#6712 - Design Progression V. Thurloe Properties - Commercial Remedies BCL

Design Progression v. Thurloe Properties

Facts

The lease was in respect of the ground floor shop premises at 143-145 Fulham Road, London SW3. This is part of a block of premises, and the adjoining property at Pond Place, where the freehold is owned by the defendant and an associated company. The defendant apparently acquired the freehold subject to existing leases in early 2000. Little is known about the defendant. It chose to adduce no evidence in relation to what decisions it actually made. It is a company registered in the British Virgin Islands and apparently operates by virtue of a power of attorney dated 14 April 2000 granted by it to Robert Keith Corkill, an attorney in the Isle of Man.

It is accepted by all parties that by 2002, when the licence to assign the subject matter of the present dispute was sought, the premises were significantly under-rented in that an open market rental of the premises on a lease granted at that time would command a rent of between 139,000 and 155,000 per annum, as summarised in a note of a Mr Lillie, a partner in Matthews & Goodman, the defendant's managing agents, dated 29 January 2002.

It is to be noted that Matthews & Goodman became aware of the proposed disposal of the premises and sought sales particulars. This was of course before any approach was made to the defendant for licence to assign. Mr Adams, of Matthews & Goodman, sent an e-mail to Mr De Lerios on 6 December 2001 referring to the claimant's lease. It is plain that these are clear instances of evidence which shows bad faith on the part of the defendant and a motivation extraneous to their duties to consider the application for licence to assign. It did not want Ms Hoppen because of the nature of her operation, allegedly. Alternatively, it wanted Ms Hoppen at a higher rental.

Statutory Provisions: First, by section 1(3) of the 1988 Act, where a landlord is served with a written application by the tenant for consent to a transaction, he owes a duty within a reasonable time

(a) to give consent, except ... where it is reasonable not to give consent,

(b) to serve on the tenant written notice of his decision whether or not to give consent specifying in addition-(i) if the consent is given subject to conditions, the conditions, (ii) if the consent is withheld, the reasons for withholding it.

Second, section 4 of the 1988 Act provides: “A claim that a person has broken any duty under this Act may be made the subject of civil proceedings in like manner as any other claim in tort for breach of statutory duty.”

Holding

Breach of Statutory Duty

Accordingly, I determine that the defendant was in breach of its obligation to give a decision within a reasonable time and that time expired on 21 March 2002, or alternatively, in case I am wrong in that regard, by 25 April 2002. It follows that the defendant is liable to the claimant in damages for breach of its statutory duty.

Exemplary Damages for breach of statutory duty

In the light of the authorities referred to in the Mount Eden Land case, and in the light of the House of Lords decision in Kuddus v Chief Constable of Leicestershire Constabulary [2002] 2 AC 122, I am of the opinion that there is a right to seek punitive or exemplary damages against a landlord for breach of its statutory duty under the 1988 Act.

Second limb of Lord Devlin’s analysis

An award of exemplary damages is available where there is unacceptable behaviour on the part of the defendant, and that behaviour displays features which merit punishment, where the defendant acts in a way calculated to make a profit for himself which might well exceed the compensation payable to a claimant. It is clear that the second categorisation of Lord Devlin in Rookes v Barnard [1964] AC 1129, namely, where the defendant's conduct had been calculated by him to make a profit for himself which may exceed the compensation payable to the claimant, is still a relevant basis for awarding exemplary damages.

It is clear, in my judgment, that the defendant through its agents operated in a cynical way designed to frustrate the claimant in obtaining its legitimate expectation, namely an assignment of the premises coupled with a receipt of the 75,000 premium and an ending of its further obligations under the lease. It was done to extract for itself the value of the property by virtue of the difference between the passing rent and the market rent when it had no legitimate reason for acting the way it did in response to the claimant's application for licence to assign. As I have said already there is nothing illegitimate in a landlord seeking to recover possession by negotiation in order to achieve that, as postulated by Matthews & Goodman initially. What is illegitimate is an abuse of the procedures under the...