Lease arrangement rectified

If two parties agree what the legal consequences of a contract should be, English courts might be able to rectify any defective provisions of the contract that are at variance with those shared aims.

However this did not seem to apply where one or more of the parties had deliberately added or omitted the relevant wording.

However a recent case has confirmed that the omission of a document left out could be rectified by the court where such omission was deliberate but based on the mistaken belief that the document was not actually necessary to meet the parties’ shared objectives for their lease contract.

Corporate Veil applied in Construction Case

Oakapple Homes (“OH”) used sister company Oakapple Construction (“OC”) to convert an old Derbyshire Mill to a large flat and retail complex. As part of the build contract arrangement OH novated the appointment of their Architect, DTR, over to OH. As the novation substituted OC for OH as Employer under the appointment DTR gave OH the usual duty of care warranty.

The Mill burnt down and also DTR went into liquidation and the liquidator disclaimed their appointment. So the issue arose to what extent DTR’s indemnity insurers were liable for DTR’s duty of care warranties that had been given to OH and some occupiers.

DTR tried to say that OC had contributed to the building being destroyed by negligently departing from their designs.

They said the beneficiaries of the warranties had to have their damages reduced because the warranties DTR gave them said that DTR owed them no greater liability than it did to the Employer under the Employer’s appointment of them, and that Employer was contributorily negligent for departing from their designs.

The court ruled that, even if OC had been contributorily negligent, and, even if OC were OH’s sister company, they were separate bodies and OH could not have had its damages affected by what another company had done. That principle applied whether OH’s damages had been under the appointment, had it never been novated, or under the collateral warranty it had got from DTR at novation.

Secondly the court said that when the warranties talked about the Employer under the appointment, they meant the original appointment, before the novation changed the Employer under that appointment from OH to OC, and, since OH wasn’t guilty of any contributory negligence that would have reduced its damages (on whichever basis), neither would the beneficiaries suffer any such reduction under their warranty claims. Also it was that original unreduced liability DTR’s insurers had agreed to insure, under the indemnity policy, not the measure of DTR’s liablity to OC, which the insurer’s were claiming to have been reduced by OC’s alleged contributory negligence.

As if that wasn’t enough the court thought the relationship between the beneficiaries of the warranties and DTR was totally contractual so statutory damages reduction for contributory negligence did not apply any way. DTR and their insurers would have had to show that the beneficiaries claims against DTR and their insurers were based common law of negligence (which it could not) and that to the extent there was also the contractual duty under the warranties that it was coextensive with, and triggered by, what was in all other respects common law negligence.

Professional indemnity insures will have taken note of a case which has potentially wide implications for them and perhaps greater protection for occupiers and other beneficiaries where property developers offer a one stop shop of development, construction and sometimes design, quantity surveying and project managment from subsidiaries within their Group.

At the same time insurers can be expected to vigorously contest claims where a professional has accepted no supervisory or inspection obligation to pick up a third party’s failure to adhere to its competent designs.

Danger of failing to buy on “practical completion”

If your new property is being built your obligation to complete your purchase usually turns on whether the archtect or other contract administrator has certified the building work is “practically complete”  – basically whether it can be used for its intended purpose which may include an initial fit out by the proposed occupant.

Linda Burgess was sued by a property renovation firm, Elmbid Ltd.,  after failing to complete the purchase of a £1.3m retirement home Bottom End Barns, in Norfolk, as the  work had not been “satisfactorily” finished.

But a judge ruled in the  High Court that Elmbid was entitled to damages and to  keep a £110,000 deposit she had paid.

The court expressed the view that her duty to complete the purchase was triggered by the issue of the certificate of practical completion even if that was wrong.  But she had failed to prove even that.  As useful future guidance the court said the kind of defects and the cost of putting them right relative to the total purchase cost were relevant factors in deciding whether practical completion had occurred.

The Big Bang under the Legal Market

 

The Legal Market is undergoing a “Big Bang”.  There will be more demand than ever but most services will be commoditised with the emphasis shifting more to cost effective technical access, research and delivery than traditional legal firms and (except for 20 or so yellow book firms) not from prestigious Ivory Towers in the City.  Other delivery will be online retail by  law companies working from cheap out of town premises with perhaps a token city centre presence,  virtual law firms of people working from home and sole practitioners with a laptop to visit clients with, a home office and indemnity insurance.  More on my Twitter Page @PhilipJTaylor1.

Those traditional law firms tied into long leases of largely redundant city centre office space will be lugging their millstones behind virtual firms unincumbered by that now greatly unnecessary infrastructure.

 

“Non compliant” Tenant break notice worked!

 

News

Siemens Hearing Instruments Ltd v Friends Life Ltd (2013) was a High Court Decision that contradicted the orthodoxy that a Tenant’s break right in a lease is an option clause and (as such) must be adhered to strictly.  The clause said the notice must be expressed to be given under Section 24(2) of the Landlord and Tenant Act 1954 and it wasn’t.

That requirement was an old one designed to stop tenants coupling a break with a statutory request for a new tenancy to secure a reduced rent for the same premises in a falling market.

The Court ruled that the break clause’s draftsman should have spelt out the consequences of non compliance with the condition if they were intended to be fatal.  Since he had not the Court felt it was left to it to decide the result of non compliance and it decided that it was not fatal to the Tenant’s break notice being effective.

The case offers hope to Tenants but should not be treated as a “get out of jail card” for any failure to comply with drafting requirements when it comes to preparing break notices.  Tenants should not drop their guard and should make sure they comply with all the conditions. .

 

clause expressly provided that the break notice “must be expressed to be given under Section 24 (2) of the Landlord and Tenant Act 1954”. – See more at: http://www.bonddickinson.com/insight/publications/tenants-given-another-break#sthash.I0FY0DDM.dpuf
clause expressly provided that the break notice “must be expressed to be given under Section 24 (2) of the Landlord and Tenant Act 1954”. – See more at: http://www.bonddickinson.com/insight/publications/tenants-given-another-break#sthash.I0FY0DDM.dpuf

Planning Permissions to “Firm Up” Earlier

From 1 July 2013  the  time limit for bringing judicial review proceedings against England & Wales’ local authority planning permissions was reduced from three months to six weeks.  So land contracts being drawn up to be conditional on planning can now become unconditional much sooner.

So anyone thinking of legally challenging a planning permission must  act very quickly:

Claimants won’t be allowed a hearing in person if a judge rules  their initial written application “totally without merit”.  And even if they are allowed that hearing  they will now have to pay a £215 court fee.  It used to be £60.

Tenant refunds under break clauses?

In a recent case the court implied into a break clause a term which entitled the tenant to a refund.

Hitherto the balance of opinion was that a tenant was not entitled to a refund unless it was covered by an express term.

This makes no difference to the legal position that the tenant must pay the lease payments in full on each payment date preceding or on the break date and apply for a refund of the unused portion after that date.

Important Case on Relocation for Telecoms Agreements under Old and New Codes

In telecoms siting agreements, a right to “Lift and Shift” is a landowner’s right to make a telecoms operator relocate its plant and equipment.

The Old Telecommunications Code, applicable to agreements entered into prior to the 28th December 2017, contains its own Lift and Shift Clauses in Paragraphs 20 and Paragraph 21. These apply whether or not the Landowner’s agreement with the Operator contains a Lift and Shift Clause and whether or not that agreement has expired.

If a Landowner served notice under either of those provisions of the Old Code the Operator has a 28 day period in which to serve a counter notice and, if a valid counter notice is served by the Operator, the apparatus can only be removed if a court order is obtained by the Landowner.

Where either of these paragraphs have been invoked, the service of a counter notice by the Operator has been a tactic to protect the Operator’s position pending a compromise permitting the Operator to relocate to a mutually satisfactory place and there are no decided cases in this area.

The new Telecommunications Code, applicable to agreements entered into on or after the 28th December 2017 contains no Lift and Shift provision so it is important that the Landowner’s agreement with the Operator contains a Lift and Shift Clause.

In the recent case of PG Lewins Limited v Hutchison 3G UK Limited and EE Limited (2018) the Operators had agreed, under the Old Code, to relocate their apparatus to a temporary scaffold and then (when required) to return the equipment to the roof. However, the Operators did not relocate their telecommunications equipment back to the roof until after the Landowner had applied for an injunction against them.

The Judge ruled that the old telecoms code did not afford the Operators any defence to the Landowner’s claim that they had breached their obligations under the “Lift and Shift” clause.

The Judge said that the Landowner’s agreement with the Operators defined the scope of the rights granted to the Operators under the Old Code.

In particular Paragraph 2(5) of the Old Code said a Code right was only exercisable in accordance with the terms conferring it.

Also Paragraph 27(2) of the Old Code said the provisions of the Old Code would be without prejudice to any rights or liabilities arising under any agreements the Operator was a party to. So, the judge said that the agreement to relocate the telecoms apparatus took precedence over Paragraph 20 whether or not the terms of Paragraph 20 were or could be expressly excluded by the telecoms agreement between the parties.

The reasoning behind the decision carries over into the New Telecoms Code because Paragraph 27(2) of the Old Code has its counterpart in Paragraph 100(1) of the New Code and the New Code replicates Paragraph 2(5) of the Old Code with its identical Paragraph 12(1).

Therefore, the terms of the telecoms agreement which creates the Code rights will remain predominant on the issue of Lift and Shift and Operators must be vigilant to comply with them.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

New Electronic Communications Code: Site Providers who are “Operators”.

The Electronic Communications Code gives licensed telecoms operators statutory rights to have equipment on private land. The Digital Economy Act 2017 contained a new Code with sweeping changes in favour of operators.

Main drawbacks of the new code for site providers:

Site Sharing: regardless of the terms of any written agreement, telecoms operators can share sites without the landowner’s consent. Landowners can no longer insist on sharing the income from operators sharing sites.

Site Dealings: regardless of the terms of any written agreement, telecoms operators can transfer their leases without landowners’ consent.

Upgrades: so long as any adverse visual impact is at most minimal and no extra burden is placed on the landowner, telecoms operators may upgrade equipment without landowners’ permission.

Valuations: Telecoms sites had been valued on an open market basis. Under the New Code they will be valued on a ‘no scheme’ basis where the existence of telecoms leases and the telecom operator’s rights will be disregarded. So compulsory purchase principles will be applied merely to value the land lost to the mast and equipment cabins and any adverse impact. This will greatly reduce landowners’ income from operators.

Terminating Code rights: Here there has been a welcome clarification of grounds. But landowners must serve a notice specifying the date when the agreement is to cease. That date must be at least 18 months from the date of notice and the contractual term of the lease must have expired by the end of that 18 month period. The telecoms operator then has three months to serve a counter-notice on the landowner and a further three months to apply to court. Even when the court has terminated the agreement the landowner then has to reapply to court to get the equipment removed unless the telecoms operator removes it voluntarily in the meantime.

Retrospectivity: The New Code’s sharing, assignment and upgrading rights will not apply to leases granted before it came into force on 28th December 2017.

Not unnaturally site providers are keen to avoid the New Code applying if they can.

It was the policy of the New Code that the New Code was not to be asserted by Telecoms Operators against other Telecoms Operators. Such arrangements were to be regulated by OFCOM. The easiest way to have achieved this would have been for the New Code to exclude itself giving Operators rights against other Operators or applying to any other Operator’s electronic communications apparatus.

Instead, the New Code draftsmen modified the New Code’s definition of “Land” over which all code powers are exercised “to expressly exclude “electronic communications apparatus”.  

Save for that exclusion “land” includes anything and everything annexed to it.

The New Code defines “electronic communications apparatus” to mean:

“(a) apparatus designed or adapted for use in connection with the provision of an electronic communications network, … and

(d) other structures or things designed or adapted for use in connection with the provision of an electronic communications network.”

This distinction between “apparatus” and “structures or things” is significant.

As a matter of law a “structure” is a composite thing put or built together from a number of different things.

All “buildings” are “structures”, but not all structures are “buildings.”

A motorway embankment may be a structure but not a building.

This has created artificial distinctions.

Antennae may be attached to “structures”, which are not obviously electronic communications apparatus such as grain silos, overground gas mains, bridges and aqueducts.

None of those structures will have been “designed” for “use in connection with the provision of an electronic communications network”, but they may or may not have been made suitable or modified (i.e. “adapted”) for such use.

I now deal with the strange results which would arise from pursuing the concept of “adaption” to it’s semantic conclusion – illogical though the outcomes may appear.

The act of attaching an antenna to a “structure” may or may not make the structure “adapted” for “use in connection with the provision of an electronic communications network” but strengthening that structure to take the weight and windloading of the antenna would make the structure “adapted”.

A single cable may sit in established channels or bespoke cable carrying trays may added to support the cable. Where the cable sits in an existing channel, the channel would be “land” and so Code rights would apply. If the cable sits within a tray added to the channel, the channel would have been adapted and so would be itself electronic communications apparatus and Code rights would not apply.

Similarly attaching brackets to a motorway embankment would be “adapting a structure for use in connection with the provision of an electronic communications network” so any electronic communication apparatus attached to those brackets would be attached to “electronic communications apparatus”, not land, and so the New Code would not apply to them.

However the position would be different if the brackets were attached, not to a motorway embankment, but instead to the parapet walls of an office roof. This is because Paragraph 5(3) of the New Code says that a “structure” only includes a “building” if the sole purpose of that building is to enclose other electronic communications apparatus.

This introduces fresh uncertainty. A water tower or grain silo may or not be a “building” as well as a “structure”.

Worst still the New Code only excludes new leases from security of tenure under the Landlord and Tenant Act 1954 where their “primary purpose” is the grant of Code Rights. If it is uncertain whether the New Code applies how can such be the “primary purpose”? Where there is doubt it would be as well to continue old lease contracting out procedures.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases

Planning: Secretary of State should have allowed parties further representations

In the High Court case of Gladman Developments Ltd v Secretary of State for Communities And Local Government & Anor [2017] the Secretary of State rejected the Inspector’s recommendation to grant planning permission on appeal.

Gladman’s first ground for seeking judicial review was that the Secretary of State proceeded unfairly and irregularly by relying on “facts”, set out in paragraphs DL29 and 30 of his decision letter, obtained by him subsequent to the Inspector’s report from the Council’s website, without complying with Rule 17(5) of the Town and Country Planning (Inquiries Procedure) (England) Rules 2000 [S.I.2000 No. 1624] (“the 2000 Procedure Rules) and providing an opportunity to the parties to challenge those facts and make representations.

The court said Secretary of State was taking into account new evidence which led him to a materially different factual finding: namely, that the housing land supply fell in the bracket of 3.7 to 5 years, rather than the 3.73 years as found by the Inspector.

Had representations from the parties been invited, the Secretary of State would have been informed that (1) the LPA did not “currently claim a more than 5-year supply”, and (2) the real contest between the parties was between Gladman’s figure of 3.65 years and the LPA’s figure of 4.15 years.

Rule 17(5) of the 2000 Procedure Rules had been breached. Both sub-paragraphs (a) and (b) were applicable, although the principal focus should be on (b).

The Secretary of State had differed from the Inspector on a matter of fact (a).

The reason why he had done so was because he had taken into account new evidence (b).

“Rule 17(5) [was] not activated if the Secretary of State discovers new evidence but decides at that juncture not to take it into consideration (see the opening words of (b)), but if he does, or is minded to, he must at that stage seek further representations from the parties if he considers that the new evidence is likely to form the basis, in whole or in part, for the ultimate recommendation reached. The Secretary of State does not have to be satisfied that the new evidence would constitute the sole reason for a different recommendation; it merely has to form part of the decision-making process.”

Furthermore, the Rule says “disposed to disagree” which imported a lower threshold.

In summary Rule 17(5) would not apply if the Secretary of State has reached the firm and fixed conclusion that the new evidence will not be taken into account or was clearly immaterial; otherwise, however, it does apply.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.