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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Plummer v Tibsco Ltd & Anor [2002] EWCA Civ 102 (31 January 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/102.html Cite as: [2002] EWCA Civ 102

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Justice Neuberger)

		Royal Courts of Justice Strand London WC2 Thursday 31st January, 2002

1. LORD JUSTICE ALDOUS: Mr Barry Plummer was and is the licensee of a public house called the Deer's Hut which is in Liphook, Hampshire. His landlord in 1986 was Courage Ltd, who in that year granted him a tenancy for five years.
2. The 1986 tenancy agreement provided for payment of rent of £7,573 per annum subject to annual reviews in accordance with the Retail Price Index. It contained covenants by Courage to effect major repairs and also to insure the premises. Mr Plummer covenanted not to assign the tenancy and to purchase all his beers, spirits and other liquor from Courage or its nominee.
3. Clause 26 of the 1986 agreement contained an option in favour of Mr Plummer to renew for a further term of five years on the same terms but subject to a rent to be assessed by an independent surveyor, if it could not be agreed between the parties.
4. Clause 26 was in these terms:

"(1) If the Lessee shall wish to take a Lease of the Premises and enter into a Business Agreement for a further term of 5 years from the expiry of the Term at the rent and on the terms and conditions hereinafter mentioned and

If (a) the Lessee shall have paid the rent and all monies due under the Lease and the Business Agreement to the Company and have performed and observed all the obligations on his part thereunder up to the end of the Term and

(b) the Lessee shall have purchased from the Company or its Nominated Suppliers at least the minimum barrelage of the designated Beers in draught or packaged form and the minimum gallonage of the designated Liquors in each year of the Term and

(c) the Lessee shall have agreed with the Company a further Business Plan and a further Business Agreement and

(d) the Lessee shall be not more than 60 years of age at the expiry of the Term and

(e) the Lessee shall not more than 12 months nor less than 6 months before the expiry of the Term give notice to the Company of his wish to take a further Lease of the Premises

then the Company will lease the Premises to the Lessee for a further term of 5 years from the expiry of the Term at a rent to be determined in a manner hereinafter provided and subject in all respects to the same obligations and stipulations as are herein contained except this clause for renewal but with the substitution of the then Company's current products lists for beers and for liquors."

5. In January 1991 Mr Plummer served notice to exercise the option to extend the 1986 tenancy for a further five years. Around this time Courage disposed of its public houses to Grand Metropolitan Plc. We were told that the defendants, Inntrepreneur Beer Supply Company Ltd and Inntrepreneur Pub Company (CPC) Ltd, were jointly owned by Courage and Grand Metropolitan. I will refer to them jointly as "Inntrepreneur". I will not differentiate between them and Courage and Grand Metropolitan unless it is necessary to do so.
6. The Grand Metropolitan Group had determined as a matter of policy to let all of its public houses on 20-year leases under which the tenant would be responsible for all repairs and insurance of the premises. That policy was recorded in a document from which I must read some passages. The document is headed "5+5 RENEWALS/TERMINATIONS AND TENANCIES AT WILL":

"A. CORE HOUSES

1. Policy

1.1. It is Company policy that no 5+5 renewals should be granted under any circumstances.

Tenants who have satisfied all their contractual requirements for renewal will be offered an Inntrepreneur Lease as an alternative to the second term.

Tenants who have failed to completely satisfy all the Option to Renew Clauses (including MPO) will generally be required to vacate their houses by the expiry date of the first term. Failure to do so may require eviction proceedings.

...

2. TAW PROCEDURES

2.1. Tenant Notification

For tenants entitled to renewal the procedure will be that the Area Tenanted Manager will inform the tenant that the company is introducing the Inntrepreneur Lease as a suitable alternative to a second term 5 year lease. For tenants not technically entitled to renewal the ATM should simply say that despite this the company is prepared to offer an Inntrepreneur Lease.

In both cases the ATM then will inform the tenant that because of the timescale it will not be possible for him (the tenant) to conclude negotiations with Inntrepreneur and that in the meantime the tenant may continue in occupation of the premises on the same terms and conditions as before but subject to a Tenancy at Will. It is anticipated that the majority of tenants will be happy with this proposal and cause few problems.

A positive stance should help to overcome objections.

...

2.3. Refusals

In the event of a tenant refusing to sign the TAW despite the most robust management efforts, DO'B must be contacted prior to any further escalation of legalities. The hope will be that negotiations for the Inntrepreneur Lease may yet be concluded (and may need to be accelerated) prior to any legal action becoming necessary by either party."

7. The document goes on to say that no further rent should be collected on five plus five renewals, and to point out that even if there be refusal it is likely the company will be prepared to go to court to argue the case for non-renewal.
8. It may be that that rigid attitude which was adopted by Grand Metropolitan was the result of the change of legislation which had been passed and was imminently to be introduced. That legislation would have given tenants such as Mr Plummer, who were entitled to a renewal of their five-year lease, statutory protection.
9. The form of the lease referred to, namely the Inntrepreneur lease, which I will refer to as the 20-year lease, is not important to this case. Suffice it to say that it was a full repairing lease at a rent set out in the lease.
10. As I have said, Mr Plummer exercised his option under his five-year lease to renew it on 21st January 1991. Pursuant to the policy contained in the document to which I have referred, Inntrepreneur declined to grant a new five-year lease to Mr Plummer and offered him the 20-year lease. Mr Plummer did not wish to take the 20-year lease and consulted solicitors. There was protracted correspondence and communications between the solicitors acting for Mr Plummer and Inntrepreneur and their solicitors, and also a number of meetings to which I shall have to come. However, in the end Mr Plummer was persuaded by Inntrepreneur to sign an agreement, dated 20th February 1992, agreeing to take a 20-year lease. That agreement defined "the Current Agreement" as the tenancy dated 23rd December 1986 made between Courage and Mr Plummer. Clause 2, headed "Surrender", was in these terms:

"The Lessee hereby surrenders to the Current Landlord the Current Agreement with the intent that the same shall merge and be extinguished in the reversion immediately expectant thereon."

11. Clause 3 stated:

"3. Agreement for lease

Subject to observance and performance of the terms of this Agreement by the Lessee the Company shall grant and the Lessee shall accept the Lease."

12. The result of that agreement was that Mr Plummer entered into a 20-year lease on 15th April 1992 with Inntrepreneur as the landlord.
13. In 1996 Mr Plummer read in the trade press an article which suggested that tenants, such as Mr Plummer, who had been, as it were, forced to take a 20-year lease by Inntrepreneur could have a claim for damages. I suspect he took advice, with the result that these proceedings were started in October 1996. We have been told that there are a number of other proceedings to similar effect. In his statement of claim he claimed damages against Inntrepreneur for breach of contract, in the alternative for misrepresentation, and, in the further alternative, for negligent misstatement.
14. At trial Mr Plummer put his case on three bases. First, he said that Inntrepreneur was in breach of clause 26 of the five-year lease because they had refused to grant him a new lease. This refusal was said to have caused him loss.
15. Second, it was said that in order to induce him to enter into the 20-year lease Mr Michelmore, an employee of Inntrepreneur, had made an oral misrepresentation to Mr Plummer. In reliance on that misrepresentation, Mr Plummer had acted to his detriment.
16. Third, it was alleged that Inntrepreneur owed Mr Plummer a duty of care when making representations, and that by making untrue statements it was in breach of that duty. Those untrue representations were alleged to have caused Mr Plummer loss.
17. The defendants denied that there had been a breach of contract. They also contended that all the claims by Mr Plummer had been settled when he entered into the 1992 agreement. They also denied making the alleged misrepresentations and contested the allegations of loss.

The judgment

18. The judge held that Mr Plummer had, at the date of the issue of these proceedings, a valid claim for breach of contract. However, he rejected the second and third claims. He rejected Mr Plummer's evidence and found that the statements alleged to have been made by Mr Michelmore were not in fact made, and further they had not been relied upon by Mr Plummer to his detriment.
19. The judge also rejected Inntrepreneur's contention that Mr Plummer's claim for damages for breach of contract had been compromised. Having reviewed the events leading to the 1992 agreement, he said this, at page 20 of the transcript:

"In my judgment, therefore, although it would be wrong to pretend that there is nothing in the correspondence to raise arguments in favour of the contention that there has been a compromise, whether one takes each of the aspects relied on by the Defendants on their own or together, I am unpersuaded that Mr Plummer thereby abandoned any contractual claim for damages."

20. The judge went on to consider whether Mr Plummer's claim was precluded by the terms of the 1992 agreement. He said, at page 21F:

"Accordingly, simply because the then current agreement was surrendered, I do not consider that a claim for damages arising in respect of an accrued breach of that agreement should be treated as abandoned. Such an abandonment is not within the wording or contemplation of clause 2.

Mr Lewison argues that the second five-year term was already in existence at the date of the 1992 Agreement as a tenancy in equity and it was surrendered as a result of clause 2, and that, therefore, any claim for damages resulting from Grand Metropolitan's refusal to grant that very tenancy ended with it. I agree that the effect of clause 2 was to surrender the tenancy in equity under which Mr Plummer held the premises following the exercise of the option, pursuant to the rather odd, if well-established, legal principle that a specifically enforceable contract for a tenancy gives rise to a tenancy in equity. However, the fact that he surrendered the tenancy in equity does not to my mind mean that Mr Plummer thereby gave up any claim for damages resulting from the Defendant's wrongful refusal to grant him such a tenancy in law. A tenancy in equity in such a case can only exist so long as the contract to grant it exists, but that does not mean that the contract ceases to exist if the tenancy in equity is determined. Thus, it is of the essence of the tenancy in equity that the contract to grant the tenancy is specifically enforceable; thus, if the contract ceases to be specifically enforceable for whatever reason, then there is no tenancy in equity. However, the converse does not apply. The fact that the agreement is no longer specifically enforceable does not mean that there is no right to damages as a result of the breach of that agreement; despite no longer being specifically enforceable in equity, the agreement is still perfectly capable of surviving as a matter of law and common sense.

In these circumstances, I consider that Mr Plummer has, and had at the date of issue in these proceedings, a valid claim for breach of contract."

21. The judge went on to consider Mr Plummer's claim for damages. At the trial Mr Plummer's claim was for £63,774, calculated in accordance with a schedule. That schedule contained heads of damage which included costs incurred in transferring to the 20-year lease; additional costs of repairs and insurance incurred by Mr Plummer under the 20-year lease up to the date of the trial; additional rent to that payable under the five-year lease up to the date of the trial; additional costs of repair and insurance incurred from trial until the termination of a notional renewal of the lease in 2010; additional rent payable under the 20-year lease and successive renewals, less the agreed rent payable for the remainder of the 20-year lease. Credit was to be given for the assignment value of the 20-year lease and for additional income received by Mr Plummer from amusement machines.
22. I will come later to the way the judge arrived at the figure of damages of £20,930. Suffice it to say, he rejected Inntrepreneur's submission that Mr Plummer was better off as a result of taking the 20-year lease, because, although he had incurred additional expenditure of £65,000-odd, he had received additional income of £14,000-odd from machines and had a capital asset worth £63,000.

The appeal

23. Mr Plummer does not seek to challenge the judge's findings of fact which disposed of his claim based on misrepresentation. Thus the only issues before us relate to the appeal by Inntrepreneur against the judge's conclusion that (a) there had been a breach of contract, which had not been compromised (b) the damages were more than nominal and (c) even if Inntrepreneur were entitled to substantial damages, the judge had erred in the way that he had assessed them.

The breach of contract claim

24. Inntrepreneur accept that their refusal to grant a new five-year lease pursuant to the exercise of the option by Mr Plummer in 1991 was a breach of contract. However, they contend that the proper conclusion to be derived from the correspondence and the discussions which preceded the signing of the 1992 agreement and the agreement itself was that Mr Plummer and Inntrepreneur compromised any claim for damages which Mr Plummer may have had as a result of Inntrepreneur's refusal to renew his five-year lease on the original terms.
25. At the trial both parties relied upon the terms of the correspondence to support their contentions. However, there must be real doubt as to whether those documents were admissible to show what was ultimately agreed at a meeting between Mr Plummer and Mr Michelmore, and was subsequently recorded in the agreement and lease. However, I must deal with the correspondence in detail because it does show the pressure that Inntrepreneur put upon Mr and Mrs Plummer. They called it "robust management". To my mind the word "bullying" would not be incorrect. Further, Grand Metropolitan appear to have advanced arguments which persons in their position should have known were plainly wrong.
26. The relevant correspondence starts with the letter of 21st January 1991 from Mr Plummer exercising the option to renew the five-year lease. It was acknowledged on 7th March 1991 by Courage. Thereafter Grand Metropolitan Estates come on to the scene. On 8th May 1991 they start a campaign to persuade Mr Plummer to take the 20-year lease. In that letter they invite Mr and Mrs Plummer to a presentation at the Queens Hotel, Farnborough on 15th May 1991. Mr and Mrs Plummer attended the meeting on 15th May. On the day after, solicitors acting on their behalf wrote to Inntrepreneur stating that they had been instructed by Mr Plummer in connection with the proposed 20-year lease. Mr Plummer had indicated to them that he had a number of points of concern arising from the general outline that had been given to him in the literature, and they asked for a draft of the proposed lease so that they could advise their clients more fully. They went on to raise particular points in respect of maintenance and repair.
27. It seems that at that stage those solicitors were not aware that Mr and Mrs Plummer had in fact exercised the option, because on 24th May 1991 Mr and Mrs Plummer's accountants sent to Mr and Mrs Plummer's solicitors a copy of the letter exercising the option.
28. On 25th June 1991 Grand Metropolitan wrote to Mr Plummer saying that they had been appointed by Courage as its managing agents. The letter stated:

"Having carefully considered the position in the light of legislative changes which have taken place in the period since your Lease was granted, we are pleased to advise you that (without prejudice to its legal rights) the Company is willing to enter into negotiations for the grant to you of a 20 Year Inntrepreneur Lease which provides statutory security of tenure. We cannot grant a five year renewal for the following reasons."

29. The letter went on to state that the company, under obligations imposed by the government, were prevented from granting the renewed lease.
30. On 1st July Mr Plummer's solicitors sought advice from the Office of Fair Trading as to whether the reasons given in the letter by Grand Metropolitan were appropriate. The Office of Fair Trading replied on 17th July, stating that they had written to Grand Metropolitan outlining their concern that the letter gave the impression that there was no choice but to offer 20-year leases. The Office of Fair Trading stated:

"The reality is that this is essentially a commercial decision made by the company."

31. To that letter was attached a letter which had been written to another person within Grand Metropolitan explaining the position.
32. On 7th August Grand Metropolitan wrote to Mr Plummer's solicitors, and it must be remembered this was a date after they had received the reply from the Office of Fair Trading. That letter stated:

"We note your Client's wish to renew his present Lease for a further five years. However, the Company must emphasise its inability to accede to this for the reasons given in our letter of 25th June.

Furthermore, we would point out that the Company has concluded that the legal difficulties posed by the Tied Estate Order and the Undertakings given by the Company to the Office of Fair Trading will preclude it from agreeing with your Client any new business agreement and/or business plan. These items would be essential pre-requisites for any five year renewal and without them such renewal cannot proceed.

We understand Mr Plummer's concerns as to his future at the Deers Hut and would stress our willingness to secure the future by negotiating a 20 year Inntrepreneur Lease. Hence, we will be resuming discussions with him on this."

33. The words "inability" and "preclude" run completely contrary to the statements made by the Office of Fair Trading, and I am surprised that they could be made by an employee of Grand Metropolitan Estates Ltd when the company had received that letter.
34. On 15th August Grand Metropolitan write again. This time they send a copy of a standard letter that appears to have been sent out to Mr Plummer and others. It states:

"Your five year Lease of the above premises is due to expire on 1st October 1991. The Company is not prepared to grant you a further five year lease but is willing to offer you a 20 year Inntrepreneur Lease of the premises on terms to be discussed.

In these circumstances the Company is prepared to allow you to remain in occupation after your Lease expires as a Tenant at Will for sufficient time to enable the discussions to take place. The Tenancy at Will would be on the following terms and conditions: ..."

35. There follows 15 terms and conditions, and the letter concludes:

"If you have any queries, please contact me. To confirm your acceptance of these arrangements you should date and sign the enclosed copy of this letter where indicated below and return it to us at the above address as soon as possible. A stamped addressed envelope is enclosed for this purpose."

36. To that letter solicitors acting on behalf of Mr Plummer replied on 27th August 1991. They said:

"... we now enclose herewith a copy of a letter we have received from the Office of Fair Trading, the contents of which we trust are self-explanatory. Our client does not accept that it is contrary to the undertakings given by your Company to the Office of Fair Trading for a new five year lease to be granted to our client pursuant to the terms of his existing Lease.

Our client has fully complied with the conditions and stipulations set out in his existing Lease and under the terms of that Lease is entitled to a new Lease for a further five years. We look forward to hearing further from you in this respect."

37. To that Grand Metropolitan replied on 10th September:

"Thank you for your letter of the 27th August 1991. We note the copy letters from the Office of Fair Trading enclosed with that letter, the contents of which we do not accept.

Without prejudice to the above paragraph, nothing in either the letter of the 11th July or the 17th July 1991 states that the grant of a further five year term to your client would be lawful. The letters from the Office of Fair Trading do not address the effect of the supply of beer (Tied Estate) Order 1989 or the undertakings given by the Company on the grant of a further term of five years on terms similar to the expired lease. In particular we are required to impose full repairing obligations and to charge commercial rents to tenants."

38. It is interesting to reflect that in these proceedings no such attitude was adopted and no such argument was put forward. For my part, I am unable to understand how they could have been put forward in the way that they were.
39. However, on 3rd September the solicitors acting for Mr Plummer sent a without prejudice letter. It stated:

"We must continue to assert that you are breach of your obligations under the client's existing five plus five Lease. Our client has fully complied with the terms of his existing Lease under which you are obliged to grant a new five year lease at the expiry of the first terms and at the request of the tenant. If you fail to grant a further five year lease to our client you will be in breach of your obligations under the Lease and we have advised our client that he would be entitled to remain in possession of the premises and could commence proceedings against you for the grant of a new lease or for damages for breach of contract.

Our client is not prepared to sign the form of Tenancy at Will contained in your letter of the 15th August, and will continue to tender payment of rent and comply with the tenant's covenants contained in the existing Lease."

40. The letter goes on to point out that at no time had he received a copy of the 20-year lease which they ask for.
41. Mr Plummer's solicitors wrote, again without prejudice, on 20th September. In that letter they reminded Grand Metropolitan that they had not received the proposals contained in the new lease. The letter states that although their client's position was that he was fully entitled to the grant of a new five-lease in accordance with the terms of his existing five plus five lease, obviously he was unable to consider the possibility of agreeing to take up a new 20-year lease unless the points raised in their letters were considered.
42. This letter of 20th September 1991 was, counsel submitted, an important letter, in that it indicated that Mr Plummer was considering choosing to take the 20-year lease. In my view it is only part of the matrix. It certainly does no more than state what was obviously sensible, that Mr Plummer would look at all the matters before him.
43. There is an important internal memorandum from Mr Michelmore dated 25th September 1991. In it he writes to Mr Howard about Mr Plummer. He states:

"... I would suggest that we do not answer the questions raised in the solicitors letter directly. I would have thought a brief response to say arrangements are in hand to contact the lessee direct, for further negotiations on the granting of a Twenty Year Lease, would be adequate.

In the meantime I have been attempting to phone Mr Plummer but he is away until Friday 27th September so I shall speak to him early next week."

44. One only has to read it to see what an unattractive memorandum it was. The advice was put into effect with the result was that Mr Plummer's solicitors wrote to this time solicitors acting on behalf of Grand Metropolitan on 16th October 1991. This was after a meeting which had taken place on 11th October when Mr Plummer had met Mr Michelmore. The letter stated that they had been instructed by Mr Plummer. It informed the solicitors that he was in receipt of a five plus five lease and he was, in accordance to that lease, entitled to renew it for a further five years. The letter went on:

"We do not accept that your clients' assertion is correct, [that is the assertion that Grand Metropolitan were precluded from granting a further extension under the Beer (Tied Estate) Order 1989] and we continue to maintain that our client is entitled to a Second five year term as provided by for by his existing Lease.

Notwithstanding this your clients have offered our client a new 20 year `Inntrepreneur' Lease and negotiations are currently taking place with regard to the rent to be charged and other matters. Before we can advise our client concerning the proposed 20 year Lease so that he can make a decision concerning this we should be grateful if you could provide us with the following documentation/information:- ..."

45. The letter goes on to request a copy of the draft lease and other information. Messrs Cannons replied that they had no instructions.
46. There followed on 26th November 1991 a telephone conversation or a meeting between Mr Michelmore and Mr Plummer when the 20-year lease was discussed.
47. On 9th December Mr Nicholas, who had previously worked for Grand Metropolitan but now was practising as an independent consultant, assessed the want of repairs of the premises on Mr Plummer's instructions at £5,500.
48. On 18th December Mr Michelmore visited the premises. The upshot of the meeting was that a new 20-year lease was negotiated. The conclusion of the meeting is recorded in a letter of 18th December written by Mr Michelmore. It states:

"Further to our meeting today, I write to confirm that, subject to company approval, we are able to offer you 20-year lease on the above pub on the following terms: ..."

49. The letter then set out the rent to be paid for the first five years. It ended in this way:

"Would you please confirm your acceptance of the above terms by 2nd January 1992. We will then be in a position to instruct our solicitors to exchange contracts on the lease by mid-January."

50. On 29th December 1991 Mr Plummer wrote back to Mr Michelmore a letter headed "Subject to Contract & Formal Lease, Without Prejudice":

"... we would confirm that we will accept your offer of a twenty year lease on the terms contained therein, that is:- ..."

51. There followed, nearly verbatim, a reproduction of Mr Michelmore's letter of 18th December. That was followed by a letter from Inntrepreneur of 2nd January confirming the basis of the agreement and setting out the timescale upon which the matter could be concluded. It included the forms which should be signed by Mr Plummer. They were signed promptly on 6th January 1992 and returned. Thereafter, Inntrepreneur wrote on 7th January stating that their solicitors had been instructed to prepare the necessary documentation. On 22nd January 1992 the standard form of surrender agreement (to which I have referred) was sent, together with the engrossed copy of the lease. The letter went to state:

"Please note that our instructions do not allow us to very the documents enclosed with this letter in any way whatsoever."

52. Thereafter the surrender agreement and the lease were signed and came into effect in February.
53. Mr Plummer said in his witness statement that following the meeting of 18th December he and his wife spent many unhappy hours discussing the future. They were very upset at the prospect of losing their home and their business. That was a possibility according to Inntrepreneur. In fact Inntrepreneur pleaded breaches of the five-year lease and asserted that they were sufficient to justify refusal of the renewal. Rightly those assertions were withdrawn, albeit shortly before trial. As Mr Plummer said in his witness statement:

"After considerable thought, we came to the conclusion that we had to accept the 20 year term as we had no other choice open to us. We came to that conclusion as we were desperately worried about our future and felt that there was no alternative but to accede to the demands being made of us."

54. Mr Lewison QC, who appeared for Inntrepreneur, submitted that it was important to keep in mind that the breach of contract alleged was the refusal to renew the five-year lease and that at all times Mr Plummer was entitled in equity to reside at the Deer's Hut on the terms of the five-year lease. Mr Lewison submitted that the correspondence and the evidence disclosed that both the parties asserted their respective positions and corresponded on a without prejudice basis, seeking to arrive at an acceptable compromise. Mr Plummer had threatened to bring proceedings to enforce his claim and thereafter his solicitors asked for information to enable Mr Plummer to decide whether it was in his best interests to take up the 20-year lease. Notwithstanding the claim, negotiations progressed and it was quite clear that it was a true and proper negotiation, in part without prejudice. At no stage during the negotiation did Mr Plummer reserve his right to assert his claim for damages for breach of the failure to grant the five-year extension. Ultimately there was a classic compromise of his claim whereby he took the 20-year lease. Further, the agreement which evidenced the compromise contained a surrender of the 1986 agreement which had by then expired, so that the only effect the surrender had was to surrender the rights arising out of that agreement. The only extant right was Mr Plummer's claim to enforce his option. This was, according to Mr Lewison, a classic case of an assertion of a right which was denied. There followed negotiations with an agreement being reached. The fact that the parties thought they had reached a compromise of the whole claim was supported by the fact that Mr Plummer never asserted his claim for damages until four years later, and then only when he read something in the press.
55. Mr Jonathan Brock QC, for Mr Plummer, supported the reasoning of the judge which appears on pages 20 to 23 of the transcript. In those pages, which I have read, the judge rejected Mr Lewison's argument based upon certain indications which occurred in certain letters. He concluded that despite the surrender of the 1989 option right, the claim for damages had not been compromised. Mr Brock emphasised that there was no document or statement which recorded that Mr Plummer waived his claim to damages. That was particularly clear when it was appreciated that the documents put before Mr Plummer to sign were standard and were not open to alteration. It was, Mr Brock submitted, unrealistic to believe that Mr Plummer gave up his residual claim to damages in the circumstances of these negotiations. Further, the 1992 agreement could not be construed as having that effect. It followed that Inntrepreneur had not established the defence of compromise.
56. In my view Mr Lewison's submissions are correct. The judge failed to have in mind what was the breach of contract which was alleged to give rise to the damage. The breach alleged was the failure to grant a further five-year lease upon the same terms as the original five-year lease. But it was common ground at the trial that Mr Plummer was entitled to, and already had, after October, a tenancy in equity. That tenancy in equity entitled him to occupy the property for the remainder of the term agreed to be granted on the appropriate terms. However, at the date of the 1992 agreement that position had not been crystallised. Mr Plummer claimed a right to the renewal. Inntrepreneur disputed that and offered the 20-year lease. The effect of the surrender was to relinquish the right that Mr Plummer had claimed to future occupation of the property upon those terms. It released Inntrepreneur from any obligation to continue to permit Mr Plummer to occupy the property on the terms of the five-year lease. In my view Mr Plummer ought not to be compensated for the loss of the right to occupy upon terms contained in the five-year lease, as that right was compromised by his agreement to surrender the right and to take the 20-year lease. Mr Plummer had remained in occupation after 1st October pursuant to his rights under the five-year lease. He surrendered his claim to continue to occupy upon those terms and also his right to compensate for the loss.
57. The judge held correctly that accrued claims for breach of contract would survive a surrender, but he failed to analyse what the accrued claim was. The correct analysis was that the accrued claim related to performance and could not be pursued after the surrender. He failed to distinguish between a claim for dilapidation or arrears of rent which would survive such a surrender, and a claim for future rent which would not. The judge distinguished between contractual rights and other rights, but this was an inappropriate distinction. In this case there was a dispute between Mr Plummer as to whether he was entitled to a renewal of the five-year lease. He compromised his claim to the renewal and took the 20-year lease. He could not come to the courts four years afterwards and contend that in fact he had a valid right to a five-year renewal and claim damages upon that basis. The fact that he made no claim for four years is strongly suggestive that he believed that his claim was compromised. Why if he believed that he had a right to recover for breach of contract did he not assert that claim?
58. In my view the correspondence and events which happened in 1991 and early 1992 do no more than show that there were negotiations. The result was the surrender agreement. Mr Plummer took a 20-year lease upon terms contained in the agreement. What happened was a classic negotiation between a party having financial muscle (and an intention to use that in an unacceptable way and without regard to the feelings of other people) and a vulnerable person, such as Mr Plummer, who was in the better legal position. The result was a compromise of their respective positions, resulting in Mr Plummer surrendering his claim. He no longer had a claim for breach of contract.
59. That conclusion means that I can deal with the claim for damages more shortly. Mr Lewison also submitted that even if there had been a breach which had not been compromised, the damages were only nominal. Mr Plummer was at the date of the breach in October 1991 a tenant in equity. He was entitled to continue in occupation upon the same terms as he had occupied the Deer's Hut. The breach was the failure to provide the legal title. In essence it was a failure to sign and provide an appropriate piece of paper. The loss for that, he submitted, was nominal damages.
60. Mr Brock made two submissions. First, he submitted that the judge was right to conclude the loss was not nominal, and I will come back to that. Second, he submitted that this was a case in which Mr Plummer had accepted the breaches as repudiation and in those circumstances he was entitled to the damages for the loss that he had suffered, subject to mitigation.
61. That last argument was not pleaded and in any case is untenable. For there to be an acceptance of a repudiation some notification must be given to the other party of that election. There was none in this case. Secondly, if there had been an acceptance of the repudiation so as to bring to an end the contract, then there would have been no need for the surrender.
62. I come back to Mr Brock's primary submission. He seeks to support the reasoning of the judge that Mr Plummer had lost the difference between the value of the lease that he had given up and that which he had taken on. In my view, that submission is not soundly based as it does not take into account what the actual breach was. The breach in this case was the failure to provide the legal title, and it is only the damages that flow from that failure that Mr Plummer is entitled to recover. Those damages would in my view be, on the basis of the evidence before this court, nominal. At most they could have been the costs that would be recoverable in enforcing the claim.
63. I come finally to the question of quantum. This was upon the basis that Mr Plummer was entitled to substantial damages. The judge considered two approaches. He said this at page 37 of the transcript:

"As at today's date one could approach any further damage in one of two different ways. The first approach would involve taking the value of the lease and comparing it with the value of the notional tenancy. The former has the attraction of being assignable; the latter would have the attraction of being less onerous with regard to rent, insurance and repairs. The second approach would be (a) to take the difference in income [outgoing] streams (due to projected higher rent, and repair and insurance costs under the lease) under the two interests for the next nine years and to discount them back [to] today and to compare them, and (b) then to make an allowance for the benefit to Mr Plummer of being able to assign the lease as against the disadvantage of not being able to assign the tenancy. In principle, these two alternative approaches should produce roughly the same figure: the value of the lease or tenancy is the present day value of the likely benefits and likely disadvantages in the future for the tenant if he takes the relevant interest."

64. The judge did not pursue the first approach, as he concluded, rightly, that he had no evidence of the value of the tenancy. He therefore proceeded to assess the damages upon the second approach. He concluded that the total loss amounted to £97,975. In doing so he went back to the schedule of damages which contained expenditure on repairs and insurance to the date of trial, extra rent that had been incurred to the date of trial, and an estimate of extra future cost of repairs from the date of trial to 2010, and also the extra future rent during that period. From that he deducted certain amounts including £63,000, which was the value put upon the lease by the valuers on the assumption that it contained the right of assignment (which it did).
65. Mr Lewison criticised that approach by reference to the evidence of the experts. Mr Lewison demonstrated that the sum of £63,000 was the value of the lease as a whole at the date of the trial. That value took into account the obligations and benefits of the lease. He submitted that the value of the benefits without the obligations would have been higher.
66. Mr Lewison referred us to Dimond v Lovell [2000] 2 WLR 1121 to support the submission that, when assessing damages for breach of contract, the court had to take into account both damage and the benefits that had accrued. If that was done, Mr Lewison submitted that at the date of trial Mr Plummer was in fact in credit. He had to pay an increased rent and had other outgoings for repairs which did not exceed about £35,000. Against that he had to bring into account the value of the 20-year lease, namely £63,000. If only the cost of future rent was to be included, then the value of the lease had to be assessed upon the same basis, namely that obligations had been disposed of.
67. Mr Brock supported the reasoning of the judge. He submitted that it was right, as the judge pointed out, that Mr Plummer would not have sold. Therefore it was right to consider as damage both past rent to the date of trial and future rent and repairs thereafter. Therefore the only deduction that needed to be made was the £63,000.
68. For my part, I cannot accept that argument of Mr Brock. The judge was wrong to award damages calculated by reference to the additional cost of Mr Plummer occupying the premises for the remainder of the term under the terms of the 20-year lease and comparing it with the costs of occupying under the terms of the five-year lease. The judge overlooked the fact that the sum of £63,000 would be paid by an assignee, who would take over Mr Plummer's liability to pay the whole of the rent and incur the whole of the outgoings until the end of the term. The calculation which was done by the judge was based on his assessment that the benefit to Mr Plummer of the right to assign would not be more than the whole of the value of the lease. But the sum of £63,000, arrived at by the valuers, represented the net value of the benefits over the liabilities, since the assignee would assume the liabilities as well as paying the premium.
69. In my view the judge was in error here as well. On the facts as we have before us I do not believe that the judge should have arrived at a conclusion that substantial damages were payable.
70. For those reasons, I would allow this appeal.
71. LORD JUSTICE ROBERT WALKER: I agree that this appeal must be allowed for the reasons stated by my Lord. I reach that conclusion with considerable regret. My regret stems from my feeling that the appellants' conduct in 1991 marked a deplorable deterioration in the standards of fair dealing which used to prevail and which ought to prevail between landlords and tenants in the licensed trade.
72. LORD JUSTICE KEENE: I agree with both judgments and I share the regrets expressed by my Lord, Lord Justice Robert Walker, at the result at which we have to arrive.
ORDER: Appeal allowed; order of the judge below set aside; Mr Plummer's action dismissed; no order for costs. (Order not part of approved judgment)
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