2 December 2019 | Comment | Article by Jennifer Butcher
The High Court’s recent decision in Bella Italia Restaurants Ltd v Stane Park Ltd & Others was a clear message to parties entering into agreements for lease, that it cannot be assumed that an agreement is personal to the named parties, unless the agreement expressly provides that it is.
Bella Italia Restaurants Ltd (“Bella”) entered into an agreement for lease (“the Agreement”) with Stane Park and others (“the Trustees”) in November 2014. The Trustees were freeholders to a new development of retail premises in Colchester and landlord to the prospective lease of the property (“the Property”) to be granted to Bella once the Property had been constructed.
During construction of the Property, the Trustees transferred their interest in the Property to a company named Ropemaker Properties Ltd (“Ropemaker”). When construction of the Property was complete in August 2018 Bella’s solicitors served notice to complete on the Trustees. The Trustees queried with Bella why this had been served on them as opposed to Ropemaker, but informed them that Ropemaker were ready, willing and able to complete. On the scheduled completion date, Bella declined to complete on the lease stating that it believed the Trustees were not in a position to complete on the lease (as they no longer held the freehold title). The Trustees disputed the validity of Bella’s termination of the agreement.
Bella issued proceedings seeking a declaration that the Agreement was terminated or in the alternative, that Bella was not in breach of the Agreement. The Defendants (cumulatively the Trustees and Ropemaker), sought their own declaration that the Agreement had not been terminated and that Bella was liable to complete the lease offered by Ropemaker.
Bella argued that the terms of the Agreement were personal to the Trustees. In particular, Bella drew reference to clause 15.1 of the Agreement which provided that “in consideration of the Tenant’s obligations under this Agreement the Landlord shall (at the direction of the Developer) grant to the Tenant and the Tenant shall accept from the Landlord the Lease on the terms set out in this Agreement”. Bella noted that the “Landlord” within the Agreement specifically referred to the Trustees, that it did not refer to the landlord’s successors in title and that the draft lease attached to the Agreement was drafted as a lease to be granted by the Trustees rather than anyone else. For these reasons Bella said that the lease could not be granted by any party other than the Trustees.
In making her finding, Kelyn Bacon QC (sitting as District Judge) first considered the issue of contractual interpretation. In doing so, she made a number of pertinent points:
- Bella’s interpretation of clause 15.1 was not accepted. It was acknowledged that the Agreement did not make reference to successors in title, but this was no doubt because a number of clauses within the Agreement were expressed to be personal to one of the parties in the agreement.
- Comparison was drawn by reference to clauses 15.2 and 15.3 which rendered the benefit of the Agreement personal to Bella as tenant. Had there been the same intention for the Landlord, similar provisions would have existed. It was considered “striking” that they did not.
- An argument that the landlord and tenant definitions in the Agreement meant that everything in the Agreement was personal to the named parties did not stand up, as if this were the case then the clauses which were expressed as being personal to one of the parties would be rendered entirely redundant.
- Nothing turned on the fact that the draft lease was drafted as being granted by the Trustees, because the definition of landlord made specific reference to successors in title.
Kelyn Bacon QC concluded that the obligation of the landlord under clause 15.1 was not personal to the Trustees and that it could be performed by Ropemaker as transferee of the Property. Bella was not entitled to terminate the Agreement and its claim failed. The Defendants successfully obtained the declaration they sought, in that the Agreement was not terminated and that Bella was liable to complete the lease offered by Ropemaker.
What can we learn from this case?
When the Trustees transferred their interest in the Property to Ropemaker, it was sold with the benefit of the Agreement. Ropemaker covenanted with the Trustees to comply with the Trustees obligations (including those under clause 15.1). Assigning rights and responsibilities such as this is a common set of circumstances. Therefore, if a contracting party wishes to ensure that a contract benefits (or burdens) a specific party and that this cannot be assigned, then careful attention should be given at the time of drafting to ensure that this is expressly provided for.
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