Lease – Shop premises – Termination of lease – Solicitors failing to apply in time for new tenancy – Company trading from shop in liquidation – Basis on which damages to be assessed
Maxvee Ltd was the tenant of a shop at 143 Oxford Street, London W1, paying £65,000 pa rent. In 1991 the landlord served a notice pursuant to section 25 of the Landlord and Tenant Act 1954 terminating the tenancy on its contractual term date, and indicated that it would not object to the grant of a new tenancy. Maxvee instructed the defendants, who failed to make the necessary application in time. Negotiations then started for a new tenancy. The landlord offered, and Maxvee eventually accepted, a five-year term, excluded from the 1954 Act and with no right of assignment, at a rent of £107,400 pa.
Maxvee sued the defendants and on April 20 1993 judgment was entered for damages to be assessed. In 1992 Maxvee went into liquidation. In 1996 the plaintiff was substituted as plaintiff in place of Maxvee although no defence had yet been served. In October 1996 leave was given to serve a defence limited to the allegation that Maxvee had failed reasonably to negotiate a lower rent. Before the judge the issues were, inter alia: whether the defendants should be allowed to plead events occurring after Maxvee’s failure to show that determination of the loss of value in 1992 was not the appropriate method of calculating damages; whether Maxvee failed reasonably to mitigate its loss by failing to negotiate a reduced rent and to determine what loss Maxvee in fact suffered in 1992 at the determination of the old tenancy.
Held Judgment for the plaintiff.
1. Damages were to be limited to the loss incurred by the company by reason of having to pay in excess of what it would have paid if it had obtained a protected tenancy . Although the general rule was that damages were assessed at the date of breach, that rule should not be mechanistically applied if assessment at another date might more accurately reflect the overriding compensatory rule: see per Nourse LJ in Kennedy v KB Van Emden & Co The Times April 15 1996.
2. The court had to look at the situation as it would have been in early 1992 when negotiations would have taken place for a new tenancy and decide what could have been obtained at that date if the solicitors had not been in breach of their duty of care by failing to apply timeously for a new lease.
3. The burden of proof was on the defendants to show that the plaintiff had failed to act reasonably to mitigate the damage. Had the requisite steps been taken and a new tenancy granted, the rate per square foot at the time such a tenancy would have been granted was £170. On the evidence and having regard to the financial position and his understanding of the situation as a trader in Oxford Street, the plaintiff had taken steps, as far as he was able, to mitigate his loss but had had no alternative but to accept the landlord’s terms. The plaintiff was entitled to damages in the sum calculated of £39,905.
Graham Platford (instructed by Cohen & Naicker) appeared for the plaintiff; Nicholas Ainley (instructed by Ince & Co) appeared for the defendants.
