Impossibility of tenant keeping lease for full term — Whether allegation of conspiracy sustainable — High Court striking out claim against two defendants — Court of Appeal holding that plaintiffs’ amended claim raising a triable misrepresentation issue
In December 1984 the plaintiffs took a lease of shop premises in Bournemouth. They paid £57,500 for the lease which reserved a rent of £7,500 pa. A draft lease was submitted by the fifth defendant, the solicitor acting for the second defendants, Blue Dolphin (Fish Restaurants) Ltd, to the first defendants as the solicitors acting for the plaintiffs. The third and fourth defendants were the directors of the second defendants. The plaintiffs subsequently claimed that they had been the victims of a conspiracy inducing them to accept a form of lease which the defendants knew was unfair so as to render the rent uneconomic obliging them to surrender the lease. They commenced proceedings against all the defendants.
The lease was for a term of 15 years with a complex rent review clause which produced a compound effect which could multiply the rent tenfold if prices rose by 8% a year. Another provision stated that section 144 of the Law of Property Act 1925 should not apply, which would allow the landlord to levy a fine for a licence to assign. A further clause effectively made it impossible for the assignee to charge the lease. The plaintiffs argued that no prospective tenant properly advised would have accepted a lease in those terms. This case concerned only the striking out of claims against the third, fourth and fifth defendants. The action was to proceed against the first defendant, the solicitor who had accepted the lease on behalf of the plaintiffs, and against Blue Dolphin seeking rescission on the ground of mistake. In the High Court the third, fourth and fifth defendants argued that the claim of conspiracy was unsustainable. The action against them had been struck out.
Held The plaintiff’s appeal against the striking out was allowed.
1. The plaintiffs alleged that the lease was deliberately misleading although it contained no overt falsehood. The defendants had unsuccessfully argued that there was no such thing as a lease on standard commercial terms, nor were there standard provisions for rent review. Further, no implied representation had been made by the mere submission of a draft lease other than that it contained the terms it did contain.
2. It was clear on the assumptions that the court was obliged to make on an application of this kind that the defendants intended to deceive and defraud the plaintiffs. The difficulty was in formulating the misrepresentation in relation to the argument that a careful reading of the draft lease would have revealed its true nature.
3. If the allegations were true, the third, fourth and fifth defendants with intent to deceive had submitted a draft lease which purported to be for 15 years but was so obscurely drafted as to be likely to escape detection; and so onerous as to oblige the tenant to surrender and lose the substantial premium paid for it. In the court’s view the plaintiffs had now by their re-amended statement of claim succeeded in formulating a misrepresentation which deserved to be considered at trial.
Stephen Miller QC and Roger Evans (instructed by Clifton Ingram, of Wokingham) appeared for the plaintiffs; Nicholas Le Poidevin (instructed by Colemans, of Maidenhead) appeared for the third and fourth defendants; David Hodge (instructed by Barlow Lyde & Gilbert) appeared for the fifth defendant; first and second defendants did not appear and were not represented.
