 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] |
|
England and Wales High Court (Chancery Division) Decisions |
||
|
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Caerns Motor Services Ltd v Texaco Ltd & Anor [1994] EWHC Ch 2 (22 March 1994) URL: http://www.bailii.org/ew/cases/EWHC/Ch/1994/2.html Cite as: [1994] WLR 1249, [1995] 1 All ER 247, [1994] 36 EG 141, [1994] 1 WLR 1249, [1994] EWHC Ch 2 |
||
[New search] [Buy ICLR report: [1994] 1 WLR 1249] [Help]
B e f o r e :
____________________
| CAERNS MOTOR SERVICES LTD | ||
| V | ||
| TEXACO LTD AND ANOTHER ; GEDDES AND OTHERS V TEXACO LTD AND ANOTHER |
____________________
The business of Save [the second defendant] is to own and operate petrol filling stations. Since 1991 Save has continued to acquire more sites and it now owns 181.
Save purchases petroleum product from a number of oil company suppliers in this country and from an oil trader in common with arrangements operated by most other oil company suppliers.
11. In the vast majority of cases, the petrol and diesel purchased from those suppliers is sold under the 'Save' brand name, in the same way that other oil company suppliers will sell petrol and diesel under their own brand name even though the product has been purchased from other competitor suppliers under swap deals or other arrangements.
12. Save also sells lubricating oil for use in customers', motor vehicles both under its own brand name and under other suppliers' brand names.
Since 29th October 1993, Save has been the landlord of the three sites and it has been and remains in a position to fulfil all of the obligations of the landlord in the three Tenancy Agreements, including 'the supply obligations'. Save's primary case is that it is not under an obligation to supply Texaco products rather than products obtained from other sources. However Save is willing, if necessary, to ensure that the plaintiffs continue to be supplied with exactly the same range of Texaco petroleum products including motor fuel, lubricating oils, lubricating greases, preservatives, anti-freeze, speciality oils and speciality products as was provided by Texaco up to 29th October 1993 . . . For its part, Save is willing that those products be sold under the Texaco brand name.
The First Defendants contend that on the assignment of the reversion to the three sites, the Second Defendants were entitled to the benefit, subject to the burden, of all the covenants contained in the leases, including the covenants specified in the Affidavits of Messrs Caerns and Cowie. Upon this basis, we seek the dismissal of the Plaintiffs' claims herein.
12. Alternatively, if the benefit of the purchase obligations of the tenants has not been transferred to the Second Defendants, then it is submitted that the Plaintiffs remain bound by their purchasing obligations to purchase from the First Defendant, and the First Defendant remains bound by its sale obligations to the Plaintiffs.
13. If this should be the case, then I confirm that the First Defendant will comply with its sale obligations as indicated in a letter from the Second Defendant's solicitors to the Plaintiffs' solicitors dated 15th December 1993 . . .
In my opinion, the rental value of the service stations on a free of tie basis upon the lease commencement dates is as follows: . . .
THE Lease particulars given at the commencement of this Lease are incorporated herein but where the body of the document contains any extra or extending provisions the body of the document shall prevail.
THE Tenant HEREBY COVENANTS with the Landlord as follows:
(a) to pay the said rent upon the days and in the manner as provided in the Third Schedule . . .
(i) not to assign charge sub-let or part with or share the possession or occupation of the Premises or any part thereof.
(ii) (a) it being hereby agreed and declared between the parties that the identity and composition of the Tenant is of paramount importance to the Landlord in granting this Lease then in any case where the Tenant is a limited company no change of control as hereinafter defined shall take place in such company
throughout the Term the Tenant:
(i) will at all times carry on upon the Premises and will not for any period or periods of time discontinue wholly or in part the business of a Petrol Filling and Service Station and will keep the same open for the sale of such of the specified products (as hereinafter defined) as are marketed from time to time by the Landlord for resale from Petrol Filling Service Stations during the Opening Hours
(ii) (a) will purchase from the Landlord on the Landlord's standard terms from time to time shown on its delivery notes/sales invoices (but so that in the event of conflict between such terms and the provisions of this Lease then the latter shall prevail) the Tenant's total requirements for resale at and for use at and or about the Premises of such brands and grades of motor fuel as shall be marketed by the Landlord from time to time and will not sell nor advertise for sale nor permit to be sold or advertised for sale at the Premises any motor fuel supplied by any other supplier.
(b) will purchase from the Landlord on the Landlord's standard terms from time to time shown on its sales invoices (but so that in the event of conflict between such terms and the provisions of this Lease then the latter shall prevail) and will at all times keep sell advertise conspicuously display and exclusively use for the Tenant's own consumption on the Premises such brands and grades of petroleum products (other than motor fuels) lubricating oils lubricating greases preservatives anti-freeze speciality oils and specialty products as shall be marketed by the Landlord from time to time and all other products from time to time marketed by the Landlord in the dealer market either under the 'Texaco' brand name or under such other name or style as the landlord may designate from time to time.
The products mentioned in paragraphs (a) and (b) of this sub-clause are herein collectively referred to as 'the specified products'.
(B) throughout the Term the Landlord will subject to the provisions of Clause 2(I)(vii)(viii) and (ix) hereof - those are parts of the clause that I have already been alluding to - use its best endeavours to supply the Tenant with the Tenant's requirements of the specified products in accordance with the terms hereof . . .
the Landlord will insure and keep the Premises in the joint names with such insurers as it shall nominate and against such risks and on such terms as it shall from time to time in its absolute discretion stipulate for the full cost of reinstatement of the Premises (including Architects Surveyors and other professional fees) . . .
. . . the owner of land contracted with a company to supply them for fifty years with at least 750 tons of chalk per week, and so much more as they might require for their manufacture of cement.
. . . though the second company could not maintain an action on the contract [that is to say to get deliveries of this chalk] in their own right as assignees of the company with whom the contract was made, the contract was a subsisting one between the original parties to it, and had not been put an end to by the liquidation of the original company or the assignment to the second company . . .
The special right of ignoring altogether the consent of the person upon whom the obligation lies to the substitution of one person for another as the recipient of the benefit would seem in principle and in common justice to be confined to those cases where it can make no difference to the person on whom the obligation lies to which of two persons he is to discharge it . . .
There is, however, another class of contracts, where there are mutual obligations still to be enforced and where it is impossible to say that the whole consideration has been executed. Contracts of this class cannot be assigned at all in the sense of discharging the original contractee and creating privity or quasi privity with a substituted person.
To suits on these contracts, therefore, the original contractee must be a party, whatever his rights as between him and his assignee. He cannot enforce the contract without shewing ability on his part to perform the conditions performable by him under the contract. This is the reason why contracts involving special personal qualifications in the contractor are said, perhaps somewhat loosely, not to be assignable. What is meant is, not that the contracts involving obligations not special and personal can be assigned in the full sense of shifting the burden of the obligation on to a substituted contractor any more than where it is special and personal, but that in the first case the assignor may rely upon the act of another as performance by himself, whereas in the second case he cannot. He cannot vouch the capacity of another to perform that which the other party to the contract might, however unreasonably, insist was what alone he undertook to pay for - namely, work to be executed by the party himself. If, for instance, he had ordered a painting from some unknown artist of his own choice, he could not be compelled to accept instead of it the work of another artist, however eminent.
The defendant contracted with K, a cake manufacturer to supply him with all the eggs of a specified quality 'that he shall require for manufacturing purposes for one year,' K undertaking not to purchase eggs from any other merchant during the year so long as the defendant was ready to supply them. During the year K transferred his business to a company, whereupon the defendant claimed to be discharged from his contract, and refused to supply any more eggs either to K or to the company. In an action brought by K and the company, as co-plaintiffs, for breach of the contract:
Held, that the defendant's contract was with K personally, and that the benefit of it was not assignable, and that the defendant was discharged from his obligation.
I base my decision on the ground that clauses 1 and 5 shew that the contract was a personal one, the measure of the defendant's obligations to supply being the extent of Kemp's personal requirements, and the undertaking by Kemp not to buy eggs of other merchants being an undertaking which was purely personal to himself.
(1) Rent reserved by a lease, and the benefit of every covenant or provision therein contained, having reference to the subject-matter thereof, and on the lessee's part to be observed or performed, and every condition of re-entry and other condition therein contained, shall be annexed and incident to and shall go with the reversionary estate in the land, or in any part thereof, immediately expectant on the term granted by the lease, notwithstanding severance of that reversionary estate, and without prejudice to any liability affecting a covenantor or his estate.
The plaintiff assigned the unexpired residue of his underlease of business premises. The assignee covenanted with the head lessee to pay the rent and perform and observe the underlessee's covenants. Two sureties entered into a covenant with the head lessor to pay all losses, costs, damage and expenses occasioned to the head lessor by the non-payment of rent or breach of any obligation by the assignee. The head lessor subsequently sold the head lease without expressly assigning the benefit of the surety covenant. In 1982 the assignee went into liquidation and stopped paying the rent. The new head lessor demanded from the plaintiff the arrears of rent which had accrued since the assignee went into liquidation. The plaintiff paid that sum to the new head lessor and sought to recover it from the defendants, one of the sureties and the executor of the estate of the other surety, by commencing an action.
. . . allowing the appeal, that the question whether, in the absence of express assignment, a benefit under a covenant (including the payment of money) could be enforced by the assignee of the immediate reversion depended on whether the covenant touched and concerned the land or was merely collateral;
Mr Primost submits that the surety covenant 'touches and concerns' the reversion to the underlease in consequence of which the benefit of such covenant passed . . .
It must be noted that there is no privity of contract between H & B and the sureties. Nor is there privity of estate. Accordingly, the Grantees of Reversions Act 1540 [now sections 141 and 142 . . .] is not directly in point. Those provisions only apply to covenants between landlord and tenant. Where there is neither privity of contract nor privity of estate, the benefit of a covenant runs with the land of the covenantee at law if, but only if, the covenant touches and concerns the land of the covenantee . . . [Then he cites from Megarry and Wade's book]. Such a covenant, if it does touch and concern the land, is enforceable by an assignee of the land against the covenantor, whether or not the covenantor has any land . . .
From these authorities I collect two things. First, that the acid test whether or not a benefit is collateral is that laid down by Best J, namely, is the covenant beneficial to the owner for the time being of the covenantee's land, and to no one else? Secondly, a covenant simply to pay a sum of money, whether by way of insurance premium, compensation or damages, is a covenant capable of touching and concerning the land provided that the existence of the covenant, and the right to payment thereunder, affects the value of the land in whomsoever it is vested for the time being. Therefore, in my judgment, these cases (which were not cited to Walton J) show that he was in error in holding that a covenant at double remove could not touch and concern the land.
For these reasons, in my judgment, it is consistent with both principle and authority to hold that a covenant by a surety, guaranteeing performance of covenants by a tenant which touch and concern the land, itself touches and concerns the land and is enforceable by an assignee of the reversion. It follows that H & B could have enforced the surety covenant against the defendants and that, accordingly, the plaintiff is entitled to be subrogated to the rights of H & B and recover from the defendants the sum he has paid to H & B.
So that was a decision on a covenant where there was no privity of estate. They are difficult, those cases, because ex hypothesi the covenantor has no stake in the land at all and therefore it is much more difficult in the case of such a covenantor to show that his obligation touches and concerns the land than the obligation of an ordinary tenant, who is there in the land and using it.
The relationship between the landlord and a surety in a case such as the present is, of course, contractual only. The surety has no interest in the land the subject matter of the demise and there is thus no privity of estate. In seeking, therefore, to enforce the surety's covenant, an assignee of the reversion cannot rely on the Grantees of Reversions Act 1540 . . . the provisions of which were substantially re-enacted in section 141 of the Law of Property Act 1925 and which apply only to covenants between landlord and tenant.
In my opinion the question of whether a surety's covenant in a lease touches and concerns the land falls to be determined by the same test as that applicable to the tenant's covenant. That test was formulated by Bayley J in Congleton Corporation v Pattison . . . and adopted by Farwell J in Rogers v Hosegood . . .
'the covenant must either affect the land as regards mode of occupation, or it must be such as per se, and not merely from collateral circumstances, affects the value of the land.'
The meaning of those words 'per se, and not merely from collateral circumstances' have been the subject matter of a certain amount of judicial consideration . . .
Formulations of definitive tests are always dangerous, but it seems to me that, without claiming to expound an exhaustive guide, the following provides a satisfactory working test for whether, in any given case, a covenant touches and concerns the land: (1) the covenant benefits only the reversioner for the time being, and if separated from the reversion ceases to be of benefit to the covenantee; (2) the covenant affects the nature, quality, mode of user or value of the land of the reversioner; (3) the covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect of the obligations only of a specific tenant); (4) the fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, to or in relation to the land . . . I am entirely satisfied that the decision of the Court of Appeal in Kumar v Dunning . . . was correct and reached for the correct reasons.
Messrs A & B, who were brewers, and also dealers in ale and stout, carrying on their business at the X Brewery, demised a public-house to the Defendant by an indenture of lease, in which the term 'lessors' was defined to include each of Messrs A & B, 'and their each and every of their heirs, executors, administrators, and assigns,' and the term 'lessee' was defined to include the 'executors, administrators, and permitted assigns' of the lessee.
The lease contained a covenant by the lessee with the lessors that he would not during the term, directly or indirectly, buy, sell, or dispose of upon the premises any ales or stout 'other than such as shall have been bona fide purchased of the said lessors, or from them or either of them, either alone or jointly with any other person or persons who may hereafter become a partner or partners with them or either of them, provided they or he shall at the same time deal in or vend such liquors as aforesaid and be willing to supply the same to the lessee of good quality and at fair current market price'.
A & B [the original lessors] afterwards sold and assigned their brewery, plant, business, and goodwill to C, a brewer carrying on business at the YBrewery, and assigned to him the public-house and the benefit of the covenant with reference to the sale of beer. About the same time A & B dissolved partnership, and ceased to carry on business at the X Brewery, which was shortly afterwards shut up.
The Defendant did not take his beer from C, and in an action brought by A, B, and C, as co-Plaintiffs, to restrain the Defendant from selling any beer other than beer purchased from C, either directly or through A & B, the Vice-Chancellor of the County Palatine Court of Lancaster, after holding that A & B, having ceased to carry on business, were not entitled to relief, granted an injunction in favour of C in the terms of the covenant.
First, Upon the construction of the covenant, that the benefit of it was not restricted either to assigns carrying on the same brewer's business as the lessors, or to assigns who themselves made beer.
That the covenant was not a personal covenant incapable of assignment, but a covenant relating to the way in which the business at a particular house was to be carried on, and accordingly a covenant running with the land, and enforceable by the owner of the reversion on the lease.
We contend that the covenant can only be taken advantage of by persons who are successors in the business of the lessors . . .
. . . assuming the word 'assigns' to bear its widest signification, the lessee's obligation was, at the most, to take beer from the lessors' assigns so long as a particular state of things continued - that is, so long as the trade of a brewer was carried on at the place where or in connection with which this covenant was entered into.
If the covenant is dissevered from the business it cannot run with the land; and that is a proposition founded on common sense, otherwise a man who has contracted to take beer for his house from a particular brewer of established reputation, and has, as in the present instance, paid a large sum of money for that advantage, may find himself afterwards tied to a brewer whose reputation will not bring customers to his house. He might even find himself transferred to a person who, though selling beer, might not be himself a brewer at all. If it is held that a covenant such as this, when disconnected from the particular business, passes to the assignee of the reversion, that will be opposed to dicta of great authority, and will defeat what were the obvious intentions of the parties to this covenant. This, we say, is a personal covenant, the benefit of which cannot pass to an assignee.
It cannot, in my opinion, be said here that this was a personal covenant with the particular landlords who granted the lease, or that it was impossible for the benefit of that covenant to be conveyed to anybody else who did not carry on their trade. It is not like entering into a contract with a particular painter to paint your picture. That is a contract made with him personally, and he must not hand it over to anybody else. In my opinion, this is not a contract which is incapable of being assigned.
Then it is said that this covenant does not run with the land. I think it does run with the land. That is my opinion; but there are other points on which this case may be decided independently of that question. It is a contract relating to the way in which the business at a particular house is to be carried on - therefore it is a contract relating to the public-house, just as much, in my opinion, as a contract as to the mode in which the cultivation of a particular bit of land is to be carried on relates to the land. It affects the value of the reversion, it affects the house, and in my opinion it is a contract running with the land. If that is so, that will enable the judgment to be supported, and will enable the present owner of the reversion in this case to sue.
I agree with Mr Collins in thinking that this case is one of very great importance both to brewers and tenants who take tied houses, because it certainly is rather a startling thing to anybody to be told that when you have agreed to buy beer of a particular brewer you may find yourself bound to take beer from somebody else. Whether you are or not depends upon the agreement into which you have entered. The whole question here to my mind turns upon the true construction of this agreement . . .
That being the case, I think there can be no reasonable doubt that this contract is not a personal unassignable contract. The question then arises whether it has been assigned to Mr Cain. It unquestionably has. If it is capable of being assigned it has been assigned. It has been assigned without any controversy in equity by the brewers to Cain, and, inasmuch as he and his assignors are both suing, I see no answer whatever to this action upon that ground.
It has also been said that it is assigned to Mr Cain by virtue of his being an assignee of the reversion in the lease. That raises a technical question which, stated in legal language, amounts to this: whether the benefit of this covenant runs with the land. We have heard the authorities discussed by Mr Collins, who has studied this branch of the law probably more carefully than anybody living, and he has not persuaded me, I confess, that this is a covenant which does not run with the land. I rather think it does. If you look at the authorities which he has cited, and look at them carefully, this does, in lawyers' language, so 'touch and concern' the land demised as to run with it at Common Law. But whether that is so or not, the benefit of the contract has been assigned to Mr Cain, and Mr Cain is entitled to it.
But then a question is raised as to whether the benefit of this covenant runs with the reversion. It was contended by Mr Collins that it did not run with the reversion, and that it was purely collateral. The benefit to run with the reversion must touch or concern the demised premises. Now, does this covenant touch or concern the demised premises? It relates to the mode of enjoyment of a public-house. The thing demised is a public-house, and the covenant compels the covenantee to buy the beer of the covenantor and his assigns.
In my opinion, it touches and concerns the demised premises; it affects the mode of enjoyment of the premises, and therefore it runs with the reversion.
(1) Rent reserved by a lease, and the benefit of every covenant or provision therein contained, having reference to the subject-matter thereof, and on the lessee's part to be performed . . . shall be annexed and incident to and shall go with the reversionary estate in the land . . .
Apart from that, it seems to me that this kind of covenant is connected with the charge, and nearly analogous to the well-known cases of tied houses for the sale of beer: see, for instance, Clegg v Hands.
and this is the important part --
That the covenant was not a personal covenant incapable of assignment, but a covenant relating to the way in which the business at a particular house was to be carried on, and accordingly a covenant running with the land, and enforceable by the owner of the reversion on the lease.
Compare also White v Southend Hotel Co already cited.
The best argument in favour of these solus agreements comes from the tied houses in the brewery trade. If public houses can be tied, why cannot filling stations? This is so obvious a parallel that I have felt it necessary to examine the brewery cases in some detail. Ever since the close of the eighteenth century public houses have been divided into two classes, 'free' and 'tied.' A 'free' house is one where the innkeeper is at liberty to buy his beer from any brewery he likes. A 'tied' house is one where he has bound himself to take all his beer from one particular brewer and from no one else. Round about 1805 there were several cases where brewers, who owned a public house, let it to a tenant on the terms that he should take all their beer from them . . .
The only question which the profession did raise in those days was the question whether these covenants ran with the land so as to be enforceable by a new brewer who brought the reversion, or against a new tenant who took an assignment of lease . . .
-- and then he refers to the three cases --
a point which was eventually decided in favour of their running with the land: see Clegg v Hands.
Benefit of covenants relating to land.
(1) A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and shall have effect as if such successors and other persons were expressed.
For the purposes of this subsection in connexion with covenants restrictive of the user of land 'successors in title' shall be deemed to include the owners and occupiers for the time being of the land of the covenantee intended to be benefited.
The tenant hereby covenants with the landlord a covenant with the landlord and his successors in title.
. . . (1) the covenant benefits only the reversioner for the time being, and if separated from the reversion ceases to be of benefit to the covenantee . . .
it . . . the covenant affects the nature, quality, mode of user or value of the land of the reversioner . . .
. . . (3) the covenant is not expressed to be personal . . .
. . . the fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied . . .
The electronic text of this judgment was provided by Estates Gazette, whose assistance is gratefully acknowledged.