Sirhowy Investments Ltd v Henderson & Anor

This case relates to premises in Pontllanfraith which were leased to the defendants, Mr Peter Henderson and Miss Julie Knight, by the claimant, Sirhowy Investments Limited (“Sirhowy”), for the purposes of their second-hand car business. Mr Henderson and Miss Knight traded together under the name “Dan’s Bangers”.

Mr Henderson and Miss Knight first rented land at Pontllanfraith from Sirhowy (which was then called “Autobond (Blackwood) Limited”) in 1999. On 25 November 1999, Caerphilly County Borough Council (“the Council”) granted permission for the plot in question to be used for car sales subject to certain conditions. The third and fourth of these read as follows:

“(3)

Notwithstanding the submitted details, within one month of the date of this consent further details shall be submitted to the Local Planning Authority for its agreement in writing showing a turning area for vehicles delivering to the site, including car transporter vehicles. Such a scheme for turning facilities as is agreed with the Local Planning Authority shall be implemented in full within three months of the date of the agreement.

(4)

The approved turning area required by condition 3 shall be marked out as approved and shall be maintained free from obstruction at all times.”

The application for planning consent had been submitted by Sirhowy.

The lease with which I am concerned (“the Lease”) was entered into on 15 October 2004. This provided for premises to be leased to Mr Henderson and Miss Knight for ten years from 1 February 2005. By clause 3.13, Mr Henderson and Miss Knight covenanted:

“Not without the consent of the Landlord to use the Demised Premises otherwise than for the sale of second hand cars and the repair of cars forming part of the stock of cars of the tenant such consent not to be unreasonably withheld ….”

The key clause for present purposes is clause 4.13. This was in these terms:

“If the local Planning Authority shall object to the use of the Demised Premises for the use permitted in Clause 3.13 hereof the tenant shall use all reasonable endeavours to secure Planning Consent for such permitted use but if the Tenant shall fail to obtain such consent the tenant shall have the right to determine this Lease on giving not less than three months notice and provided the Tenant shall have paid the rent and observed and performed the covenants contained in this Lease then on expiry of such notice the Term is to cease and determine immediately but without prejudice to any rights or remedies that may have accrued.”

It is common ground that this provision was inserted into the Lease at the instigation of Mr Henderson and Miss Knight. Mr Robin Harries, one of Sirhowy’s directors, gave this explanation in a witness statement:

“In 2002 the Council informed myself and Nigel [that is, Mr Nigel Bond, another director of Sirhowy] that they were not happy with the way that the Defendants unloaded the cars onto the road and had to use the unloading lorry at the side of the building. I told the Defendants that I would sort out the problem with the Council but the Defendants were not happy that I had the authority as their landlord to do this. The Defendants therefore requested a break clause in the Lease to reflect that if they could no longer trade from the site, they could terminate the Lease ….”

The land comprised in the Lease included a workshop and an area of open ground surrounded for most part by fencing. The workshop was a new addition to the “Dan’s Bangers” premises; Mr Bond had hitherto occupied it for his bodywork business. The open area was principally used to accommodate Mr Henderson’s and Miss Knight’s stock of used cars. Miss Knight said during her oral evidence that “Dan’s Bangers” needed to be able to carry a stock of 120 cars.

When “Dan’s Bangers” originally went into occupation of premises at Pontllanfraith, transporters delivering vehicles to them could turn on some adjacent scrubland that Mr Harries owned. That ceased to be possible, however, in about 2003, when a car compound was constructed on the land in question for the benefit of another car dealership, “Arrow Ford”, of which Mr Harries was then the owner. Thereafter, transporters making deliveries to “Dan’s Bangers” (or to “Arrow Ford”) had little option but to unload vehicles on the public road.

On 18 August 2008, the Council served on Mr Henderson and Miss Knight a breach of condition notice. This recorded that condition (3) of the 1999 planning consent had not been complied with and went on to require Mr Henderson and Miss Knight to secure compliance by taking the following steps:

“1)

Submit to the Local Planning Authority for its agreement in writing, details showing a turning area for vehicles delivering to the site, including car transporter vehicles.

2)

Construct and Complete in full the turning area for vehicles delivering to the site, including car transporter vehicles, in accordance with the agreed details.

3)

Cease the use of the premises the subject of Planning Permission P/99/0820, for the sale of motor vehicles until such time as the turning area for vehicles delivering to the site, including car transporter vehicles has been completed in full in accordance with the agreed details.”

Periods for compliance were given. That for the first step was 30 days from receipt of the notice, that for the second step was 90 days from receipt of the notice, and that for the third step was 120 days from receipt of the notice.

On 30 March 2010, the Council sent Mr Henderson and Miss Knight a letter which concluded as follows:

“Accordingly the requirements of the Breach of Condition Notice have not been complied with. It would therefore appear that in the absence of a satisfactory resolution to this matter, I have no alternative but to refer this matter to the Council’s Solicitor, with a request that proceedings are commenced at Magistrate’s Court against you … for failure to comply with the Breach of Condition Notice dated 18^th August 2008.

I would be pleased if you could inform me of the current position in respect of your intentions in this matter.”

On 9 April 2010, Mr Henderson’s and Miss Knight’s solicitors sent Sirhowy a letter in which they claimed to determine the Lease pursuant to clause 4.13. The letter included this:

“We enclose for your information a copy of a letter sent by Caerphilly County Borough Council planning department to our clients dated 30^th March 2010 objecting to use of the premises for the use permitted within the Lease.”

Solicitors acting for Sirhowy responded on 14 April 2010 and denied that Mr Henderson and Miss Knight had been entitled to serve any notice under clause 4.13 of the Lease. Among other things, the solicitors said this:

“It is our understanding that … planning consent has been obtained to allow the Demised Premises to be used for the sale of cars – the ‘issue’ with Caerphilly County Borough Council relates (as we understand it) to a breach of a condition in that planning consent. Our point simply is that the tenant has not failed to obtain consent for the clause 3.13 use (which is the ‘trigger’ allowing clause 4.13 to operate). Your clients have obtained planning for the requisite use; the fact that such consent may or may not be subject to conditions which (for whatever reason) may or may not have been satisfied is irrelevant to the operation of clause 4.13. The ‘trigger’ which allows the tenant to give notice under clause 4.13 has simply not occurred.”

The present proceedings were issued in May of last year. They depend essentially on whether Mr Henderson and Miss Knight validly terminated the Lease under clause 4.13.

As was pointed out by Miss Carys Williams, who appeared for Mr Henderson and Miss Knight, three particular questions arose:

On the first day of the trial, I determined the first of these issues in favour of Mr Henderson and Miss Knight. In other words, I concluded that the Council had objected to the use of the demised premises for the specified purpose within the meaning of clause 4.13. In the events that happened, Mr Henderson and Miss Knight were required to cease the use of the premises for the sale of motor vehicles, and the Council therefore objected to the user specified in the Lease.

The next question is whether Mr Henderson and Miss Knight used all reasonable endeavours to secure “Planning Consent for such permitted use” within the meaning of clause 4.13.

It is clear from the evidence that Mr Henderson and Miss Knight did take steps to try to resolve the planning problems. Mr James Criddle and Mr Malcolm Parker, each of whom formerly represented Pontllanfraith on the Council, said that they knew that Mr Henderson and Miss Knight had attempted to address the difficulties. At one stage, Mr Henderson and Miss Knight approached the Council about the possibility of leasing from it an area close to their premises that could be used to provide a turning circle. However, the Council was not willing to lease the land in question to Mr Henderson and Miss Knight alone, and Mr Harries was not prepared to enter into a joint lease.

Sirhowy, however, argues that the planning problems could have been resolved without much difficulty by having a turning circle on land comprised in the Lease. Condition (3) of the 1999 planning consent was, it is said, rapidly satisfied once Mr Bond became involved with matters in 2010. He commissioned Steve Morgan Associates, consulting engineers, to prepare a plan showing a turning area, and the Council accepted the plan in a letter dated 4 August 2010.

The real question, as it seems to me, is whether the requirement to use “all reasonable endeavours to secure Planning Consent for such permitted use” meant that Mr Henderson and Miss Knight had to be ready to countenance having a turning area on their site. Sirhowy maintains that they did. That a turning area would take up a proportion of the land on which “Dan’s Bangers” parked stock was, it was argued, a matter for Mr Henderson and Miss Knight. The Lease did not give Mr Henderson and Miss Knight any right to an off-site area for turning.

On balance, however, I take the view that Mr Henderson and Miss Knight could not reasonably be expected to agree to a turning area on the land they were leasing. Had Mr Henderson and Miss Knight adopted a scheme such as that devised by Steve Morgan Associates, the usefulness of a good part of that land would have been very much reduced. Mr Harries suggested that cars could have been parked on the relevant area when transporters were not turning there, but (a) the plan prepared by Steve Morgan Associates made provision for the words “Keep clear” to be painted on the affected part of the site and (b) the Council stressed in its letter of 4 August 2010 that the turning area had to be “marked out and maintained free of any obstruction in accordance with the requirements of condition 4 [of the 1999 planning consent]”. Further, although the Lease did not entitle Mr Henderson and Miss Knight to any turning area outside the land they were leasing, neither did it make any reference to the provision of such an area within the leased premises, and in practice Mr Henderson and Miss Knight had never been expected to afford space for turning within their site.

I turn, therefore, to the question of whether Mr Henderson and Miss Knight “paid the rent and observed and performed the covenants” contained in the Lease. Mr Henderson and Miss Knight say that they did. Sirhowy, on the other hand, alleges a variety of breaches of covenant.

In the first place, Mr Henderson and Miss Knight are said to have breached clause 3.14.7 of the Lease. This barred Mr Henderson and Miss Knight from permitting “livestock of any kind to be kept on the Demised Premises”. Mr Henderson and Miss Knight are said to have infringed this provision by keeping a Rhodesian Ridgeback dog on the site. In my view, however, clause 3.14.7 did not apply to the dog Mr Henderson and Miss Knight had. A dictionary with which I was supplied defines “livestock” as “animals, esp. on a farm, regarded as an asset”. In contrast, Mr Henderson and Miss Knight had only one dog, it was not on a farm, and it was not regarded as an asset. The dog in question was not kept for either use or profit but rather as a pet. No breach of clause 3.14.7 has, therefore, been established.

A second complaint relates to parking. Two provisions of the Lease are relevant. Clause 3.13.1 stipulated that an area coloured yellow on the plan annexed to the Lease was to be used “for the parking of customer vehicles only”, and clause 3.14.21 stated that Mr Henderson and Miss Knight were not to permit “persons working on the Demised Premises to park vehicles … within the area coloured yellow on the plan annexed”.

According to Sirhowy, these provisions were breached on a regular basis. Mr Harries said in cross-examination that problems first arose soon after Mr Henderson and Miss Knight went into occupation and that he told them many times that if their staff parked in the yellow area, their customers would park in spaces allocated to Arrow Ford and that that would cause trouble. Mr Bond similarly said that employees of “Dan’s Bangers” would park in the yellow area when it should have been left for customer parking.

Mr Henderson and Miss Knight, on the other hand, denied that their employees parked on the yellow land. “Dan’s Bangers” had the use, they said, of the car park at a neighbouring rugby club, and staff parked there.

On balance, I think the likelihood is that staff of “Dan’s Bangers” did sometimes park on the yellow land in breach of the Lease. To my mind, however, it does not necessarily follow that Mr Henderson and Miss Knight were debarred from exercising the break clause found in clause 4.13 of the Lease. That clause spoke of Mr Henderson and Miss Knight having “paid the rent and observed and performed the covenants contained in this Lease”. What was required as regards rent was surely that Mr Henderson and Miss Knight were up-to-date with their payments at the relevant time (as they in fact were); it would not have mattered, as it seems to me, if Mr Henderson and Miss Knight had been late in paying rent on some past occasion. Similarly, a purely historic breach of covenant with no continuing consequences should not be considered to have precluded exercise of the break clause. The parties are unlikely, I think, to have intended that any past breach of covenant, however, insignificant, should prevent Mr Henderson and Miss Knight from ever invoking clause 4.13. Clause 4.13 is better read as focusing on the position when the Lease was to be determined.

Was then the staff parking on the yellow land such as to prevent Mr Henderson and Miss Knight from invoking clause 4.13 of the Lease? I do not think it was. While I consider it probable that staff parked on the yellow land on occasions, it has not been established either that such parking occurred in the period after Mr Henderson and Miss Knight sought to exercise clause 4.13 or that any earlier parking had any continuing consequences. Any breaches of covenant that may have taken place are correctly viewed as purely historic.

A third complaint concerns planning requirements. The Lease imposed obligations on Mr Henderson and Miss Knight not to make a planning application without Sirhowy’s written consent (clause 3.18.1), to give Sirhowy full particulars in writing of the grant of planning permission (clause 3.18.4) and to obtain any requisite planning consent (clause 3.19.1). Sirhowy alleges that Mr Henderson and Miss Knight erected a workshop without planning permission, subsequently applied for retrospective permission without its written consent and failed to give it written particulars of the grant of planning permission when it was ultimately obtained. In my view, however, Sirhowy has not established either that the workshop was erected during the currency of the Lease rather than (as Mr Henderson and Miss Knight maintain was the case) in 2003 or that (contrary to evidence given by Miss Knight) Mr Bond was not given the requisite particulars of the final planning permission. As for whether Mr Henderson and Miss Knight applied for planning permission without Sirhowy’s written consent, Mr Philip Eacott, a building surveyor whom Mr Henderson and Miss Knight engaged, gave evidence about a meeting he attended with, among others, Mr Harries at which he was authorised by Mr Harries to sign on his behalf a certificate required for the planning application. While Mr Harries no longer remembers the meeting, I accept Mr Eacott’s evidence. In the circumstances, Sirhowy is, I think, to be regarded as having consented in writing to the application. In any case, it seems to me that any breach would have been purely historic by the time Mr Henderson and Miss Knight claimed to determine the Lease under clause 4.13, and I understand that Mr Henderson and Miss Knight in fact took the workshop away with them.

Finally, Sirhowy alleges failures to repair and decorate.

The Lease contained a number of provisions dealing with repair and decoration. Clause 3.4.1 imposed on Mr Henderson and Miss Knight an obligation to keep the whole of the demised premises in “good and substantial repair”, with the proviso that they were not to be liable to put the demised premises in any better state of repair and condition than they were in at the commencement of the term. Clause 4.5.1 stated that Mr Henderson and Miss Knight were periodically “to paint … the whole of the outside wood and metalwork and other external parts of the Demised Premises usually painted … and varnish bronze and polish all outside wood and metalwork usually so treated”. Clause 3.5.2 provided for the decoration of the interior of the demised premises. Clause 3.7.1 stipulated that, at the expiration or earlier determination of the term, the demised premises were to be yielded up “decorated repaired cleaned and kept in accordance with the Tenant’s covenants”.

Sirhowy claims that Mr Henderson and Miss Knight failed in their obligations in a variety of ways. More specifically, it is said that Mr Henderson and Miss Knight never painted or varnished external walls of the workshop formerly used for Mr Bond’s bodywork business, a piece of wood to be found above the porch, roofing over the porch or some roller doors; that rust on some bollards and gates was painted over; that some sodium lights were removed; and that fencing was not adequately repaired.

I do not find some of the issues that arise easy to determine. Take, for example, the external walls of the workshop. Mr Bond was adamant that the walls could be painted, Mr Henderson and Miss Knight equally clear that they never had been and could not be.

In the end, it seems to me that, with one exception, Sirhowy has not discharged the burden of proving failures to repair/decorate. The exception relates to the fencing. Photographs in the trial bundle show two places where the fencing has been patched with sheeting. Mr Bond gave evidence to the effect that the sheeting was not there when the Lease was granted and was erected by Mr Henderson and Miss Knight after break-ins. Miss Knight suggested that the relevant photographs had been taken couple of years after she and Mr Henderson had left the premises and that the sheeting had been put up during the intervening period; the fence, she said, was in good repair when she and Mr Henderson vacated. When it was suggested to her that some of the sheeting could be seen in a photograph dated 9 July 2010, Miss Knight disputed this, and I also understood her to suggest that any defects in the fencing pre-dated the Lease. Having, however, looked carefully at the photographs, it seems clear to me that the sheeting depicted in the July 2010 photograph is also shown in two of the photographs in the trial bundle. In other words, I am satisfied that, contrary to Miss Knight’s evidence, that sheeting at least was in place by July 2010 and was not erected by Mr Bond (or anyone else) later. That being so, I doubt whether Miss Knight was correct, either, about when the second area of sheeting visible in the trial bundle photographs was put up. The chances are, moreover, that the sheeting was installed by Mr Henderson and Miss Knight during the currency of the Lease. Any suggestion by Miss Knight that the sheeting was there earlier (a) came late, (b) does not sit comfortably with her previous explanation of events and (c) is inconsistent with evidence given by Mr Bond.

Miss Williams argued that the sheeting did not disclose any breach of covenant by Mr Henderson and Miss Knight even if they were responsible for its erection. The sheeting was sufficient, she submitted, to keep the fencing in “good and substantial repair”. It may not (she said) be repair in the manner Sirhowy would have undertaken, but that was not a requirement of the Lease.

I cannot, however, accept that contention. It seems to me that the Lease required Mr Henderson and Miss Knight to effect repairs in keeping with the remainder of the fencing. It was not good enough for them to attach sheeting to holes in the fence. They had to ensure that the end product was consistent with what already existed. In the circumstances, I find that Mr Henderson and Miss Knight failed in their repairing obligations as regards the fencing.

Miss Williams suggested that Sirhowy would have consented to or waived any breach of covenant that it might establish. She pointed out that Sirhowy accepted rent without complaining about the state of the fencing. That, she said, indicated that there had been consent.

For his part, Mr Nick Thomas-Symonds, who appeared for Sirhowy, submitted that Sirhowy had not even waived its right to forfeit. He referred me to clause 4.10 of the Lease, which stated that “[t]he acceptance of rent by the Landlord … shall not constitute and shall not be construed to mean a waiver of any of the covenants on the part of the Tenant herein contained or of the penalty attached to the non-performance thereof”. In any case, he said, a landlord can waive his right to forfeit for a breach of covenant without losing all right to complain of the breach. He referred me to Woodfall, “Landlord and Tenant”, which explains (in paragraph 11.044):

“After a breach has occurred, the covenantor’s liability in respect of that breach may be discharged by waiver on the part of the covenantee. It is important to distinguish between different types of waiver. Waiver of forfeiture is based upon the doctrine of election: a man cannot simultaneously pursue inconsistent remedies. Thus the doing of an act (e.g. accepting rent) which is inconsistent with treating a lease as forfeit will waive a forfeiture. But there is no inconsistency in treating a lease as continuing, but suing for damages for breach of its terms. In this context, waiver of the breach of covenant (thereby precluding an action for damages) is based not on election but on an inference of consent to the breach.”

In the present case, it seems to me that, whether or not Sirhowy waived its right to forfeit the Lease for breach of the repairing obligations, I cannot infer that Sirhowy consented to the breach. The evidence simply does not sustain the suggestion.

I am conscious that in some respects Mr Henderson and Miss Knight can claim, not merely to have kept the leased premises in repair, but to have improved them. I cannot see, however, how that fact can have operated to negate or lessen their duty to keep the fencing in repair.

The upshot is, in my view, that Mr Henderson and Miss Knight cannot be considered to have “observed and performed” all their covenants when they served notice to determine the Lease in April 2010 or when that notice would have expired three months later. It follows, in my view, that the notice will not have taken effect, and that the Lease will have continued. I must, accordingly, give judgment for Sirhowy.

The parties sensibly agreed quantum. In the light of that agreement, I shall order Mr Henderson and Miss Knight to pay damages of £70,000, with interest and costs.