Monthly Archives: December 2018

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.