he submitted that the present case was similar to the Havant case in that in the Havant case no break notice could validly be given by anyone other than the original Tenant, namely Exel and Consumer. Mr Driscoll submitted it was possible to distinguish the Lemmerbell and Proctor & Gamble cases, as in both of those cases an unlawful assignment could have afforded to the giver of the notices the right to determine the lease although the landlord could not know whether there had been such an assignment; see page 71L in Lemmberbell and paragraph 40 in Proctor & Gamble.

Mr Driscoll submitted that it would have been unreasonable speculation on the part of Prudential to have supposed that Exel had given the Notice on its own behalf because Consumer no longer existed. Consumer could only have ceased to exist if it had been dissolved, which would give rise to a notice of dissolution against its name at the Companies Registry: dissolution would take place only 3 months after the registration of the notice pursuant to the sections 201(2) and 205(2) of the Insolvency Act 1986. Before a liquidator could file any such notice there would have had to have been a liquidation in the course of which Prudential as a creditor would have been given notice. What is more, Mr Driscoll submitted, a company search would have shown as a matter of certainty whether a dissolution had occurred. Mr Driscoll submitted that it was permissible, in construing the Notice, to take account what a company search would have revealed since it was publicly available information, and in this regard he relied upon passages in Mr Justice Hart’s judgment in the Havant case at pages 304-305 to which I have referred above. In fact, a company search was carried out by Mr Berridge prior to 19^th June 2006.

Mr Driscoll submitted that, knowing of the continued existence of Consumer, it would be fanciful for a reasonable landlord to think that another notice might be provided on the part of Consumer.

Mr Driscoll then submitted that there were a number of reasons for why the reasonable recipient of the Notice would have concluded that a mistake had been made in the drafting of the Notice:

Against all of this background, Mr Driscoll submitted, the reasonable landlord would have concluded that Kimbells intended to give the Notice on behalf of the Tenant (that is both Exel and Consumer) and not Exel alone, and would have had no reasonable doubt that by mistake Kimbells had not referred also to Consumer when they had obviously intended to.

Mr Driscoll submitted that this case was similar to the Havant case because a good notice could only be given by Exel and Consumer together, and the reasonable landlord would have known from the information which he had that there could be no permitted assignee to take their place.

Mr Driscoll then submitted that the approach taken by Lord Justice Neuberger in Lay v Ackerman was applicable in the present case. In particular he relied upon what Lord Justice Neuberger said at paragraph 62 to the effect that if it had been clear in Lemmerbell that notice was being served on behalf of the actual tenant, whoever it was, it would have been a good notice. On the facts of this case, Mr Driscoll submits, there could be no reasonable doubt that Kimbells, instructed as they were by both companies who were together the Tenant, and mistaken as they were as to the identity of the Tenant, were nonetheless clearly serving a notice under clause 7.2 on behalf of the Tenant.

Mr Driscoll then sought to distinguish Lemmerbell on the basis that in that case an assignee under an unpermitted assignment could exercise the break provision; see page 71L of the Report. Mr Driscoll emphasised that for the reasons mentioned above, Exel alone could not have exercised the break provision.

Mr Driscoll then addressed the passage at page 71L-M in Lemmerbell in which Lord Justice Peter Gibson said that because it was not obvious from each notice in that case that there was an error in the name of the lessee, nor was it obvious who the actual current lessee was, nor whether the solicitors were duly authorised by anyone other than Life, it was impossible as a matter of construction to cure the known defect by substituting Direct for Life as the person on whose behalf the solicitors were giving each notice. These considerations, Mr Driscoll argued, do not arise in the present case, because there was simply an omission of Consumer’s name, and Exel was not described as a successor in title. In any event, Mr Driscoll submitted, the question of authority to give a notice should not be confused with the question of whether the notice as a matter of form complied with the requirements of the Lease. However, Mr Driscoll argued, that in the present case, Prudential knew that Kimbells acted for both Defendants as of September 2004 and had no substantial reason to suppose that they did not have authority to give a notice on behalf of the Tenant.

With regard to the Proctor & Gamble case, Mr Driscoll emphasised that the break notice was served in the name of the original tenant at a time when there had been an assignment. He pointed out that the very feature of the Havant case by reference to which Mr Justice Neuberger distinguished it, is also a feature of the present case, namely, that the break provision is one of which only the original tenant could take advantage (as explained above).

Mr Driscoll submitted that since this is a case concerned with the construction of a notice given under a lease, not the construction of a contract, any rule of law excluding the consideration of negotiations leading up to the conclusion of a contract has no application. Thus if the solicitors for the parties had agreed in correspondence before the notice was served that Exel could be treated as the Tenant for the purposes of the break notice, it would plainly be wrong not to look at that agreement for the purpose of construing the Notice.
Similarly, he maintained, where there has been such an assumption that Exel was the tenant and entitled to exercise the break right, it was permissible to look at the communications. In this regard, he maintained, it did not matter that CMS did not regard as important, in those earlier communications, the identification of the Tenant; for this proposition he relied upon the passage in Lord Wilberforce’s speech in Reardon Smith Line Ltd v. Yngvar Hassen-Tagen [1976] 1 WLR 989 at 997 B-D, to the effect that the relevant background can include facts in which one or both of the parties may take no particular interest. (Lord Simon of Glaisdale and Lord Kilbradon expressly agreed with Lord Wilberforce’s speech; Viscount Dilhorne and Lord Russell of Killowen delivered concurring speeches.)

Mr Driscoll referred me to the decision of the Court of Appeal in KPMG LLP v. Network Rail [2007] EWCA Civ 363, in particular paragraphs 44 to 50 for the proposition that where there has clearly been a mistake in a contract and it was clear what the mistake was, the court would construe it as though the mistake had not been made. This approach, he submitted, should be adopted in the case such as the present. In the course of developing his submissions orally, Mr Driscoll accepted, however, that the effect of the authorities was that a court would hold a document effective if there was plainly a mistake in its drafting, but this approach would only be available if the mistake in drafting was the only realistic possibility.

In all the circumstances Mr Driscoll submitted that the only explanation for the omission to make reference to Consumer was a mistake by Kimbells and that any other explanation was not a reasonable one in the light of the history.

Mr Driscoll also placed considerable emphasis on the fact that Prudential knew that the Property Department was paying the rent for the Wembley Warehouse as shown by what is recorded in Prudential’s computer records. Those records note the tenants as Exel and Consumer but give the relevant contact address as the Property Department.

With regard to the Notice itself, Mr Walker made four points:

Mr Walker submitted that the effect of the Lemmberbell and Lay v Ackerman decisions is that where the issue concerns the identity of the person on whose behalf a notice is given, the notice will be invalid unless the reasonable recipient would know:

Exel, Mr Walker submitted, was correctly named in the Notice so that the mistake was not a misnomer, but the omission of Consumer. Whereas a misnomer might, in certain circumstances, be an obvious error, the omission of a party will increase the uncertainty of the reasonable recipient of the notice.

With regard to what material is relevant in construing the Notice, Mr Walker submitted that it was simply the Notice itself and the Lease, and for that he relied on Lord Hoffmann’s speech in Mannai at 779E-F and on Lord Clyde’s speech at 781F-G.

On the strength of the Lemmerbell and Proctor & Gamble decisions, Mr Walker submitted that, for the Notice to be valid, a reasonable landlord would have had to have been entirely confident that Exel was named alone in the Notice by mistake, but the current lessees were still Exel and Consumer and that Kimbells were duly authorised to give notice on behalf of both. Each of those elements, he submitted, must be “obvious”.

A reasonable landlord receiving the Notice, Mr Walker argued, could not act on it safely with the knowledge that it was valid, nor could he be confident of the elements mentioned above, because:

Even if wider circumstances could properly be taken into account, Mr Walker submitted, genuine and reasonable doubts would remain as to the Notice:

Mr Walker submitted that the present case was not comparable to the Havant case. Clause 3.50 of the Lease did not absolutely prohibit assignments by both Defendants to one of them only, and any absolute prohibition (such as that for which Mr Driscoll contended) would not be obvious to a reasonable landlord receiving an erroneous notice. Equally it was not something which such a landlord should know or assume was both appreciated, and, very importantly, had been observed by the original lessee. Mr Walker submitted that the Havant decision was a marginal one and the circumstances of the present case fell well short of those in Havant, not least because the present break clause was not expressed to be a personal one.

In developing his submissions orally, Mr Walker suggested that the case for the Defendants is internally inconsistent. He maintained that for the purposes of the construction argument the Defendants maintained that the change in the correspondence from references to Exel and Consumer, to Exel alone was not to be taken as indicative that anything had changed in relation to the identity of the Tenant. On the other hand, the Defendants relied on the same correspondence as indicative of a change whereby everyone treated Exel as the Tenant for the purposes of establishing estoppel.

Mr Walker went on to submit that:

With regard to the context in which the Notice was served, Mr Walker submitted that this did not assist the Defendants’ case because what it demonstrated was an unclear picture:

Mr Walker relied upon passages in Lemmerbell (page 72B-C) and in Proctor & Gamble (at paragraph 42) for the proposition that where a notice has been drafted by a solicitor it is to be expected that care will have been taken in identifying the party on whose behalf it is said to be served. This would tend to limit any room for mistake.

Having regard to all of these matters, Mr Walker submitted that, from the point of view from the reasonable recipient of the Notice, there remained a real possibility that Consumer had simply been overlooked and that its authority to exercise the break had not been sought.

The following principles emerge from the authorities:

I gratefully remind myself of what Mr Justice Neuberger said in Procter & Gamble at paragraph 40 (cited above) as to taking care about relying on other cases, and the need to fasten upon the circumstances of the particular case before the Court. The question for determination in this case then, is whether the Notice clearly and unambiguously would have been understood by a reasonable recipient to be an effective notice given on behalf of the Tenant, that is the Defendants. This question must be answered by reference to the terms of the break clause, the terms of the Notice, and the context in which the Notice was served.

I find that, contrary to Mr Walker’s submission on this point, the relevant contextual scene is not confined to the Lease and the terms of the Notice itself. In many cases such limited material will be all that is relevant, as Lord Hoffmann said in Mannai at page 779E-F. However, that will be because in many cases there will have been no correspondence or other communication between the parties in the run up to the exercise of the break provision. To take Lord Hoffmann as indicating that only the Lease and the Notice were relevant would run entirely counter to the thrust of his speech Mannai where especially at page 779F-G cited above he clearly favoured the approach of admitting all the relevant background available to the parties to be considered to ascertain intention.

The following matters I consider to be of significance:

In my judgment the Notice, against the background described, would not unambiguously have been understood to be an effective notice by a reasonable recipient. Its own terms would generate real doubt as to whether it was served on behalf of Consumer, because they suggested that although Consumer was known to have been a lessee, the Notice was not being served on its behalf. The background described does not eliminate the doubt manifest from the Notice; it multiplies it. In terms, through the pleadings in the L&B action, Kimbells did not equivocally hint that Exel alone was the Tenant; they positively averred it. This left unexplained the position of Consumer.

This case is to be distinguished from the Havant case. In the present case there was material both in the Notice, and extraneous to it, to suggest that the omission of reference to Consumer in the body of the Notice was not accidental.

I do not consider that this conclusion can be disturbed by the consideration that only the Tenant (as defined) could exercise the break option validly. As Mr Walker submitted, a possible explanation, judged from Prudential’s perspective, was that Consumer had simply been overlooked. (That would not be fanciful; it had been overlooked in relation to the L&B litigation, although, of course, Prudential would not know that this was due to oversight.) As Mr Walker further submitted, the reasonable landlord could not know or assume that the Defendants’ had appreciated, and honoured, the provisions of the Lease, with regard to what would constitute a valid assignment and who could validly exercise the break option.

Further I do not consider that any of the communications between the parties and their solicitors led to any special use of language whereby reference to Exel should be understood to be a reference to both Defendants. Certainly such usage cannot be gleaned from the use of the term “client” or “clients”, when the respective solicitors adopted such terms in correspondence. There was a complete inconsistency of usage, sometimes within the same letter. Further, in the context of the exercise of the break provision no-one attempted in the course of communications to identify who was being referred to as the Tenant, save that when Kimbells did actually address the point, in pleadings and in the Notice, they identified Exel without mention of Consumer, whilst at the same time acknowledging that Consumer had at some point been one of the Tenants.

Since the Notice was not a valid exercise of the right to break the Lease, the issue arises as to whether Prudential is estopped from disputing that there had been such a valid exercise. I have described above the history of the communications between the parties and their respective solicitors, but in relation to this issue I must deal also with other evidence which was given at trial.

Mr Lyon’s evidence was that after he received instructions from Mr Bayes in October 2004 to the effect that he should not incur further costs without prior instructions, he placed his file on hold. He was then re-instructed by Mr Farrow of the Property Department in April 2005. In his first witness statement Mr Lyon acknowledged that the reference in his letter of 1^st June 2005 only to Exel was “unfortunate and incomplete”. He said that it was possible that something in his file had led him to refer inaccurately to only one of his two clients, but he always understood his firm to be instructed by whoever was the tenant of the Wembley Warehouse within the Exel group. Speaking of events a little later, and from about July 2005, Mr Lyon acknowledged that he had by that time lost sight of the fact that there were two tenants of the Wembley Warehouse and that he referred mistakenly in correspondence only to Exel.

Mr Lyon accepted that he continued his mistake when commencing proceedings against L&B. He referred to the correspondence with CMS with regard to whether the break notice could be validly served despite the problems caused by the L&B dispute. He said that in reliance on the assurance given by CMS on 13^th June 2006 to the effect that Prudential that no point would be taken in respect of L&B’s occupation of the disputed land, he served the Notice.

In his first witness statement, Mr Lyon said that in reliance on the way in which CMS had expressed themselves in correspondence, he thought that a notice given in the name of Exel only would be sufficient. He said that he accepted that the mistake was initially his own but it went unnoticed or un-remarked on for so long afterwards that by the time he came to settle and serve the Notice he believed that both the landlord and the tenant recognised Exel as the person entitled to break the Lease. He said that had CMS or Prudential said at any stage before the Notice was given that a valid notice had to be given by both companies, then there would have been no difficulty in making an amendment to the notice. He said that no one familiar with the Lease and the correspondence and the issues leading up to the service of the Notice could have been in any real doubt at all that the Notice was intended to be given by “the Tenant”; this observation was of course no more than his opinion.

In his second witness statement Mr Lyon said that he did not become aware of the mistake that had been made until he received CMS’ letter of 25^th September 2006.

In both his witness statements Mr Lyon dealt, in some detail, with the events which followed the serving of the Notice. This material was introduced because at one stage the Defendants sought to advance their case as to estoppel on the basis that in the light of conduct on the part of Prudential following the serving of the Notice, it would be inequitable for Prudential to take the point that the Notice had not been validly served. In the course of the trial, I gave permission for the Points of Defence to be amended to develop the case in that regard, but with the qualification that the amendment should make clear that the Defendants were not making any allegation of a new representation or convention after the serving of the Notice. It is however unnecessary for me to deal with the evidence in relation to conduct after the serving of the Notice because Mr Driscoll realistically accepted in the course of making his submissions that it was not open to him, on the material available, to advance the case as to estoppel by reference such events.

In cross-examination Mr Lyon said that as from the moment that he was reinstructed in April 2005, he believed that Exel was the Tenant and entitled to exercise the break. He said that he never had any doubt that he was instructed by the Tenant and was working under a mistaken assumption that the Tenant was Exel.

Asked about his letter of 28^th September 2006 (which did not advance a case based upon the construction of the correspondence or estoppel but asserted Exel’s agency on behalf of both Defendants), Mr Lyon said that this was just a response by which he hoped to “knock the matter on the head” quickly. He said that when he wrote the letter he was shocked and that although he knew the letter might be relied on, he had not felt able to raise detailed arguments on estoppel. He pointed out, perfectly fairly, that he had to notify insurers and his clients and that a detailed response would have to await assistance from counsel.

He said that he had no better explanation of how he worked on the basis of there being only one client, but he attributed the error to the fact that his file had been closed for a period of about 6 months. He said that it was in April 2005 that he lost sight of the fact that there were two tenants. He said that at that time Consumer simply slipped from his mind.

He said that when he drafted the Notice he looked at nothing because he was clear that the Tenant was Exel. In respect of the e-mail communication between him and Mr Berridge on 9^th and 13^th June 2006 (culminating in Mr Berridge’s confirmation that should the Lease be broken, Prudential would take no point in respect of L&B’s occupation of the disputed land or Ikea’s access), Mr Lyon said that he was not conscious of any point about the identity of the Tenant. He said that all times Mr Berridge knew that he acted for the Tenant.

Mr Berridge also gave evidence at trial. In his first witness statement he dealt with points concerning the validity of the Notice and the authority of Kimbells.

In his second witness statement he said that he gave no thought to the identity of Kimbells’ client or clients until such time as it became important to Prudential to do so. With regard to the L&B dispute, he said that he was not concerned with the precise identity of Kimbells’ client(s) but was trying to ensure that the issue of L&B’s occupation was resolved. As to the reference to the manner in which his own correspondence referred to Kimbells’ client, he said that he did no more than follow and use Mr Lyon’s own characterisation. He said that at no stage insofar as he was concerned, did he or Prudential do anything which might have encouraged or justified any belief on the part of Kimbells or the Defendants that a break notice given by Exel alone would be a valid notice or that Prudential recognised Exel as the person entitled to break the Lease. He said that it was not until he considered Kimbells’ letter of 13^th June 2006 that he had any cause to consider the identity of the Tenant. He said that when he received the Notice, his initial view was that its form and wording appeared to be and was likely to be deliberate and that Kimbells had probably had good reason to serving the Notice on behalf of Exel alone. He said that his expectation was that he would be told that there had been an assignment that had led to the term of the Lease becoming vested in Exel alone so that Exel alone was entitled to give a break notice.

In cross-examination Mr Berridge said that when he received Kimbells’ letter of 1^st June 2005 (confirming that Kimbells acted for Exel), he had not applied his mind to who the Tenant was. He said that at that stage he was concerned with the adverse possession claim.

Mr Berridge said that when he received Mr Lyon’s email of 9^th June 2006 (seeking an assurance that no point would be taken on an exercise of the break provision in respect of L&B’s occupation of the disputed land) he did not address his mind to who Kimbells’ client was, and did not give thought to the precise identity of the Tenant. He said he thought that Kimbells’ client was the Tenant. He accepted that “your client” in his e-mail could possibly be interpreted as meaning Exel.

Mr Driscoll submitted that it was clear from the correspondence that, up to the service of the Notice, both Kimbells and CMS as well as Prudential itself, treated Exel as the company which was entitled to serve a break notice.

Mr Driscoll placed particular reliance on CMS’s e-mail of 13^th June 2006 in which it was confirmed that Prudential would take no point “should your client seek to break its lease in respect of L&B’s occupation of the disputed land …”.

Mr Driscoll submitted that in the circumstances Prudential was estopped from denying that Exel was not “the Tenant” or not authorised to give an effective break notice in its own name. He said that in reliance on the representation that Exel was entitled to serve an effective break notice, Exel served such a notice.

Mr Driscoll submitted that it was plain from the correspondence that from June 2005 onwards Mr Lyon mistakenly treated the Lease as a lease granted to Exel alone, and that he laboured under that mistaken assumption all the time down to the moment when he drafted and sent off the Notice. He argued that Mr Berridge made the same assumption, and never corrected Mr Lyon.

As to Prudential’s case that it was unimportant to it until the Notice was served to establish who the tenant was, Mr Driscoll submitted that this case could not stand up to scrutiny because the identity of the Tenant was relevant to the possession proceedings and who was the tenant who served the break notice. Mr Driscoll submitted that Mr Lyon asked Mr Berridge for confirmation that Prudential would accept a break notice from Exel as valid even though vacant possession could not be delivered.

Both solicitors, Mr Driscoll pointed out, dealt with both the L&B dispute and the matter of the break clause under the same reference number, and the issues became inextricably linked before Notice was served.

Mr Driscoll contended that the letter of 1^st June 2005 was of particular significance because in that letter Kimbells had set out the history of the title in some detail and asserted that Exel was the tenant. The mistaken assertion was not challenged or corrected by CMS. Thus, Mr Driscoll argued, from 10^th June 2005 onwards, both parties in correspondence treated Exel as the Tenant and continued to do so right up to the moment when Kimbells asked for confirmation that Prudential would accept a break notice even if vacant possession could not be delivered up.

From June 2005, Mr Driscoll argued, the solicitors for the parties proceeded on the basis of an underlying assumption of fact (due to mistake or indifference) on which they conducted dealings between themselves right down to 13^th June 2006 when in reliance on that assumption Kimbells drafted and served the Notice, based on that assumption, which notice was good if the parties were bound by the underlying assumption. Quite clearly, Mr Driscoll argued, it would now be unconscionable, unfair or unjust for Prudential to go back on that underlying assumption if the requirements for an estoppel by convention are otherwise met. The convention, he argued, was established in the course of correspondence between solicitors acting for the parties.

Mr Driscoll put his case primarily on the basis of an estoppel by convention and relied in particular upon the principle, as stated by Lord Denning MR in Amalgamated Investment & Property Co Ltd v. Texas Commerce International Bank Ltd [1982] QB 84 at page 122:

“The doctrine of estoppel is one of the most flexible and useful in the armoury of the law. But it has become overloaded with cases. That is why I have not gone through them all in this judgment. It has evolved during the last 150 years in a sequence of separate developments: proprietary estoppel, estoppel by representation of fact, estoppel by acquiescence, and promissory estoppel. At the same time it has been sought to be limited by a series of maxims: estoppel is only a rule of evidence, estoppel cannot give rise to a cause of action, estoppel cannot do away with the need for consideration, and so forth. All these can now be seen to merge into one general principle shorn of limitations. When the parties to a transaction proceed on the basis of an underlying assumption - either of fact or of law - whether due to misrepresentation or mistake makes no difference - on which they have conducted the dealings between them - neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it, the courts will give the other such remedy as the equity of the case demands.”

Mr Driscoll submitted that this principle applied to the conduct of all the parties and their solicitors who proceeded on the basis that Exel was entitled to serve an effective break notice so that it would be unfair if Prudential were now to resile from that common, albeit, mistaken, assumption.

Mr Walker submitted that for there to be promissory estoppel, the Defendants would need to prove that there was a clear and unequivocal assurance which was intended to affect the legal relationship between the parties, that it was relied upon by the Defendants and that they had suffered detriment by reason of a change of position so that it would be unjust if Prudential were allowed now to go back on it.

As to an estoppel by convention, Mr Walker submitted that the Defendants would need to prove the mutual establishment of a convention or common understanding as to the legal relationship between Prudential and the Defendants under the Lease and that this was communicated by each to the other, and was intended to be, and was, acted upon in operating the relevant relationship on the basis of the convention. In addition, reliance upon the convention and the detriment, such that it would be unjust if Prudential were to be allowed to depart from the convention, would have to be established.

Mr Walker submitted that the required elements of both estoppels were absent from this case. He submitted that there was no assurance at all let alone an assurance to the effect that a notice given by Exel alone would be treated as a valid break notice.

Mr Walker submitted that no landlord could sensibly give an assurance that he would treat a notice between himself and only one of two tenants as doing something which it would not do in law as between himself and both tenants. He argued that no landlord would be understood as doing so without the same being made absolutely clear. In oral submissions, Mr Walker developed this point by asking rhetorically how could a landlord allow one tenant to exercise a break notice without tying in the rights of the other?

For an assurance, by way of promissory estoppel, or a convention, to be operative in this case, Mr Walker argued, it would need to go so far as to make clear that Prudential would allow Exel to serve in its own name a break notice even if (as was the case), it was not the sole lessee.

Further, Mr Walker submitted, there could be no estoppel, because there was no recognition on the part of Prudential or CMS that they were aware of any issue as to the identity of the Tenant or that any comments made could have an impact on the true legal position under the Lease or the break clause. In the absence of such an appreciation, Mr Walker submitted, there could be no assurance which would give rise to an estoppel. First he relied on a passage in the judgment of Mr Justice Phillips, as he then was, in The Superhulls Cover Case (No. 2) [1990] 2 Lloyd’s Reports 431, 450-1:

“... If the circumstances were such that it was reasonable to conclude that the insurers were aware of the nature of the limitation of the cover and that the insurers conduct represented that the cover was nonetheless satisfactory to them, then they implicitly represented that they would not claim any right that depended upon an assertion that the limitation of cover was unsatisfactory.

In my judgment the brokers fail to make out this case on the facts. I have already made findings in respect of the state of mind of the insurers when they signed the order letters and received the cover notes and contract wording. Those findings were made in the light of the evidence given by the insurers themselves but they were based largely on the implications to be drawn from the surrounding circumstances at the time. The conduct of the insurers did not unequivocally represent, when viewed objectively, that they were aware of the existence and nature of the limitation of cover that had been inserted without their instructions and that the reinsurance was nonetheless satisfactory to them.”

Mr Walker relied also on the following passage in the judgment of Lord Justice Tuckey (with which the other member of the Court, Lord Justice Carnwarth agreed) in the Court of Appeal’s decision in HIH Casualty and General Insurance Limited, Axa Corporate Solutions [2002] 2 All ER (Comm) at paragraphs 21 and 22:

“21... Mr Hamblen submits however that the representation must carry with it some apparent awareness of the right upon which the representor will not insist. Mr Flaux did not dispute this and I do not think he could have done so because otherwise the representation would lack the necessary character to found the estoppel. As the judge put it “the essence of the plea must go to the willingness of the representor to forego its rights”. Unless the representation carries with it some apparent awareness of rights it goes nowhere: the representee will not understand the representation to mean that the representor is not going to insist upon his rights because he has said or done nothing to suggest that he has any.

22.

What I have said illustrates the difficulty in establishing this type of estoppel when neither party is aware of the right which is to be foregone. A representor who is unaware that he has rights is unlikely to make a representation which carries with it some apparent awareness that he has rights. Conversely a representee who is not aware that the representor has a particular right is unlikely to understand the representation to mean that the representor is not going to insist on that right or abandon any rights he might have unless he expressly says so.”

The communications in the present case, Mr Walker submitted, could not be regarded on either side as having been intended to affect the legal rights of the Prudential or the Tenant under the Lease, or as containing anything by way of any common understanding as to such rights. He argued that a solicitor could not expect to rely on the kind of statements on which the Defendants rely in this case unless it was clear that the solicitors with whom they were dealing, CMS, knew that they were making a statement which might affect their client’s rights or unless they ought to know that.

In all the circumstances therefore, Mr Walker submitted, there was no assurance capable of giving rise to an estoppel. He relied upon the same matters to submit that there was no convention, but he also relied upon a number of other points. Prudential, he submitted, in no way suggested that it was adopting or acquiescing in any convention or that it would accept a break notice served by Exel alone. Mr Lyon did not actually think that Prudential, through CMS, accepted or was acquiescing in any convention, nor would it have been reasonable for him to think that. Further, he submitted, there were no relevant dealings conducted on the basis of any convention.

Mr Walker submitted that both pleas of estoppel were to be defeated because the element of reliance required for both was wholly absent. He argued that Mr Lyon relied on nothing more than his own mistaken belief.

Finally with regard to estoppel, Mr Walker submitted that no change in position, detriment or unconscionability could be established, since it was not the case that Mr Lyon had been induced to prepare the Notice in the manner that he did because of anything done on the part of Prudential or CMS.

I entirely accept Mr Lyon’s evidence that from the time that he was reinstructed in 2005 he believed that Exel was the Tenant and was entitled to exercise the break provision. This, however, was not as a result of anything which Prudential or CMS said or did. It was Mr Lyon’s own error. It was why he wrote in the terms which he did, as to acting for Exel, and why he pleaded the case in the L&B litigation in the manner in which he did. Had he been aware of his oversight it is inconceivable that he would deliberately have drafted the Notice in a defective manner, referring only to Exel as exercising the break provision. I therefore reject Mr Lyon’s evidence that that he drafted the Notice as he did because of reliance on anything said or done by or on behalf of Prudential, and in particular because of the manner in which CMS expressed themselves in correspondence. (In fairness to Mr Lyon I add that I do not think that he was trying to mislead me when he gave such evidence, but simply that he had convinced himself, erroneously, as to how he came to continue in his mistaken identification of the Tenant.) I also reject Mr Lyon’s evidence as to what Mr Berridge was said to have known, where that evidence is at variance with Mr Berridge’s evidence. Mr Lyon was expressing a view about the situation, and I do not find that view was justified.

I accept the evidence of Mr Berridge. He did not apply his mind to who the Tenant was, even when receiving Mr Lyon’s e-mail of 9^th June seeking assurance that no point would be taken as to the exercise of the break provision on the basis of L&B’s occupation of the disputed land.

Attractively as Mr Driscoll put the case on estoppel, I find neither promissory estoppel, nor estoppel by convention to be made out for the following reasons:

For the reasons given above, I conclude that:

I will hear further submissions on the form of relief to be granted.

I am extremely grateful to counsel on both sides for the considerable assistance which they have given me in this case, and for the quality and clarity of their submissions.