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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Paragon Finance Plc v City of London Real Property Company Ltd [2001] EWHC Ch 483 (16 July 2001) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2001/483.html Cite as: [2002] 1 P & CR 36, [2002] 1 EGLR 97, [2001] EWHC Ch 483, [2002] L & TR 9

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IN THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION)

		Royal Courts of Justice Strand London WC2A 2LL
		Monday 16 July 2001

JUDGE RICH: The Claimant holds an underlease dated 2 December 1997 of an office building known as 28 King Street in the City of London. The term is until 2012; the rent is a full market rent. The underlessors are two charitable companies going under the name of the Mercers Company and no doubt established by that company which also, on 2 December 1997, granted to them their lease at a peppercorn.

It is agreed on behalf of the defendants by Mr Gaunt QC, who has properly conceded everything that should be conceded that, prior to the date when the lease and underlease were granted the ground to third floors of the Lawrence Lane elevation of that building had, for probably a century and a half, enjoyed access of light over what was a public highway known as Mumford Court. Consequently the freehold had acquired an easement of light under the doctrine of lost modern grant.

Mumford Court has been closed as a highway and the defendant company has recently acquired the title from the City of London. It proposes, as a joint venture with the Mercers company to build a new office building partly owned and belonging to the Mercers, but also, so far as is here relevant, over Mumford Court in which the Mercers neither have, nor ever have had, any interest. Mr Gaunt accepts that to do so would interfere with the light to the building to a degree which would be actionable at the suit of a person entitled to the benefit of a right of light over Mumford Court.

The underlease defines the demised premises as the property described in the schedule, namely "all that land together with the building thereon known as 28 King Street", but the demise adds also "together with the appurtenances belonging thereto". Again it is agreed that a right of light attaching to the underlessor's interest would be an appurtenance and would be included in the demise held by the claimants subject to any special terms in the underlease.

The defendants say that neither the underlessors nor the claimants were entitled by reason of their respective grants to prevent or restrict the development at Mumford Court. The defendants say that this follows from clause 6(7) of the lease. The underlessors now hold a lease dated 1994 which, no doubt, was intended to put the question now raised beyond doubt. But, again, Mr Gaunt accepts that that 1994 grant cannot affect the rights granted to the claimant under their 1987 underlease. In order to ascertain what was within the power of the underlessors to grant, reference can be made only to the effect of clause 6(7) of the 1987 lease. In order to see whether they granted as much as was within their power, it would then be necessary to refer to the underlease. But, in practice, the underlease needs no separate consideration because clause 7(7) (the renumbering of which arises because the underlease contains a rent review clause) is in exactly the same terms as clause 6(7) of the lease.

The claimants seek an injunction to prevent the proposed interference with the light to their building. They apply for judgment under Part 24 on the ground that the defendant has no real prospect of successfully defending such a claim. I have indicated to Mr Morgan QC for the claimant in the course of his opening that, even if I thought that the claimants were entitled to their easement, it would, in the circumstances of this case, probably be a matter for trial whether the remedy should be an injunction or damages in lieu.

For this reason, only the issue of construction of the lease and underlease was argued before me. That issue is raised equally by the defendant's application for judgment under Part 24 on the ground that the claimant has no real prospect of succeeding.

Although the issue between the parties is thus a point of construction, the answer to which is not simple or obvious I accept that it is right for the courts to resolve such question under this summary procedure and, having done so, to give such judgment under Part 24 as might be appropriate. The issue is one of law and the construction of documents, all material matters of fact being, as I have already recited, agreed or admitted.

At the beginning of the hearing Mr Morgan sought permission to amend the particulars of claim, first and without objection, to refer specifically to the right of light as an appurtenance; but, secondly, to allege a conspiracy to procure the underlessors to breach the covenants of the underlease.

I gave permission so far as the first is concerned, but made no order as to the second, it being agreed that the need for and the appropriateness of any such amendment would raise issues, which Mr Morgan accepted would have to go to trial, could best be considered after I had given this judgment on the two applications under Part 24.

Clause 6(7) of the lease is headed "Landlords other premises". There is then a proviso as follows. I will read it interpolating numbers to identify four separate phrases into which Mr Morgan, for the purposes of his argument, conveniently quotes the clause:

"1. Without prejudice to the provisions of clause 5(1) hereof...."

That is a covenant for quite enjoyment,

"....nothing herein contained or implied.

2. shall impose or be deemed to impose any restriction on the use of any land or buildings of the landlord not comprised in the this Lease; or

3. give the Tenant the benefit of the right to enforce or to have enforced or to prevent the release or modification of any covenant condition or stipulation entered into by any tenant of the landlord or other person in respect of property not comprised in this lease; or

4. shall operate to prevent or restrict in any way the development of any land not comprised in this Lease."

So far as the present proceedings are concerned, both parties rely only on phrases 1 and 4, although they would refer to phrases 2 and 3 to assist interpretation of the other phrases. I shall, therefore, re-read phrases 1 and 4 together, adding to clause 4 the general words which apply also to phrases 2 and 3 to give them their application.

"1. Without prejudice to the provision in clause 5(1) hereof....

nothing herein contained or implied….

4. Shall operate to prevent or restrict in any way the development of any land not comprised in the lease."

I find it convenient to look at phrase 1 first, which, as Mr Morgan submits and I accept, governs the other phrases including phrase 4. I shall do so on the assumption that phrase 4 would, without it, have the effect contended for by the defendants, namely that no easement including right of light appurtenant to the demise is to prevent or restrict development which would otherwise be an act or interference with such right.

Mr Morgan says that since the proviso is "without prejudice" to clause 5(1), clause 6(7) is only to have effect in so far as it does not involve interference to the lessee's enjoyment of the property demised, including, therefore, the appurtenances. I look to clause 5(1) to see whether it can have such effect. The covenant in clause 5(1) is in common form. It reads:

"Quiet Enjoyment

That the tenant paying the said yearly rent hereby reserved and observing and performing the covenants, conditions and agreements hereinbefore contained on its part to be observed and performed, shall and may quietly enjoy the demised premises during the said term without any interruption by the landlord or persons lawfully claiming through, under or in trust

[There must be inserted the word "for"] the landlord."

I do not accept Mr Morgan's submission as to the effect of this clause. The covenant as to quiet enjoyment is concerned only with interruption by the landlord or persons lawfully claiming under the landlord. I do not see how an exception to the proviso that nothing is to prevent the development, which development is not a development by the landlord or those claiming under the landlord, can restrict the application of the proviso in respect of development which is in fact by others. The covenant for quiet enjoyment has nothing to do with it. This, no doubt, is why Mr Morgan proposed his amendment in the particulars of claim to allege that the development is, in effect, by persons claiming under the landlord. But I must base my present judgment on the fact that the development is not by the lessor, nor is it the lessor's land.

Secondly, as a matter of the words used in phrase 1, to say that the proviso is to have no effect if it involves a breach of the covenant of quiet enjoyment, in my judgment involves reading "without prejudice" as if it meant "subject to". But the phrases are different. In my judgment, "without prejudice" means, as Mr Gaunt submits, that clause 5(1) is to continue in operation save in so far as clause 6(7) omits infringement on the rights which a landlord has covenanted not to interrupt. It does not mean that clause 6(7) is to have no effect in so far as it permits impingement upon rights which the landlord has otherwise covenanted not to interrupt.

Mr Morgan points out that Mr Gaunt would himself not construe clause 6(7) as entitling the landlord to, in effect, destroy the subject matter of his demise. I accept that the words of each phrase of clause 6(7) would be construed subject to such gloss as Vinelott J applied to the lease he had to construe in Overcom Properties v Stockleigh Hall Residents Management Ltd [1988] 58 P&CR 1. In that case, the lease granted the defendants rights of access over the grounds and forecourts of a block of flats, but reserving to the lessor the right to develop "notwithstanding that the access of light or air or any other easement appertaining to the flat may be obstructed or interfered with". Vinelott J held at page 10:

"Looking at the lease as a whole and to the situation of the flat and the entrances, the words 'obstructed' or 'interfered with' should be read as 'permitting acts which would otherwise allow for an unjustified obstruction or interference with an easement and which would otherwise be an act or nuisance but not acts which would, for practical purposes, destroy it'."

In my view that is a proper limitation upon the words both in phrase 2 of the clause which I have to construe, which concern restriction on the use of any land or buildings of the landlord, and in phrase 4 as to the development of any land not comprised in the lease.

Such construction avoids the dilemma which Mr Morgan suggests otherwise arises that, unless the effect of phrase 1 is as he submits, the lessee is deprived of any right to sue in nuisance. He is, in my judgment, so deprived in respect of uses or development to which phrases 2 or 4 apply, but only to the extent that the proviso in those phrases which permits uses or development do not permit acts which, for all practical purposes, destroy the enjoyment of the demised property. To construe the effect of phrase 1, as Mr Morgan contends, in effect destroys the rights which it is clearly the intention for clause 6(7) to reserve.

I turn therefore to consider the extent of such rights; that is as to the proper construction of phrase 4 itself. In this respect Mr Morgan makes two rather tentative submissions. First, in paragraph 29 of his skeleton, which reads:

"The parties appear to have principally, if not exclusively, in mind land owned by the landlord (see the heading to clause 6(7) although the claimant recognises that the lease contains clause 6(11)). If the reference to any land not comprised in this lease refers to land owned by the landlord, then this part of clause 6(7) will have no bearing on the present dispute because Mumford Court is not land owned by the landlord."

Secondly, in paragraph 30 of his skeleton, he said:

"Further, the parties appeared to have in mind when drafting clause 6(7) matters which would operate as restrictions on the use of or development of some other land and not matters of positive right and enjoyment of the demised premises and its appurtenances."

I can dismiss the second argument quite easily. Phrase 2 is concerned only with use. Phrase 4 uses the expression "development" which is defined in clause 1(8) to have the same meaning as in the Planning Act; that is it includes building and other works as well as the making of a material change of use. It seems to me that it is that which the persons permits, rather than and even at the expense of the enjoyment of the deemed premises.

The first argument, however, although expressed to be based on an appearance of intention derived from the heading, requires more consideration. I think Mr Gaunt is right that one should consider this argument of Mr Morgan solely by reference to the context of phrase 4 within clause 6(7). Clause 6(11), as Mr Morgan accepts, does not entitle the parties to construe the clause by reference to its heading.

Mr Gaunt points to the different language used in each phrase. Phrase 2 is concerned expressly with use of "any land or buildings of the landlord not comprised in the lease" (my emphasis). Phrase 3, which is concerned to exclude any claim that the lessee has the benefit of covenants either by any tenant of the landlord or other person, is expressed to be "in respect of any property not comprised in this lease" (my emphasis). Nevertheless, the phrase can be concerned only with covenants attached to the property of the landlord. It could not otherwise arise if the lessee would have any claim to the benefit of covenants by reason of the lease. When, therefore, in phrase 4 reference is made to "any land not comprised in this lease" (my emphasis), is it to be treated as referring to any land by whomsoever owned, or is it to be understood as referring only to the land of the landlord as in practice must be within the scope of phrase 3 and is expressed to be within the scope of phrase 2?

I think Mr Morgan is right to submit that the phrase must be construed restrictively and against the grantor. He refers me to the decision of the Court of Appeal in William Hill (Southern) Limited v Cabras [1986] 54 P&CR 42. The case is by no means direct authority. Its facts are set out in the headnote which reads as follows:

"In 1978 the defendants' predecessors in title granted a 20 year lease of a licensed betting office situated on the first floor of premises to the plaintiffs. The plaintiffs were already in possession under an earlier lease and had previously affixed two illuminated signs advertising the business above the entrance at street level. In 1979 one of the signs had been replaced with the express consent of the then landlord. Clause 2 of the lease demised the premises defined in clause 1(a) as including the appurtenances thereto. Clause 3 provided that the demise could not be deemed to confer any easement except such as was specifically granted. Tenants covenant (xv) provided that no sign was to be attached to the premises without the lessor's consent, which in respect of a sign stating the lessor's name or business should not be unreasonably withheld. In 1983 the ownership of the building and of the reversion was acquired by the defendants who asserted that there existed a licence to maintain the signs revocable on the giving of reasonable notice. The plaintiffs sought a declaration that they were entitled to maintain the signs. The judge held that on the true construction of covenant (xv) of the lease the plaintiffs had been specifically granted a right to exhibit the signs.

Held, dismissing the appeal, that although there was no grant of the right to exhibit the signs, on a proper construction of covenant (xv), the right to maintain the signs was granted by the demise of the appurtenances to the demised premises. In the circumstances 'together with the appurtenances thereto in clause 1(a) could not, in the context of the present lease, be treated as mere surplusage. Bearing in mind the permitted use of the premises and the practical and commercial considerations, it was to be supposed that the appurtenances included the right to maintain the signs. That view was not invalidated by clause 3 which did not refer to appurtenances as such and which made express exception to the rights specifically granted by the lease. Further, applying the general principle that the grantor shall not derogate from his grant, the court would not construe a general provision, most of all an exception in very general terms, such as that in clause 3, to take away that which had already been granted in the dispositive provisions of the lease."

Clause 3, to which reference has been made, provided as is recited at page 45 of the report:

"The demise hereby made shall not be deemed to include or confer, and shall not operate to convey or demise under the lessee, any right of light or air, liberties, privileges, easements or advantages except such as are specifically granted by this lease in, through, over and upon any land or premises adjoining or near to the demised premises."

Nourse LJ said at page 47:

"There was some debate as to whether it could be said that the appurtenances were specifically granted on the ground that the word is an entirely general one. However, I do not think there is much in that point. The appurtenances were clearly granted expressly and I think that is enough, particularly when the general principle to which I now come is borne in mind."

He then stated the general principle as follows:

"Mr Sparrow submits that the court will not construe a general provision in a lease, particularly an exception and most of all an exception couched in very general terms such as those in clause 3, so as to take away with the other hand that which has already been granted by the one hand in the dispositive provisions of the lease. Although Wheeldon v Burrows was a case on implied rights, I accept Mr Sparrow's proposition with regard to the construction of express rights, it being, as Thessiger LJ said, consonant to reason and common sense and also, I would add, to the commercial realities of a case such as this."

In this case, the grant is of a right of light. As I construe it, the landlord reserves a right to interfere with such right if it interferes with development of land not comprised in the lease. If that is to be construed as meaning that the tenant has no right to light against anyone, then the landlord is indeed taking with his other hand what he had already granted by the one hand in the dispositive provisions of the lease. That result is at least mitigated by construing "any land not comprised in the lease" to mean any land of the landlord, and I so construe it.

I receive some modest reinforcement for that construction in that, as I have already pointed out, it is only such development that could be permitted "without prejudice to clause 5(1)". It would have no application to development of the land of others. This is more an understanding of the general purpose of the clause than a direct aid to its construction.

That is, on the facts admitted, enough to entitle the claimant to judgment, either for an injunction or damages in lieu. But Mr Morgan had a further submission with which I must deal because it was addressed in argument by both sides. He says that at least as against the defendant the claimant is independently of the lease entitled to enforce a right arising under section 3 of the Prescription Act. That section provides:

"When the access and use of light to and for any.... building, shall have been actually enjoyed therewith for the full period of 20 years without interruption, the right thereto shall be deemed absolute and indefeasible, any local usage or custom to the contrary notwithstanding, unless it shall appear that the same was enjoyed by some consent or agreement expressly made or given for that purpose by deed or right."

There is no dispute that the building has enjoyed the access of light for 20 years. Equally there is no dispute that the claimant, whose interest dates from only 1987, has not. In cases where the claimant has enjoyed such right for 20 years, the claim for prescription has been negatived where it has appeared that he has enjoyed it by consent. The relevant question to be asked was expressed by Eve J in Foster v Lyons [1927] 1 Ch 219 at page 227 thus:

"The question is whether the words I have just read operate as an agreement within the section or were only meant to negative the implied right which the lessee would otherwise have had of insisting that the lessor should not derogate from his own grant by building on the adjoining land - in other words, does the case fall within the decision of Hayes v King or that in Mitchell v Cantrill? It cannot be disputed that if the words in question had not been inserted, the lessee by virtue of the lessor's implied covenant not to derogate from his grant, would have been entitled to the continued access over the lessor's land of the light actually enjoyed at the date of the demise, and that by the uninterrupted enjoyment thereof for the statutory period he could have acquired an absolute right under the Act to the access of that light. As the lease contains a covenant by the lessee not to alter the elevation or the structure of the demised premises without the written consent of the lessor, the only windows in the contemplation of the parties to which reservation was directed must have been those in existence at the date of the demise. Whether the right to which the lessor lays claim by virtue of the qualifying words can really be described as a reservation, I very much doubt, but the matter cannot be disposed of by a criticism of this nature. One must find out the substance of the contract and in my opinion the words must be construed as a grant by the lessee to the lessor of the full right to build on his adjoining land notwithstanding the result of injury to the light of the demised premises."

It seems to me that adopting that approach, the reservation in phrase 4 of clause 6(7) must be construed as granting to the lessee the rights of light attached to the building, only subject to the reservation of the right to develop other land not comprised in the lease which is, in effect, a grant back by the lessee to the lessor of thought to build. If, as I have held, such land means only the landlord's land, the effect of the Act would be unaffected by the reservation unless perhaps the Mercer's company were now to acquire Mumford Court.

I record that possibility because I should make clear that no argument has been addressed to me as to whether the limitation on the right to develop, which I have found does apply to phrase 4 of clause 6(7), restricts the scope of clause 6(7) only to the case of a landlord's land as at the date of a grant or also to any after acquired land.

For this reason, in case circumstances are changed, it is desirable to consider whether the consent which I construe is contained in the lease does have the effect of preventing an absolute and indefeasible right being claimed by the claimant in respect of rights enjoyed only with consent granted under the lease.

Mr Morgan's submission is that consent other than by the servient owner is not within the exception provided by section 3 of the Prescription Act. That amounts to a submission that it was not within the Landlord's power in granting a demise of the property to exclude from his grant the easement of light which would arise by prescription, although of course he could exclude the easement presumed to arise from a lost grant.

Reading the words of section 3 alone, there is nothing to say that the consent referred to must be that of the servient owner. That, Mr Morgan, says must be implied. Any right under prescription existing in 1987 which then arose from more than 20 years enjoyment remained, however, inchoate because there was, by reason of section 4, no relevant period of 20 years. That section reads:

"Each of the respective periods of years hereinbefore mentioned shall be deemed and taken to be the period next before some suit or action wherever the claim or matter to which such period may relate shall have been or shall be brought into question."

If action is now brought by or against the lessee, wherein the right is brought into question, he cannot establish that the right has been enjoyed other than with consent during the whole period. The freeholder would be in no such difficulty.

It is, in my judgment, for this reason, that it is within the power of the owner of the building which has enjoyed a right for more than 20 years, to agree with the person to whom he grants an interest in such building that he should not be entitled to assert such a right. I see no reason why the position in respect of rights arising by prescription should be different from the rights held by the freeholder as grantee. In respect of such right, there can be no doubt that the grantee can refuse to grant it to a person taking an interest under him.

For this reasons, I conclude that the claimant does not have a right under the Prescription Act independent of the grant of the right derived from loss of grant as an appurtenance of the demise.

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