Assignee of lease contending against original landlord that rent claimed exceeded that provided for by lease – Landlord seeking rectification of lease to accord with alleged prior agreement for additional payment – Whether original parties had continuing intention that lease should be in form contended for – If so whether landlord’s rectification claim amounted to overriding interest
The defendant (Ramsden) owned leasehold premises in Hull where it operated a cash and carry business. In 1990 Ramsden entered into negotiations with Linrock Ltd (Linrock), a subsidiary of Fitzwilton plc. In October 1990 Ramsden agreed in principle to sell the business to Linrock for the price of £350,000 and on terms that Linrock would take a 25-year sublease at a rent reviewable upwards-only every five years. The sublease (the lease) was executed on November 21 and in due course registered. The lease provided that until the first review date on November 7 1995 the rent would be £3.50 per sq ft calculated on an area of 59,338 sq ft. In 1994 the plaintiff (Nurdin) became the sole owner of Linrock under a share purchase agreement, whereby Nurdin had agreed to buy various Fitzwilton companies. On June 1 1995 Linrock, for a consideration of £1, executed an assignment which resulted in Nurdin becoming registered proprietor of the lease on June 15 1995. By that assignment Nurdin covenanted to observe the covenants in the lease and to keep Linrock indemnified accordingly.
In February 1997, following the takeover of Nurdin by another group, the question was raised as to why Nurdin had, since the first review date, been paying rent at £4.5 per sq ft. The explanation given was that, shortly before the execution of the lease, Ramsden and Linrock had agreed that an increase of £1 per sq ft would become payable as from the beginning of year four, and that accordingly the passing rent on the first review date was £4.5 per sq ft. Nurdin commenced proceedings, contending that the increase only applied for years four and five. Ramsden did not dispute Nurdin’s interpretation of the lease, but claimed that the lease should be rectified so as to accord with the alleged agreement. At the conclusion of his decision the judge found that Ramsden had failed to establish the necessary common intention that the lease should be in the form contended for. However, before so concluding, the judge considered whether, if he had found otherwise, Nurdin would have taken the 1995 transfer free from or subject to Ramsden’s rectification claim.
Held The claim would have been enforceable against Nurdin.
1. Ramsden could not deny that Nurdin was a purchaser for value of the legal estate without notice. A “purchaser” was any person who took the estate otherwise than by operation of law: see Megarry and Wade, The Law of Real Property 5th ed, at p50. While the nominal payment could not amount to “value” in the eyes of equity, the indemnity given to Linrock did: see Johnsey Estates Ltd v Lewis and Manley (Engineering) Ltd [1987] 2 EGLR 69, per Bingham LJ, at pp70-71. Moreover (and contrary to the opinion expressed in Equity & Law Life Assurance Society Ltd v Coltness Group Ltd [1983] 267 EG 949, per Whitford J, at p950), the same would have applied even without the giving of an express indemnity: see Harris v Tubb (1899) 42 ChD 79.
2. However, because Nurdin had become registered proprietor of the lease, it had to be determined whether Ramsden, being “in receipt of the rents and profits” of the land in question, could assert an “overriding interest” within the meaning of section 70(1)(g) of the Land Registration Act 1925. On that point, Nurdin’s contention that a rectification claim did not amount to a “right” as contemplated by the section was inconsistent with the reasoning of the House of Lords in National Provincial Bank Ltd v Hastings Car Mart Ltd [1965] AC 1175, as correctly applied by Judge Mervyn Davies QC in Blacklocks v JB Developments (Godalming) Ltd [1982] Ch 183.
Jonathan Brock QC and Alexander Hill-Smith (instructed by Brookstreet Des Roches, of Witney) appeared for the plaintiff; Edward Nugee QC and Patrick Walker (instructed by John Barkers, of Grimsby) appeared for the defendant.
Alan Cooklin, barrister
