Thanet Lodge (Mapesbury Road) & Anor v Arun Mirchandani
[2024] UKUT 205 (LC)
Kaushal Corporation v Maria Carmel O'Connor
21 March 2023
[2023] EWHC 618 (KB)
High Court
A landlord tried to get a guarantor to pay for legal fees from a past lawsuit. The judge said the lease agreement didn't cover those fees and the landlord never formally asked for the money, so the guarantor didn't have to pay.
Key Facts
- •Maria Carmel O'Connor (Respondent), lacking capacity, was sole shareholder and director of Red Rooster Restaurants Limited (RRR), lessee of a commercial property.
- •Kaushal Corporation (KC, Appellant) became freeholder in 2012, inheriting a personal guarantee from O'Connor for RRR's lease obligations.
- •RRR went into liquidation; KC rejected three proposed lease assignments by RRR.
- •RRR sued KC (Claim 612) for unreasonable refusal to consent; KC won, and RRR was ordered to pay 90% of KC's costs.
- •RRR didn't pay; KC failed to commence detailed assessment within the 3-month timeframe, delaying for 6 years and 5 months.
- •KC sued O'Connor (Claim 215) under a lease clause for various liabilities of RRR, including legal costs from Claim 612 (£193,661).
- •The lower court dismissed KC's claim for legal costs, ruling the lease clause didn't cover them and no demand for payment was made.
Legal Principles
Contract interpretation aims to ascertain the parties' mutual intentions objectively, based on a reasonable person's understanding of the language used against the factual background.
Woodfall on Landlord and Tenant Law, para. 11/007; Philpots (Woking) v Surrey Conveyancers [1986] 1 E.G.L.R. 97; Melanesian Mission Trust Board v Australian Mutual Provident Society (1996) 74 P. & C.R. 297, PC
Commercial common sense shouldn't override the clear language of a contract; a court shouldn't rewrite a contract to help an unwise party.
Arnold v Britton [2015] A.C. 1619
There's no special rule for interpreting service charge clauses; standard construction rules apply. Words should be given their natural and ordinary meaning unless ambiguity exists.
Arnold v Britton [2015] A.C. 1619
A demand for payment is a pre-condition for liability under a clause stating 'on demand'. The demand must be clear and peremptory, but the exact wording is not critical.
Chitty on Contracts, para. 41.271; Re Colonial Finance...
CPR r. 47.7, 47.8, and 44.11 govern costs assessment procedures, including sanctions for unreasonable delays.
CPR r. 47.7, 47.8, 44.11
CPR r. 52.21(3) allows overturning a judgment if it was wrong or unjust due to serious procedural irregularity.
CPR r. 52.21(3)
Outcomes
Appeal dismissed.
The lease clause didn't cover the legal costs of Claim 612; KC failed to make a demand for payment as required by the clause.
Legal costs of Claim 612 are not recoverable from the Respondent.
The judge correctly interpreted the service charge clause as not including legal costs arising from litigation. The words 'any application or request for any approval or consent' do not encompass subsequent court proceedings.
No demand for payment was made.
KC's director admitted no demand was made; the claim didn't plead a demand; and the court order for costs didn't constitute a demand.