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Dispute Resolution Briefing Notes
Rent in administration proceedings: a headache for landlords
Richard Baines, Head of Druces LLP’s Business Turnaround, Restructuring and Insolvency team deals with developments in the law relating to the effect of the moratorium in administration proceedings on the rights of landlords to be paid rent due under the lease in this article first published in the May 2013 issue of the In-House Lawyer.
Agreements to Agree revisited: MRI Trading v The Erdenet Mining Corp
Prior to this month’s decision of the Court of Appeal in MRI Trading AG –v- The Erdenet Mining Corporation LLC (2013) it had been generally safe to assume that ‘agreements to agree’ written into contracts in relation to fundamental provisions of the contract (such as pricing) would most likely be unenforceable for lack of certainty. In this case an ‘agreement to agree’ in respect of a treatment charge, shipping charge and shipping schedule in a contract for the sale of copper concentrates was upheld and a term was implied that the charges and shipping schedule were to be reasonable or referred to arbitration in the event of dispute.
Erdenet and MRI had contracted for Erdenet to supply copper concentrates to MRI. A dispute arose and, as part of a settlement agreement, three future contracts for the supply of the concentrate were entered into. Erdenet complied with the first two contracts but refused to deliver under the third contract which contained the ‘agreement to agree’. An arbitral tribunal found that the contract was unenforceable as it contained an ‘agreement to agree’ on an important aspect of price. The High Court allowed MRI’s appeal, and Erdenet appealed to the Court of Appeal. The Court of Appeal upheld the High Court decision and found in favour of MRI. The Court’s reasoning was that it would be perverse to attribute to parties an intention not to be bound in circumstances where every other aspect of the contract, including quality, specification and price, had been agreed. The Court also placed emphasis on the parties agreement to arbitrate disputes. The Court read the disputed contract with the other two contracts and the settlement agreement, seeing them as parts of a whole, and therefore finding that there had already been part performance. The case demonstrates the Court’s willingness to imply terms where there is uncertainty over a reasonably fundamental provision of the contract. If you would like further information, please contact Toby Stroh, head of Druces LLP’s Corporate & Commercial team or Tim O’Callaghan, Partner.This note does not constitute legal advice but is intended as general guidance only. It is based on the law in force in May 2013.
Liability for defective premises: Zennstrom v Fagot and Others
Residential property owners and developers.
Pursuant to the Defective Premises Act 1972 (“DPA”) those who refurbish or rebuild residential property with the intention of re-selling owe a duty to a purchaser for defects in the property which make it unfit for habitation. In the case of Zennstrom v Fagot and Others  EWHC 288 (TCC) the Technology and Construction Court has recently considered when a refurbishment or rebuild is carried out in the course of a business thereby making an individual liable under the DPA and when it can be said that the refurbishment or rebuild is for personal use only.
Facts of the Case
Ms Moseley and Ms Wilks (“the Defendants”) purchased 22 Crowsport, Hamble in Southampton in 2004. The property was on a much coveted private road overlooking a marina. The Defendants said that they purchased the property with the intention of living there. After a while living in the property they had it demolished and they built a new property in its place. Having done so, and due to a change in circumstances, they were unable to continue servicing their mortgage. They therefore had to sell the Property to Mr Zennstrom and another (“the Claimants”).
Following the sale it transpired that there were a number of substantial defects in the new property they had built. The Claimants brought a claim against the Defendants under the Defective Premises Act 1972 (“DPA”). The Claimants stated that the Defendants had built the property purely for profit rendering them liable under the DPA for any defects which made it unfit for habitation.
Section 1(1) of the DPA provides that:
‘A person taking on work for or in connection with the provision of a dwelling (whether the dwelling is provided by the erection or by the conversion or enlargement of a building) owes a duty-
(a) if the dwelling is provided to the order of any person, to that person; and
(b) without prejudice to (a) above, to every person who acquires an interest (whether legal or equitable) in the dwelling;
to see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that as regards that work the dwelling will be fit for habitation when completed.’
The Claimants had to prove that:
1. When the Defendants entered into the contract with the builder to carry out the works they intended to sell the property once the works were completed; and
2. That the Defendants did not intend to occupy the property as their home for any period of time that was more than minimal.
In seeking to prove these elements of their claim, the Claimants relied on previous purchases made by the Defendants; their alleged difficulties in paying for the building works and their financial position before and during the works generally, which suggested that they could never have realistically afforded to live in the property after it was built; and the fact that the Defendants had received a significant inheritance shortly before the sale of the property which had actually put them in a financial position to service the mortgage had they genuinely intended to remain living there.
The Defendants pointed out that they had never carried on a business as property developers; that the installation of unusual features in the property were particular to the Defendants and demonstrated that they were building for themselves and not for the market; their subsequent purchase of a property within 100 yards of the property; and the absence of an NHBC or similar certificate.
Mr Justice Edwards-Stuart found in favour of the Defendants. He stated that he was completely satisfied that when the Defendants embarked on the rebuilding of the property they did not have any intention to sell it. He was also satisfied that the Defendants were not aware of any defects of significance when they sold the property.
This decision was watched closely by those who have rebuilt or refurbished properties for their own use as if it had been found that the Defendants’ had been liable for the defects there would have been a departure from the general rule of caveat emptor – let the buyer beware. The case provides a useful guide to the type of factors that may be taken into account in determining whether the DPA applies.
The Supreme Court in Rubin -v- Eurofinance and New Cap -v- Grant
The Supreme Court recently overturned the potentially ground-breaking Court of Appeal decisions in Rubin & Anor -v- Euro Finance SA and New Cap Reinsurance Corp -v- Grant & ors relating to the application of common law jurisdiction rules about the enforceability here of foreign judgments in insolvency proceedings.
This complex and detailed judgment has been analysed by Julian Johnstone, head of Druces LLP’s litigation team in a continuing series of articles published by Druces’ partners and fee-earners in the In-House Lawyer magazine. A copy of Julian’s article can be accessed and downloaded in the link below.
Commercial Agents Regulations: Anderson (t/a Spectrum Agencies) v Crocs Europe
This case concerned the entitlement of an agent, Spectrum Agencies (“Spectrum”), to compensation for the damage it suffered as a result of the termination of its agency agreement by the principal, Crocs Europe BV, under the Commercial Agents (Council Directive) Regulations 1993 (“the Regulations”). The ability of Spectrum to claim damages under these Regulations in this case turned on whether or not there had been a repudiatory breach (a repudiatory breach is a breach of contract which is sufficiently serious to entitle the innocent party to the contract to terminate it with immediate effect).
In such circumstances, the Regulations deprive an agent to a right to compensation. Crocs Europe had sought to terminate its agreement with Spectrum for a repudiatory breach, following a posting on a website of a piece described as “the Crawl” by an employee of Spectrum. This posting was unfavourable to Crocs Europe but Spectrum argued that the Crawl was a light hearted joke based on a typical working day of their customer services team and their alleged battle to get service from Crocs Europe.
At first instance, the High Court held that the Crawl did not amount to a repudiatory breach. The Court of Appeal held that the evidence available was sufficient to support the Judge’s decision at first instance so immediate termination was not justified. In doing so, the Court of Appeal rejected an argument by Crocs Europe that Regulation 3 of the Regulations, which require a commercial agent to look after the interests of his principal and act dutifully and in good faith, operated by way of a condition entitling termination of the agreement if breached. Although Regulation 3 was found to have been breached at first instance, the Court of Appeal considered there was no basis for the argument that it implied fundamental conditions into the agency agreement so that its breach would always be repudiatory.
In the absence of a repudiatory breach, Spectrum was entitled to compensation under the Regulations. For advice on the Commercial Agents (Council Directive) Regulations 1993 contact Marie-Louise King, Partner in Druces LLP’s Litigation & Dispute Resolution team and see our briefing note below.
Doubling your rent – how to maximise returns when tenants hold over wrongfully
You may not have come across the Landlord and Tenant Act 1730 or the Distress for Rent Act 1737 and it might seem anachronistic today to rely on statute that is nearly 300 years old. However these Acts contain valuable provisions relating to tenants who fail to give vacant possession of premises at the expiry of their tenancies.
On the expiry of a tenancy which is not subject to any statutory continuation regime, such as the security of tenure provisions relating to business tenancies contained in the Landlord and Tenant Act 1954, the tenant is usually obliged to give vacant possession back to the landlord. If the tenant fails to give vacant possession and holds over following the expiry of the tenancy, the landlord may in certain circumstances be entitled to recover double rent or double the yearly rental value for the premises for the period of the tenant’s holding over. Typically a claim for double rent or double value would be made as part of the landlord’s court proceedings to get vacant possession of the premises from the tenant.
Double Value under section 1 of the Landlord and Tenant Act 1730
Double value may be demanded from a tenant under section 1 Landlord and Tenant Act 1730 where the tenant wilfully remains in occupation of premises after the expiry of its tenancy and the landlord has given the tenant notice in writing demanding vacant possession of the premises. Typically the landlord will give the tenant notice demanding vacant possession to be given on the contractual expiry date of the tenancy. The notice should specify that the landlord will claim double value if the tenant does not give up vacant possession to the landlord on that day.
If the tenant does not give up possession on the due date, the landlord can claim double the yearly value of the premises for the period in which the tenant remains in occupation following the giving of the notice.
Note that the provision applies to tenancies for fixed terms and for tenancies from year to year but not to shorter periodic tenancies. It is also important to remember that the provision has no application where the tenant is entitled to stay in the premises after the expiry of the tenancy by reason of the security of tenure provisions contained in the Landlord and Tenant Act 1954.
Double Rent under section 18 of the Landlord and Tenant Act 1737
If a tenant has the ability to give notice to quit under the terms of its tenancy and has given the landlord a valid notice to quit and thereafter does not give vacant possession of the premises to the landlord on the date of expiry of its notice, the landlord is able to demand double rent from its tenant under section 18 of the Landlord and Tenant Act 1737. This provides that where the tenant refuses to deliver up possession at the time stipulated in the tenant’s notice, the tenant must pay the landlord double the passing rent and such double rent must continue to be paid while the tenant remains in occupation.
Obtaining vacant possession
Landlords should ensure that recovery of double value or double rent from their tenants in the circumstances outlined above is carried out hand in hand with the process of obtaining vacant possession of the premises. If the tenant remains in possession of the premise following expiry of the tenancy and the landlord accepts rent from the tenant in respect of the tenant’s occupation without taking steps to obtain vacant possession, a new periodic tenancy could be created, entitling the tenant to remain in occupation of the premises on the terms of the new periodic tenancy and, potentially, subject to the security of tenure provisions of the Landlord and Tenant Act 1954.
The provisions in these Acts are often overlooked in circumstances where a landlord can rely on them. Notwithstanding the age of these provisions, they remain a useful tool in landlords’ armouries. Tenants who overstay their welcome in rented premises should be aware of the potential cost of doing so.
This note does not constitute legal advice but is intended as general guidance only. It is based on the law in force in November 2012.
Bradbury -v- Taylor: Nephew wins appeal to keep late uncle’s farmhouse
The Court of Appeal has upheld the decision of Judge Jeremy Griggs in the case of Bradbury -v- Taylor to allow Roger Taylor to keep his late uncle’s £800,000 farmhouse, despite this going against the wishes of the deceased.
After an incident at the property William Taylor invited his nephew, Roger Taylor together with his partner and their two children to move from Sheffield and into his house. Roger Taylor and his family lived in the east wing of the property, while William Taylor stayed in the west wing. When the couple discovered that William Taylor’s latest will left most of the property to charity a bitter legal battle pursued. Roger Taylor claimed that William Taylor had promised to leave them the house. William Taylor “vehemently denied” this. Furthermore, shortly before William Taylor’s death he left a witness statement stating that “Roger would be the last person that I would leave the house to. There was never any intention of leaving my house to him, or anyone else.”
After William Taylor’s death the dispute continued between his executors and Roger Taylor. Last year His Honour Judge Jeremy Griggs, sitting as a deputy Circuit Judge in the Plymouth County Court, accepted that a deal had been struck between the uncle and nephew and that Roger Taylor and wife had acted in reliance on that to their detriment in moving in with William Tayor. On that basis he held that a proprietary estoppel had arisen, and that William Taylor thereafter held the property on trust for Roger Taylor and his wife. The effect of that was to render William Taylor’s attempt to leave the property elsewhere ineffective. Accordingly the property was left to Roger Taylor and his wife subject to inheritance tax.
This decision was challenged in the Court of Appeal, the grounds of appeal being, in summary, that His Honour Judge Griggs was not justified in finding that a proprietary estoppel had arisen on the basis of the facts of the case. However the Court of Appeal dismissed the appeal, holding that the Judge’s decision took into account all the relevant factual considerations and that he had been entitled to come to the conclusion that he came to on the basis of those facts.
This note does not constitute legal advice but is intended as general guidance only. It is based on the law in force in October 2012.
How judges assess factual evidence in civil cases
The recent case of Vallen International Limited v Lewis and another  EWJC B5 (QB) involved consideration of the approach civil courts take to fact-finding where there is conflicting witness evidence on key issues. HHJ Simon Brown QC, sitting as a High Court judge, referred to key authorities and commentary which provide guidance on this question.
One commentary indicates that the court should first identify “common ground between the parties…such as facts as are shown to be incontrovertible.” Documents created prior to the dispute often set out much of the knowledge and intentions that the parties had at a particular time, independent of human recollection. Relying on contemporaneous documents enables the court to judge the oral evidence of witnesses “against a background not only of what the parties agree to have happened but also of what plainly did happen, even though the parties do not agree.”
The commentary suggests a five point test which the courts can use in assessing the honesty of witness testimony:
- the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred;
- the internal consistency of the witness’s evidence (i.e. are different elements of the witness’s evidence consistent with each other?);
- consistency with what the witness has said or deposed on other occasions;
- the credit of the witness in relation to matters not germane to the litigation;
- the demeanour of the witness.
Case law reiterates the crucial importance of documents:
“when considering the credibility of witnesses, always test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also pay particular regard to their motives and to the overall probabilities.”
In most civil cases there is usually an abundance of documentary evidence against which witness testimonies can be assessed. However, the absence of written documentation may also be significant:
“if the judge is satisfied that certain contemporaneous documentation is likely to have existed were the oral evidence correct, and that the party adducing oral evidence is responsible for its non-production, then the documentation may be conspicuous by its absence and the judge may be able to draw inference from its absence.”
It is clear that evidence contained in contemporaneous documents is key to courts’ assessment of witness evidence and that witness evidence that is inconsistent with contemporaneous documents is likely to be subject to close scrutiny. The emphasis on evidence in documents means that the parties’ document management and preservation systems play an important role in managing disputes effectively.
Herrmann v Withers LLP: negligence in the conduct of a property transaction
Summary: In the recent case of Herrmann and Another v Withers LLP  EWHC 1492 (Ch) the Court held that a firm of solicitors had wrongly advised their clients that the high value property they were purchasing had communal garden access rights. This advice was negligent and the solicitors were liable to their clients in damages.
Relevant to: Property owners, Legal practitioners
Oliver v Symons: Extent of a right of way
The Court of Appeal has ruled that, in the absence of evidence to the contrary, a right of way does not extend beyond the verges of the track over which it runs and does not include a right to swing space for wide loads extending beyond the verges of the track. The determination in the case of Oliver and another -v- Symons and Another  EWCA Civ 267 provides useful guidance as to how the Courts interpret the extent of rights of way. Please speak to Julian Johnstone, Partner and Head of Druces LLP’s Litigation & Dispute Resolution team for further information and read our briefing note below.