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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Basch v Stekel & Anor [2000] EWCA Civ 3033 (25 July 2000) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/3033.html Cite as: [2000] EWCA Civ 3033, [2001] L & TR 1 (2001) 81 P & CR DG1

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY
(HIS HONOUR JUDGE SIMPSON)

		Royal Courts of Justice Strand London WC2
		25th July 2000

1. LORD JUSTICE CHADWICK: This is an appeal against an order made on the 27 November 1998 by His Honour Judge Simpson in proceedings brought in the Central London County Court by Mr Jack Basch against the personal representatives of the late Mr Edmund Stekel for performance of an obligation contained in a lease dated 21 January 1992 and made between (1) Mr Basch, as landlord, (2) North Lodge Garages and Services Ltd (to which I will refer as "the Company"), as tenant, and (3) Mr Edmund Stekel as guarantor.
2. The short point raised in these proceedings is whether the obligation of Mr Edmund Stekel as guarantor survived his death on 2 March 1995, so that it could be enforced against his executors. The judge held that it did not survive the death of Mr Edmund Stekel. Accordingly, he dismissed the landlord's claim. The landlord appeals with the leave of this Court (Brooke LJ) granted on 13 April 1999.
3. Following service of the notice of appeal, but pursuant to an arrangement which had been made between the parties to these proceedings in May 1998 - that is to say, before the trial of the action - the landlord has relet the property to a third party. It follows that the claim to specific performance is no longer pursued. The appellant now seeks an order for payment of rent, at the rate payable under the former lease, from 25 March 1998 until the grant of the new lease, together with a contribution to insurance and rates.
4. The underlying facts may be stated shortly. The lease, which was of commercial premises at Buckingham Chambers, Vivian Avenue, Hendon, was granted for a term of 15 years from 24 June 1990, at an initial rent of £12,500 per annum. The rent was subject to upward review on the fifth and tenth anniversaries of the commencement date. Clauses 1.1.1, 1.1.2 and 1.1.3 defined "the Landlord", "the Tenant" and "the Guarantor" to mean, respectively, Mr Basch, the Company and Mr Edmund Stekel. As defined in those clauses those expressions did include successors or assigns.
5. Clause 8 contained the Guarantor's covenants. It was in these terms, so far as material:

"8. The Guarantor covenants with the person named in clause 1.1.1 [meaning Mr Basch] and without the need for any express assignment with all his successors in title that:

8.1 During the term the Tenant shall punctually pay the rents and observe and perform the covenants and other terms of this lease and if at any time during the Term the Tenant shall make any default in payment of the rents and observe and perform the covenants or terms in respect of which the Tenant shall be in default and make good to the Landlord on demand and indemnify the Landlord against all losses damages costs and expenses arising or incurred by the Landlord as a result of such non-payment non-performance or non-observance notwithstanding:

8.1.1 any time or indulgence granted by the Landlord to the Tenant or any neglect or forbearance of the Landlord in enforcing the payment of rents or the observance or performance of the covenants or other terms of this lease...

8.1.2 that the terms of this lease may have been varied by agreement between the parties

8.1.3 that the Tenant shall have surrendered part of the Premises ... and

8.1.4 any other act or thing by which but for this provision the Guarantor would have been released

6. 2 If at any time during the Term the Tenant (being an individual) shall become bankrupt or (being a company) shall enter into liquidation and the trustee in bankruptcy or liquidator shall disclaim this lease the Guarantor shall if the Landlord shall by notice within 60 days after such disclaimer so require take from the Landlord a lease of the Premises for the residue of the Contractual Term which would have remained had there been no disclaimer at the Rent then being paid under this lease and subject to the same covenants and terms as in this lease (except that the Guarantor shall not be required to procure that any other person is made party to that lease as guarantor) such new lease to take effect from the date of such disclaimer and in such case the Guarantor shall pay the costs of such new lease and execute and deliver to the Landlord the counterpart of it."
7. It is plain that something has gone wrong with the language of clause 8.1 in the form in which it appears in the letter. What is likely to have happened is that a line of text has been missed out in the course of copying from some earlier text. It is, I think, clear that the provision should read:

"...and if at any time during the term the Tenant shall make any default in payment of the rents [and in observing and performing the covenants or terms, then the Guarantor shall pay the rents] and observe and perform the covenant or terms in respect of which the Tenant shall be in default"

8. as if the words in square brackets (or some words to like effect) had been included. It is not suggested that this Court should not read clause 8.1 as though they were there.
9. Mr Edmund Stekel died on 2 March 1995. By his will he had appointed his son, Mr Ronald Stekel, and Mr Sullamith Reif to be his executors and trustees. They obtained probate of the will. On 26 June 1996, at an extraordinary general meeting of the Company, it was resolved that the Company be wound up. Joint liquidators were appointed. On 15 January 1998 the joint liquidators served notice under section 178 of the Insolvency Act 1986, disclaiming the lease. By notice in writing dated 11 February 1998 the landlord called upon the executors to take a new lease, pursuant to the provision of clause 8.2. The executors declined to do so. These proceedings were commenced at or about the end of May 1998. The primary relief claimed was specific performance of the covenant in clause 8.2 of the lease -that is to say, the covenant by Mr Edmund Stekel to take a new lease of the premises for the residue of the contractual term if required to do so - with an ancillary claim for damages in lieu of or in addition to specific performance. But there was a secondary claim for rent, under the covenant in clause 8.1 of the lease, from 25 March 1998 to the date when the new lease was executed.
10. Shortly before the commencement of these proceedings the parties, by their respective solicitors, had signed and countersigned a letter in the following terms:

"Re: Buckingham House.

This agreement is made totally without prejudice to either party's position with regard to proceedings shortly to be issued by Mr Basch against Mr Stekel and Mr Reif for specific performance of their obligation to take up a new lease of the above premises.

Neither party shall be entitled to rely upon this agreement or any actions taken pursuant to it (including the proposed joint marketing of the property or of any subsequent letting of it whether by Mr Basch or by Mr Stekel and/or Mr Reif ("the estate") in the proposed forthcoming litigation or any other litigation raising the same or similar issues and in particular shall not seek to rely upon the same as evidence that Mr Basch has accepted the waiver of the lease by the Liquidator or that he has elected not to call on the estate to take a new lease or that he has waived his rights to claim rent under the old lease or that he has elected to treat the old lease as being at an end or as evidence that the estate has any continuing obligations of any nature whatsoever in respect of the property.

The property shall be jointly marketed by ourselves and yourselves on behalf of our respective clients. All costs of marketing shall be born equally by the parties and the party who is unsuccessful in the litigation will reimburse the successful party.

Mr Basch will not be obliged to grant a lease to any intending lessee to whom the property shall have been marketed to.

We shall jointly agree with our respective clients those estate agents who are to be instructed to market the property and we shall jointly sign their instructions as agents for our respective clients."

11. That letter was not brought to the attention of the judge at trial. He was allowed to proceed with the trial on the basis that the Landlord was continuing to pursue his claim for specific performance; that is to say, that the primary relief sought in the action was an order that the executors take a new lease of the premises in their own names for the residue of the contractual term under the original lease of 1992.
12. It was in those circumstances that the argument before the judge was directed, primarily, to the construction and effect of clause 8.2 of the lease. The executors contended that, as a matter of construction, the obligation imposed on the Guarantor by clause 8.2 was personal to Mr Edmund Stekel and determined on his death. They pointed to the contrast between clauses 3.1 and 3.4. Clause 3.1 is in these terms (so far as material):

"3.1The expressions "the Landlord" and "the Tenant" wherever the context admits include the person for the time being entitled to the reversion immediately expectant on the determination of the Term and the Tenant's successors in title respectively..."

13. The need for that provision is clear enough when it is in mind that the definitions of the Landlord and the Tenant set out in clauses 1.1.1 and 1.1.2 do not, as I have already mentioned, include the usual provisions extending those definitions to the successors in title of the original landlord and the original tenant - that is to say, to the persons entitled to the reversion immediately expectant on the determination of the Term, and the assignees of the leasehold interest created by the lease. It is to make good those omissions in the definitions in clauses 1.1.1 and 1.1.2 that clause 3.1 is needed. Without it, upon the devolution of either of the reversion or the Term, the definitions in the clauses 1.1.1 and 1.1.2 would be inept.
14. By contrast, clause 3.4 provides:

"3.4 The expression "Guarantor" includes not only the person referred to herein (if any) but also any person who enters into covenants with the landlord pursuant to clause 5 hereof."

15. The reference there to a person who enters into covenants with the Landlord pursuant to clause 5 of the lease is, plainly, intended to give effect to the provisions in clause 5.9.5. That clause requires that, on a permitted assignment to a limited company, and if the Landlord shall so reasonably require, the Tenant will procure that two directors of the assignee company, or some other guarantor or guarantors acceptable to the Landlord, enter into direct covenants with the Landlord in the form of the guarantor's covenants contained in the lease, but with the assignee substituted for the tenant. Again, clause 3.4 is necessary in the circumstances that there may be other guarantors introduced under clause 5.9.5 who would not fall into the definition of the Guarantor in clause 1.1.3.
16. The judge accepted the argument for the executors on construction. At page 4 D-G in the transcript of his judgment he said this:

"There is no reason why the expression 'Guarantor' should be extended ... because it is easy to see that ... there would be an inconvenience in the distribution of the guarantor's estate and that distribution might be held up for a long time. There is also the question of the severance of the link between the guarantor and the company. I do not think that the parties to this document, having regard to the language which they have used, intended that the obligation of the guarantor should survive and devolve on to his personal representatives. One can easily see the inconvenience which would arise if this were so."

17. Counsel for the executors, who are the respondents in this appeal, seeks to uphold the judge's finding in that respect. But, in my view, the judge asked himself the wrong question. No-one has suggested, and it could not be suggested, that the personal representatives were to assume any liability beyond their liability as personal representatives, limited to the assets of the estate in their hands. The relevant question was not whether the expression "the Guarantor" should be extended so as to include the personal representatives of Mr Edmund Stekel. The relevant question was whether the obligations which Mr Edmund Stekel had assumed during his lifetime should continue to bind his estate after his death. In other words, whether there was a sufficient intention in the lease to displace the rule appropriate under the general law: that personal representatives of a contracting party are bound, so far as his assets will extend, to perform all his contracts although not named therein -see paragraph 21-005 in Chitty on Contracts, 28th Edition 1999 Volume 1 at page 1070. If further authority is required, it can be found (in the context of landlord and tenant) in the decision of this court in Youngmin v Heath [1974] 1 WLR 135 - see, in particular the observations of Lord Denning, Master of the Rolls, at page 137 C and of Stamp LJ at page 137 H.
18. The judge ought to have asked himself, not whether the lease showed an intention to extend the definition of guarantor so as to include the personal representatives of Mr Edmund Stekel, but whether there was anything in the lease which led to the conclusion that the parties intended to restrict the operation of the general law by providing that obligations of an individual should not be enforceable against his estate. The only provisions relied upon are those in clauses 3.1 and 3.4. For the reasons that I have already set out, those provisions are there for a perfectly understandable, but quite different, purpose. In my view, it is not open to the court to derive from those provisions any intention which goes beyond the obvious purpose for which they have been included. That purpose does not extend to restricting the rule, under the general law, that a person's estate is liable to meet the obligations which he has incurred during his lifetime.
19. The judge went on to consider whether, if he were wrong as a matter of construction, this was a case in which specific performance of the obligation in clause 8.2 should be granted. He came to the conclusion that to grant specific performance against the executors, as executors, would produce a degree of inconvenience or hardship which they should not be required to suffer. Accordingly, specific performance being an equitable remedy, the judge held that it should be denied. It is unnecessary to say more about that in the circumstances that the claim for specific performance is no longer pursued.
20. The judge then turned to the alternative claim for damages for breach of covenant. Since it was his view the liability under clause 8 was restricted to Mr Edmund Stekel personally and was not enforceable against his estate, he held that the claim under clause 8.1 would fail for that reason alone. But he went on to say, at page 9 D-F in his judgment, that the landlord's action in requiring the executors to take a lease, with rent, commencing from 15 January 1998 operated an election to treat the old lease as having been determined at the latest at the date of the notice, if not before. So he held there was no liability under the old lease which could have devolved to the personal representatives on the death of the guarantor: the landlord had made his election and must be held to it.
21. In this Court the point is not put on the basis of election. That seem to me a sensible recognition that election could not be a foundation for the point in the light of the observations of this Court in Oliver Ashworth Ltd v Ballard Int [2000] Ch 12. The way the point is put before us is that, by serving the notice in February 1998, the landlord had retaken possession of the premises so as to indicate an intention not to rely on the obligations in the old lease which were the subject of Mr Edmund Stekel's guarantee.
22. In order to address that point it is necessary to have regard to the position which arises following a disclaimer under section 178 of the Insolvency Act 1986. As explained by Lord Nicholls, in his speech in the House of Lords in Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70, section 178 of the Insolvency Act 1986, subsection (2), enables a liquidator, by the giving of a notice in the prescribed form, to disclaim any onerous property. Subsection (4) is in these terms:

"(4)A disclaimer under this section -

(a) operates so as to determine,as from the date of the disclaimer, the rights interests and liabilities of the company in or in respect of the property disclaimed; but

(b) does not, except so far as is necessary for the purpose of releasing the company from any liability, affect the rights or liabilities of any other person."

23. For over 90 years prior to the decision of the House of Lords in Hindcastle the law was generally thought to be as it had been explained by this Court in Stacey v Hill [1901] 1 QB 660. In Stacey v Hill this Court had held that the effect of the disclaimer, under what was then the comparable provision in the Bankruptcy Acts, was to free the bankrupt and his property from any future liabilities in relation to the property; with the consequence that a surety was also released from his obligation as guarantor of those liabilities. It was to meet that problem that a well-drawn lease imposed the surety's obligation in two parts: first, an obligation, as surety, to pay the rents and observe and perform the covenants which the tenant was obliged to pay and to observe and perform; and, secondly, following a disclaimer, to take a new lease in the surety's own name. The device of requiring the surety to take a new lease in his own name was to ensure that he then became liable under the covenants in the new lease; so that the landlord was not met with the argument in Stacey v Hill that the liability in relation to the covenants under the old lease had gone with the disclaimer. That is what was done in clause 8(1) and 8(2) of the 1992 lease in the present case.
24. Lord Nicholls explained in Hindcastle v Barbara Attenborough why the former practice was unnecessary. He pointed out that the operation of clause 178 of the Insolvency Act 1986 is limited by the provisions in paragraph (b) of subsection (4). The disclaimer takes effect under the section only insofar as is necessary for the purpose of releasing the insolvent company from liability. The disclaimer does not affect the rights and liabilities of other persons, in particular persons such as a surety or an original tenant. Nevertheless, the tenancy, itself, does cease to exist as an estate in the land demised by the lease. The relationship of landlord and tenant is preserved notionally for the purposes only of giving rise to an obligation on the surety or other third parties.
25. Lord Nicholls put the point, at page 88 H in the report of his speech:

"The statute provides that a disclaimer operates to determine the interest of the tenant in the disclaimed property but not so as to affect the rights or liabilities of any other person. Thus when the lease is disclaimed it is determined and the reversion accelerated but the rights and liabilities of others, such as guarantors and original tenants, are to remain as though the lease had continued and not been determined. In this way the determination of the lease is not permitted to affect the rights or liabilities of other persons. Statute has so provided."

26. Lord Nicholls then drew attention to the provisions in section 181 of the 1986 Act, which enable a person having an interest in the property or a person who is under any liability in respect of the disclaimed property to make an application for the vesting of the property in him. If a vesting order is made, then, of course, the property vests under that order in a new tenant. But Lord Nicholls went on at page 89 B-C to say this:

"If no vesting order is made and the landlord takes possession, the liabilities of other persons to pay the rent and perform the tenant's covenants will come to an end so far as the future is concerned. If the landlord acts in this way, he is no longer merely the involuntary recipient of a disclaimed lease. By his own act of taking possession he has demonstrated that he regards the lease as ended for all purposes. His conduct is inconsistent with there being a continuing liability on others to perform the tenant's covenants in the lease. He cannot have possession of the property and, at the same time, claim rent for the property from others."

27. In reliance on that passage, it is submitted on behalf of the executors that the Landlord's act in serving the notice on 11th February 1998 was an act of taking possession - alternatively an act which demonstrated that he no longer intended to rely on the continuing liability of the executors to perform the tenant's covenants in the lease - so as to prevent the Landlord thereafter from relying on the Guarantor's liability to perform the tenant's covenants.
28. In my view, that submission is misconceived. The service of a notice requiring the executors to take a lease cannot, of itself, be treated as an act of taking possession by the Landlord. The effect of the notice, if valid, is to bring into existence a contract under which the executors are obliged to take a grant. When they take a grant the Landlord will, under the terms of that grant, be required to deliver vacant possession; but he will not be required to deliver vacant possession until the grant is taken. By serving the notice the Landlord asserts that he is ready, willing and able to give vacant possession at the time when the grant is taken. But that, of course, this landlord was in a position to do; in the circumstances that the estate formerly existing under the lease had been disclaimed.
29. Nor, as it seems to me, was the service of the notice inconsistent with the Landlord's continuing intention to enforce the obligations in the Tenant's covenants against the executors. For the reasons which I have sought to explain, clause 8 in the lease provides alternate methods of enforcing the covenants against the guarantor: (i) either by treating the guarantor as surety for the tenant's covenant in the former lease, or (ii) by requiring the guarantor to enter into his own covenants in the new lease. But the covenants in the new lease are to be terms identical to those in the former lease: that is what clause 8.2 requires.
30. It is plain, as it seems to me, that what the landlord was doing by the service of his notice was to reaffirm that he did require the executors to meet the obligations under the covenants in the former lease. Whether that was to be done by enforcing the covenants in the old lease or by requiring the executors to enter into covenants in a new lease seems to me neither here nor there. There is nothing inconsistent in holding the executors to the covenants in the old lease until the time at which they take a grant of the new lease and so become subject to the covenants under that lease. That is what both sides would expect.
31. For those reasons, the points taken by the respondents must fail. I would allow this appeal. It will be for consideration, after hearing submissions, what form of order the court should make.
32. LORD JUSTICE BUXTON: I agree.

Order: Application dismissed. The claimant to have judgment for the amount of rent from 25th March 1998 to 22nd October 1999, a total of £19,537.708, with interest under the rate prevailing under the County Court Act. No order for payment of insurance moneys or rates. Order not to be drawn up for a period of 7 days. If, within that period, the parties have agreed an amount for insurance and rates that amount may be included in the order. If no amount is agreed, the fact that there was an opportunity to agree it and include it in the order is to be brought to the attention of any other court which has to consider a claim for insurance and rates in further proceedings so that that court can take that into account when deciding what an appropriate order for costs in that action might be. Appellant to have the costs of the appeal, including the costs of 14th June. The order for costs made by the judge below should be set aside and the matter be left with no order for costs in the Crown Court.

(ORDER DOES NOT FORM PART OF APPROVED JUDGMENT)




POST JUDGMENT DISCUSSION

1. LORD JUSTICE CHADWICK: Mr Staddon, what do you want to say about the form of order?

2. MR STADDON: My Lord, should your Lordships be minded (referring to paragraph 17 of my further submissions), I would seek the relief granted in paragraph 17 together with interest on those sums, which my learned friend and I could deal with. The rate of interest under the lease is the usual, or not unusual, 4% above Barclays' base rate. But should your Lordships say that you do not have sufficient material to deal with this, or should your Lordships say the rent can be claimed but the insurance and rates must be remitted to the county court, or new proceedings must be issued, then so be it. I would hope that my learned friend would be able to agree the relief which might be granted; but I am not sure what the position is.

3. LORD JUSTICE CHADWICK: Is there any dispute as to the period over which the rent the runs?

4. MR DENEHAM: My Lord, no, not the period of the rent.

5. LORD JUSTICE CHADWICK: So the rent runs from 25th March 1998 for six quarters. That is accepted?

6. MR DENEHAM: My Lord, yes.

7. MR STADDON: And 23 days, my Lord, for the final order.

8. LORD JUSTICE CHADWICK: And 23 days.

9. MR DENEHAM: Yes.

10. LORD JUSTICE CHADWICK: Mr Deneham, do you want to continue to resist insurance and rates?

11. MR DENEHAM: Those are my instructions, my Lord. It may well be that even if it is a little stick, it is one that my lay clients can waive at the landlord before he commences his new action. There may be some mileage in it. If not they will pay it up. I have said all I can say about that.

12. In respect of the claim for interest, I will just check the pleading. Of course, there is no claim for contractual interest in the particulars but merely interest under section 69 of the County Courts Act 1984. I may have shot myself in the foot, because that may be higher than the contractual rate, but I doubt it. That is how the claim is pleaded. Of course, if that is the claim that the defendant is meeting the landlord should be bound by that rather than now advancing the contractual claim. Again, it is a small point which may not sound very much in terms of real money, but I take the point because it is there. As of principle, the interest should follow the six quarters and 23, but the claim is based upon the statutory right and I would say that the court should limit the landlord to that.

13. LORD JUSTICE CHADWICK: The order that we think appropriate is this. The claimant is to have judgment for the amount of rent from 25th March 1998 to 22nd October 1999, a total of £19,537.78, with interest on that sum under the rate prevailing under the County Courts Act. We make no order for the payment of insurance moneys or rates; but our order is not to be drawn up for a period of seven days. If, within that period, the parties have agreed an amount for insurance and rates, then that amount may be included in the order. If no amount is agreed, then the fact that there was an opportunity to agree it and to include it in the order is to be brought to the attention of any other court which has to consider a claim for insurance and rates so that they can take that into account when deciding what an appropriate order for costs in that action might be.

14. Do you want to say anything about costs in this action?

15. MR STADDON: Yes, my Lord. I have an application for costs both here and below.

16. May I mention two things about below? Mr Basch lost on the specific performance below, but that was overtaken by events which happened. I know your Lordship is concerned that perhaps the letter of 29th May 1998, or the agreement embodied in the letter, should have been drawn to the attention of His Honour Judge Simpson; but, my Lord, that was written without prejudice. Both counsel who were there (and I was one of them) thought it inappropriate in those circumstances to draw it to the County Court Judge's attention because it was without prejudice. Indeed, had an order for specific performance been made, as I understand it, it would have been enforced: it would have been relied upon even though marketing had been going on in the meantime. As your Lordships will see, the lease was not granted until some considerable time after the order was made dismissing the application.

17. I would ask for the costs of this appeal and indeed the costs below to be subject to detailed assessment. Perhaps it should be taxation below, as it was entirely done under the old regime.

18. MR DENEHAM: My Lord, in respect of the case below, I was not there, but it would appear from the judgment, indeed the issues and how they are reflected in the original skeleton arguments, that the bulk of the period below was taken up arguing the case for specific performance -- I do not invite the court to have regard to that letter at all for these purposes -- and that is something that the landlord lost upon. It may well be that the construction point that the judge relied upon was wrong in that when it came to discretion, your Lordship -- one of the first things your Lordship mentioned to me about the great difficulties of putting that (inaudible) under grade two. It may be that although events over took the judgment, that element of the judge's judgment would have survived the appeal. So, in my submission, the landlord should not get all the costs below; there should be a discount. I suggest a 75% discount in respect of the specific performance.

19. In respect of the appeal, ordinarily I would not trouble the court with any submissions; but on 14th June, when we had half a day set aside for the arguments to this appeal, we were in your Lordships' court for about 45 minutes and not an hour. I certainly came to court on that day prepared to argue a specific performance point and was told, not by my learned friend but other counsel outside, that the point was no longer being pursued. In my submission, in those circumstances, whilst the landlord should get the costs of the appeal they ought not to include the costs incurred on 14th June of counsel attending before your Lordships, which costs should be the respondents and should be paid by the landlord.

20. LORD JUSTICE CHADWICK: On 14th June both counsel told us that that matter had been settled, save for, I think, some agreement as between the executors themselves.

21. MR DENEHAM: Those are my instructions, yes.

22. LORD JUSTICE BUXTON: That is what we were told. Had we not been told that, we would have proceeded to hear it on 14th June.

23. MR DENEHAM: Notwithstanding that, I don't go behind what is said, but the specific performance element of the appeal was simply abandoned so far as I was concerned on the morning of 14th, and therefore such costs as were incurred in respect of those matters were incurred and wasted. That should be reflected in some element in the costs of the 14th.

24. LORD JUSTICE CHADWICK: Mr Staddon, unless you want to make further submissions to us, the order for costs we propose to make is that the appellant should have the costs of this appeal, including the costs of 14th June, but that the order for costs made by the judge below should be set aside and the matter be left with no order for costs in the Crown Court on the basis that, had the judge been told about this letter, as to my mind he plainly should have been, he would not have embarked on the consideration of whether specific performance was an appropriate remedy because plainly it was not in the circumstances. All the parties were concerned about is who should pay the interim rent before the property was embarked upon.

25. MR STADDON: I once had the unhappy experience of a County Court Judge explaining what his preliminary view was on costs. As a result of my arguing, it ended up with a far worse order than had initially been proposed. My Lord, may I grasp

26. LORD JUSTICE CHADWICK: You are not using that threat.

27. MR STADDON: If the threat were there. May I grasp the nettle? In my respectful submission that would be inappropriate. First of all, I say this. There were two counsel there. Therefore I was there, fairly long in the tooth, and there was Mr David Eadie(?) of counsel, who is a very experienced Chancery practitioner, who is even longer in the tooth. Both of us thought it was appropriate to refer to a matter which was without prejudice. It was not that we were just arguing about the interim rent, so far as specific performance was concerned the marketing had not been successful. Had we got an order for specific performance, we would have enforced it. If then the new tenant or tenants had wished to carry on marketing the property and found someone suitable to take over the liability from them, so be it. That is fine. But, of course, there was no certainty at all in November 1998 that a new tenant would be found for the property. Indeed, in practice it took another nine months or so before a new tenant could be found for the property. It was a serious application for specific performance then. It was not just going through the motions for negotiating purposes, we wanted specific performance, and the fact that there had been a joint marketing exercise with a view to mitigating someone or other's loss if it proved to be successful should not deprive, in my respectful submission, the appellant of his costs.

28. LORD JUSTICE BUXTON: You lost your application.

29. MR STADDON: We lost on that application but the reason we are not appealing it----

30. LORD JUSTICE BUXTON: I understand that, but nonetheless you lost. As far as the case below is concerned, you lost on that point.

31. MR STADDON: Yes, but we also lost on another point. As my Lord Chadwick has pointed out, in a way it did not matter which we went for because in substance we would have got the rent either way. Whether it be under, if you like, an equitable lease -- so soon as it is found we had a right to specific performance -- or under clause 8.1, it matters not. But, my Lord, we won on one of the issues. The other point has been abandoned because events have been overtaken. In my submission, even if both counsel had gone behind the without prejudice document and told the judge, it still would not have meant that we were binding anyone in the claim for specific performance, or that it would have been a matter which the judge properly could have taken into account in refusing the specific performance.

32. Those are my submissions, for what they are worth.

33. LORD JUSTICE CHADWICK: No. The order which we will make is as I have indicated.

(The Court Adjourned)