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	England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Allied Carpets Group plc v Whicheloe MacFarlane Partnership [2002] EWHC 1155 (TCC) (17 June 2002) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2002/1155.html Cite as: [2002] EWHC 1155 (TCC)

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IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		-
		17 June, 2002

I direct that no further note or transcript be made of this judgment


 


The Judgment of His Honour Judge Bowsher Q.C. is as follows:

PARTIES

1. The claimant is the owner of a leasehold interest in a retail discount warehouse at Sticklepath Terrace, Barnstaple, Devon (the Warehouse).

2. The defendants were a firm carrying on business as architects and structural engineers.

ISSUE

3. On 15 March, 2002, His Honour Judge Humphrey Lloyd Q.C. ordered the trial of a Preliminary Issue.

4. The Preliminary Issue, which is now before me for trial is:

“Is the claimant, as alleged at paragraph 3 of the Particulars of Claim, entitled to the benefit of the Warranty referred to in the Particulars of Claim?”

5. To understand what is involved in that Preliminary Issue, it is necessary to consider some background.

BACKGROUND

6. The owners of the site on which the Warehouse is now built wished to develop the site by building on it a warehouse to the requirements of Harris Queensway plc and thereafter to lease the Warehouse to Harris Queensway. Canynge Bicknell Limited (Bicknell), as developers, engaged the defendants as consultants for the project. If the defendants did their work badly, the party with the greatest interest in seeking a remedy at law from them would be Harris Queensway. But Harris Queensway had no contract with the defendants so could not sue in contract and following the decisions of the House of Lords in D & F Estates v. Church Commissioners [1989] AC 177 and Murphy v. Brentwood District Council [1991] AC 398 they could not sue them in tort. So, as is now commonly done in such cases, Bicknell agreed with Harris Queensway to procure that the defendants would provide what are known as Collateral Warranties by deed directly to Harris Queensway. Such a deed was entered into between the defendants and Harris Queensway.

7. The question now before me is whether the claimant can pursue an action against the defendants relying on a deed to which the claimant was not a party.

8. I must make it plain that, this being the trial of a Preliminary Issue, there has been no investigation by the Court of any of the claimant’s complaints against the defendants and no finding is made about those complaints.

9. I must now consider the history in more detail.

10. On 10 December, 1987, Bicknell entered into an Agreement for Lease (the Agreement) with Harris Queensway. The Agreement was in fact much more than a simple agreement to lease. Bicknell was described as the landlord. The Agreement provided that Bicknell was first to carry out what were called “the Landlord’s Works” “in good and substantial manner”. When the defendants certified Practical Completion of those works, Harris Queensway (the Tenant) would be allowed access to the site to carry out Tenant’s Works, such as installing fixtures and fittings and putting in stock. Completion of the grant of the lease was to take place within 14 days after Practical Completion of the Landlord’s Works with rent to begin to become payable under the lease 6 months after the earlier of Practical Completion of the Landlord’s Works or the date when Harris Queensway was given access. There were many detailed provisions to provide mechanics for the operation of that general scheme. For present purposes, the most important terms were:

Clause 7.5: “Within the period of 3 calendar months after the date hereof the Landlord shall obtain and deliver to the Tenant warranties from the architects [the defendants] and the building contractors for the Landlord’s Works in the form of the respective draft agreements annexed hereto.”

Clause 10: “The Tenant shall not assign charge or part with the benefit of this Agreement PROVIDED ALWAYS that if for any reason other than the default of the Tenant the Lease shall not have been granted to the Tenant by a date being six months after the Date of Practical Completion the Tenant shall be at liberty to assign its interest under this Agreement upon the same terms and subject to the same conditions as are contained in Clause 3.19 of the Lease and PROVIDED FURTHER that nothing in this Agreement shall preclude the Tenant from entering into any mortgage charge or debenture imposing any floating charge on the assets or undertaking of the Tenant or any part thereof.”

11. Annexed to the Agreement were draft agreements including a draft form of Deed of Warranty between the defendants and Harris Queensway and a draft Lease to be entered into between Bicknell and Harris Queensway.

12. Clause 3.19 of the Lease, referred to in Clause 10 of the Agreement, first contained in clause 3.19.1 and 3.19.2 provisions designed to prevent the leasehold interest being divided. Clause 3.19.3 provided that Harris Queensway was “not to assign transfer mortgage or charge the whole of the premises ….without the prior written consent of the Landlord such consent not to be unreasonably withheld…” There followed some fairly usual conditions that were to be satisfied before the Landlord gave consent to assignment.

13. The draft Warranty and the Warranty eventually signed were expressed to be made between the defendants and Harris Queensway. Harris Queensway were described as “ ‘the Company’ which expression shall where the context so admits include its successors in title”.

14. Recital (2) of the Warranty defined the word Agreement in the document as referring to the Agreement for Lease.

15. Clause 6 of the Warranty provided:

“The Company shall be entitled to assign the benefit of this Deed and the rights and remedies available to it hereunder to any person to whom it shall also assign the benefit of the Agreement.

16. On 10 January, 1989, a lease was granted in the form of the draft save that it was granted not by Bicknell but by Guy’s Hospital Nominees. How that came about was not explained to me but it does not matter.

17. The Warranty was not provided within the time scale required by the Agreement for Lease. It was provided by deed made between the defendants and Harris Queensway on 12 January, 1989, two days after the grant of the lease. The Warranty provided was almost in the same terms as the draft Warranty, but there was at least one difference. Clause 2 was a warranty that the defendants had professional indemnity insurance. To the Warranty as signed there were added terms about production of evidence of the maintenance of cover and the level of cover. There was a spelling mistake in the added words that was corrected in manuscript and the defendants put their initials in the margin. The only significance of that departure from the draft and the manuscript alteration for present purposes is that counsel for the defendants says that it shows that the parties to the Deed applied their minds to its terms.

18. No oral evidence was called before me, so I do not know whether the parties did in fact apply their minds to the terms of the Warranty but it would be surprising if they did not apply their minds to the terms of such an important document.

19. Nor is there any explanation of why the Warranty should have been executed with clause 6 in the terms of the original draft at a time when the Agreement for Lease had merged in the Lease. At the date the Warranty was executed there was no possibility of Harris Queensway assigning the benefit of the Agreement for Lease. I do not know what was the date of Practical Completion of the Landlord’s Works, so I do not know whether Harris Queensway ever did have the right to assign their interest under clause 10 of the Agreement for Lease.

20. Clause 6 of the Warranty does not make any express prohibition against assignment but counsel for the defendants submits that it is to be implied that there is a prohibition against assignment except in the circumstances referred to in that clause. There is no express covenant against assignment elsewhere in the Warranty.

21. Subsequently, Harris Queensway went into liquidation.

22. By an agreement dated 19 August, 1991, the claimant bought the Warehouse together with many other properties from the Liquidator.

23. The claimant has found fault with the Warehouse and wants compensation. The claimant might be able to find some alleged breach of covenant arising out of the sale agreement with the Liquidator (though that is unlikely since it was a term of the sale that all warranties were excluded) but it would obviously be unattractive to prove in the Liquidation, so the claimant wants to proceed against the defendants.

24. The claimant was not a party to the Deed of Warranty. Can the claimant sue on it? That is the question before me.

THE CLAIM

25. By paragraph 3 of the Particulars of Claim, the claimant makes its claim in four ways. Paragraph 3 is as follows:

“The Warranty was expressed to be for the benefit of Harris Queensway PLC of Harris House, 76 High Street, Orpington Kent, and its successors in title, and the claimant is entitled to the benefit of the Warranty,

i. as successor in title to Harris as lessee of the Warehouse, and/or

ii. as successor in title to Harris as owner of the benefit of the Agreement referred to in the Warranty, and/or

iii. as assignee of the Warranty and assignee of the Lease of the Warehouse and of the benefit of the Agreement for Lease between Canynge Bicknell and Harris plc dated 10^th December 1987 referred to in the Warranty and/or

iv. as assignee of the Warranty pursuant to clause 6 of the Warranty.”

26. Mr. Clay on behalf of the claimant conceded that the claimant did not now pursue the case as successor in title under heads 1 and 2 of paragraph 3 of the Particulars of Claim. Mr. Clay submitted, and I agree, that as purchaser of the leasehold interest the claimant is the successor in title to Harris Queensway. However, Mr. Clay said that he was unable to argue that the fact of being a successor in title standing on its own put the claimant in a position to claim to be an exception to the rule of privity of contract.But Mr. Clay did say that he relied on the reference in the Warranty to “successors in title” and to the fact that his clients were successors in title in relation to the question of intention when one comes to consider assignment. As to that, I comment at this stage that while those circumstances might be relevant to a question whether the parties intended that the Warranty should be assignable, they do not assist in deciding the question whether there was an intention actually to assign on this occasion.

27. As to assignment, Mr. Clay conceded that there had been no legal assignment, but submitted that on the true construction of the sale documents and conveyancing documents there had been an equitable assignment to the claimant.

28. As to head 4 of paragraph 3 of the Particulars of Claim, that head cannot succeed because, as Mr. Clay himself argued in another context, on the grant of the Lease the Agreement for Lease became merged in the Lease and since clause 6 depends on assignment of the benefit of the Agreement for Lease, since the Agreement for Lease could not have been assigned to the claimant, clause 6 could not have operated.

29. Mr. Clay said that he did not rely on sections 63 or 75 of the Law of Property Act, 1925.

30. That leaves for consideration head 3 of paragraph 3 of the Particulars of Claim with the reference to the benefit of the Agreement for Lease being deleted. So the question is whether there has been an assignment of the Lease and of the Warranty. There is no doubt that the Lease has been assigned. Has the Warranty been assigned by an equitable assignment?

31. The alleged assignor has not been joined as claimant or defendant as would normally be required with an equitable assignment: Tolhurst v. Associated Portland Cement [1903] AC 414. However, no objection has been taken on that ground and the Court can overlook the non-joinder: Weddell v. Pearce & Major [1988] Ch 26.

32. Both counsel referred to the decision of His Honour Judge Esyr Lewis Q.C. in Kijowski v. New Capital Properties Limited(1987) 15 ConLR 1. At page 8, the Judge said:

“”It is not necessary for an equitable assignment to follow any particular form, but it is essential that there should be an intention to assign and, it seems to me, some act by the assignor showing that he is passing the chose in action to the supposed assignee.”

33. Both counsel accept that statement as good law and I also agree. Both counsel then said that they would address their arguments to two questions, Was there an intention to assign, and was there an act showing assignment? However, in this case, there are two further questions. Was there a covenant against assignment of the Warranty? If so was the assignment (if there was one) in breach of covenant effective to pass the benefit of the Warranty? There was much argument on the question whether clause 6 of the Warranty was a prohibition on assignment in any circumstances other than the circumstances expressly provided for in clause 6. That argument was mingled with and confused the argument about whether there was intention to assign. There are substantial arguments either way as to entitlement to assign the Warranty, and Harris Queensway and the Liquidator may or may not have thought that they had the right to assign. If they thought that they did not have the right to assign that might have been some (but not conclusive) evidence that they did not have the intention to assign. If they thought that they did have the right to assign that is not evidence that they had the intention to assign on this occasion. Many people have rights capable of assignment that they have no intention of assigning. There is no evidence of the view taken by Harris Queensway as to the construction of a Deed made between them and the defendants, and they might well have taken either of the views argued in this case, so the question whether, as a matter of law, Harris Queensway had the right to assign the warranty can have no bearing on whether there was an intention to assign. Accordingly, although the question of the right to assign logically comes first, I propose to assume for the moment that there was a right to assign and consider whether the documents do, as Mr. Clay submits, show an intention to assign and an act of assignment.

34. Mr.Clay accepts that there are no letters before the Court passing between the parties to this action so for evidence of intention and act one looks solely to the conveyancing documents.

35. The agreement for sale and purchase of this leasehold property (together with many others, freehold and leasehold) was dated 19 August, 1991. By clause 2 of that agreement, the purchaser agreed to buy properties listed in lengthy Schedules. Those Schedules included the relevant property. By clause 18, the vendor agreed to hand over on completion the documents listed in certain Schedules drawn up before the agreement but it was agreed that the vendor was not to be liable if it was unable on completion to hand over any documents of title other than those listed in those Schedules. The Schedule relating to this property referred to 7 documents. First there was an indenture from 1864 between certain gentlemen and the North Devon Railway and Dock Company. Next there was a Wayleave Agreement between the British Transport Commission and the Southern Electricity Board from 1961. Next there was an agreement of 8 December, 1987 between British Railways Board, Bicknell, and Devon County Council. It is not suggested that any of those documents created rights that were being assigned. Next came the Agreement for Lease: Mr. Clay in another context submitted that although there might be some minor benefits under that agreement still subsisting (and he did not identify what those might be) such minor benefits should be ignored as the bulk of the Agreement had been performed. There followed the Warranty from the contractors (made in 1988) and the Warranty from the defendants. The only two documents in the list that are argued to be the subject of an assignment are the two Warranties. Mr. Clay says that the inclusion of the Warranties in the list and the subsequent handing over of the documents show both an intent to assign and the necessary act. He adds that if there was no assignment the benefit of the Warranties remained with Harris Queensway and the documents therefore ought to have been retained by the liquidator. But why should they? The documents were of no further use to Harris Queensway. Mr. Clay said that Harris Queensway might, if sued, wish to join the defendants as Part 20 defendants. But the Liquidator no doubt thought that that was not a live possibility since there was a term of the sale that all warranties were excluded and the leave of the Court would in any event have to be obtained to bring proceedings. In response, Mr. Constable said that there were many documents in this and other schedules that could not possibly refer to rights capable of being assigned. As an extreme example, he referred to a death certificate in a Schedule relating to another property, which no doubt was included because it was relevant to adducing title. As Mr. Constable submitted, it is quite likely and indeed probable that the Liquidator simply took out of his files any documents that he could find that in any way related to the properties and they were listed in the Schedules. Mr. Clay sought to explain the absence of express words of assignment by submitting that everything was done “in short form”. But it does not take many words to assign the benefit of a warranty: and where in other respects many words were required, words were not spared. The agreement for sale itself is 43 pages long, and the total number of pages used, including the Schedules was 606. If Harris Queensway and the Liquidator had told their solicitors Clifford Chance that they wished to assign the benefit of the Warranty, I cannot believe that Clifford Chance would have drafted a document that left such an assignment to be implied.

36. I cannot see in the conveyancing documents any expression of intent to assign. Nor do I see the handing over of the document containing the Warranty as an act of assignment. I find that the claimant has no right to bring this action.

37. It is not necessary for me to say more, but out of deference to counsel and in case this matter is taken further I will very briefly refer to the other submissions.

RIGHT TO ASSIGN

38. Having regard to the nature of the Deed of Warranty, the starting point when considering the right to assign the benefit of the Warranty is that there is a right to assign unless it is excluded. Mr. Constable submits that Clause 6 of the Warranty on its true construction limits the right to assign to the circumstance there mentioned, namely that assignment may be made to any person to whom the assignor also assigns the benefit of the Agreement for Lease.

39. In support of the proposition, Mr. Constable relies on the canon of construction, expressio unius est exclusio alterius. Mr. Kim Lewison in his book, “The interpretation of Contracts” paragraph 6.05 expressed the canon in English,

“Where the contract expressly mentions some things, it is often to be inferred that other things of the same general category which are not expressly mentioned were deliberately omitted. Similar principles apply to the express inclusion of obligations dealing with a particular area of application.”

40. In Colquhoun v. Brooks (1888) 21 QBD 52 Lopes LJ described the canon as “often a valuable servant, but a dangerous master to follow in the construction of statutes or documents”. In Dean v. Wiesengrand [1955] 2QB 120, Jenkins LJ said that the canon carried “little if any weight where it is possible to account for the expressio unius on grounds other than an intention to effect the exclusio alterius”.

41. Mr. Constable submitted that the scheme of the Agreement for Lease and the documents annexed to it was against assignment of rights beyond Harris Queensway. Clause 10 of the Agreement for Lease was a covenant against assignment with an exception and there was a covenant against assignment in the Lease again subject to usual exceptions i.e. with consent of the landlord such consent not to be unreasonably withheld etc. Reference to the Agreement for Lease and the Lease shows wording that runs counter to the argument made by Mr. Constable. The Warranty was in the same bundle of documents produced at the same time as the Agreement for Lease and the Lease. In both the Agreement for Lease and the Lease the clause dealing with assignment begins with a general prohibition of assignments and then makes exception. It is not correct to say that the scheme of the Agreement for Lease with the annexed documents was against assignment of rights beyond Harris Queensway. The covenant against assignment in the Lease is in more or less standard terms that allow a chain of assignments to any person or body that would reasonably be regarded as a suitable tenant. Moreover, the Agreement for Lease could be assigned in more limited circumstances. If clause 6 of the Warranty was intended to have the effect contended for by Mr. Constable it would have been very easy to have drafted it in the same way as clauses relating to assignment in the Lease and the Agreement for Lease by beginning with a general prohibition and then providing for an exception. The fact that clause 6 was not drafted in that way, which would have put its meaning beyond argument, suggests that Mr. Constable’s submission is unfounded and that the parties had some other intention. Furthermore, the description of Harris Queensway in the Warranty as “‘the Company’ which expression shall where the context so admits include its successors in title” runs counter to the suggestion that Harris Queensway was intended to be the last beneficiary of the Agreement for Lease, the Lease, and the Warranty.

42. There is a good reason for the inclusion of clause 6 of the Warranty other than an intention to effect a general covenant against assignment and the statement of Jenkins L.J. in Dean v. Wiesengrand is relevant. The Warranty was given to Harris Queensway and its successors in title. Before the Lease was granted to Harris Queensway, Harris Queensway could not create any successors in title by way of an assignment of the Lease, though it could be said that Harris Queensway at that stage had an equitable right to a lease that it could transfer subject to the conditions of clause 10 of the Agreement for Lease. To remove any doubt about whether the benefit of the Warranty could be assigned before grant of the Lease, clause 6 was granted to give a limited right to assign before the grant of the Lease. I would accept that clause 6 is to a limited extent exclusionary in that before the Lease was granted, the only way in which the Warranty could be assigned was as stated in clause 6. That may not be an accurate way of putting it because it may be said that clause 6 gave an additional right to assign that would not otherwise have existed and the restriction was not exclusionary but merely a restriction on what was granted. In any event Clause 6 imposed no restriction on assignment after grant of the Lease.

EFFECT OF ASSIGNMENT IN BREACH OF COVENANT

43. In the light of my findings, it is not necessary for me to consider the effect of an assignment made in breach of a covenant against assignment. Mr. Clay relied on the decision of the Court of Appeal in Old Grovebury Manor Farm Limited v. W. Seymour Plant Sales and Hire Limited [1979] 1 WLR 1397. That decision was considered by Lord Browne-Wilkinson in Linden Gardens v. Lenesta Sludge and St. Martins Property Corporation v. Sir Robert McAlpine [1994] 1 AC 85 at 108. For the reasons given in his speech (with which the other members of the Judicial Committee agreed and which I shall not repeat) Lord Browne-Wilkinson distinguished that decision as relating to a lease and said that the law relating to the assignment of contractual rights was wholly different. The assignment alleged here was dealing wholly with contractual rights under the warranty. The principle of Linden Gardens v. Lenesta Sludge and St. Martins Property Corporation v. Sir Robert McAlpine applies and if there had been both a covenant against assignment and an assignment made in breach of that covenant it would have been ineffective to pass the benefit of the warranty to the assignee.

COMMERCIAL PURPOSE

44. For the sake of completeness, I should add that Mr. Clay submitted that the commercial purpose of warranties of this kind was such that they can be expected to contain a provision allowing assignment. What he really meant, I think, was that such warranties should be expected not to contain a provision preventing assignment. I reject that submission. The extent of such warranties is a matter for negotiation. In the absence of consideration, the warranty is normally required to be made by deed and hence has a 12 year limitation period. The warrantor firstly has a commercial interest in not giving a warranty at all. If commercial pressures (such as a choice between getting the work or not getting it) persuade him to give a warranty the warrantor’s commercial interest is in favour of making the warranty non-assignable. On the other hand, the commercial interest of the first beneficiary of the warranty is in favour of the warranty being assignable because that will add to the sale value of the property. The conflicting commercial interests are resolved by negotiation.

CONCLUSION

45. The answer to the question put in the Preliminary Issue ordered for trial is “No”. The claimant is not entitled to the benefit of the Warranty referred to in the Particulars of Claim. The claimant has not established any right to bring this action and the action is therefore dismissed.