Law Brief Update, September 2018

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Law Brief Update, September 2018
Welcome to the latest issue of Law Brief Update, a free monthly newsletter, written by our team of specialist barristers. It provides a brief introduction to recent case law in all the major areas of law.
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Aidan Ellis, Anthony Johnson, Tim Kevan (editors)
Contents
Construction
Costs and Civil Procedure
Financial Services Law
Insurance
Intellectual Property
Personal Injury
Professional Negligence
Property
Expert Witness Corner
Construction
Paul Bury, Keating Chambers, 020 7544 2600
Swansea Stadium Management Co Ltd v (1) City & County of Swansea; (2) Interserve Construction Ltd [2018] EWHC 2192 (TCC)
This was an application by the second defendant for summary judgment against the claimant's claim on the grounds that the limitation period had expired. The proceedings concerned the Liberty Stadium in Swansea. The claimant was the leasehold owner of the stadium, the first defendant the freehold owner, and the second defendant was the design and build contractor. The works commenced in September 2003 and in April 2005 the Employer's Agent sent a letter stating that Practical Completion had been achieved as at 31 March 2005. In about April 2005, the parties entered into an undated collateral warranty as a deed. On 4 April 2017 the claimant issued a claim form seeking damages against the defendants in the sum of £1.3m. They alleged defects in paint delamination and corrosion to the exposed steel structural elements of the stadium and inadequate resistance for foot traffic on the surface of the concourse and mezzanine floor. Against the second defendant, the claim was pleaded as breaches of the collateral warranty. The second defendant argued that the claim was time barred as practical completion was achieved on 31 March 2005 and the claim was only issued on 4 April 2017. The claimant contended that the cause of action accrued at the date of entering into the collateral warranty. O'Farrell J granted judgment in default. The judge held that the collateral warranty had retrospective effect so that the cause of action accrued as at practical completion rather than the later date when it was signed. This was because the purpose of the collateral warranty was to give the claimant the same rights as it would have had if it had been a party to the building contract. Practical completion was deemed to have occurred on 31 March 2005 which was the date stated in the relevant letter and there had been no attack on the Employer's Agent's reasonable belief in practical completion being achieved on that date. There was no compelling reason to order a trial.
Costs & Civil Procedure
Harriet Wakeman, Temple Garden Chambers, 020 7583 1315
Juliet Wells, Temple Garden Chambers, 020 7583 1315
Tim Kevan, www.timkevan.com
COSTS
Sony/ATV Music Publishing LLC & Anor v WPMC Ltd & Anor [2018] EWCA Civ 2005
The Court of Appeal's recent decision in Sony/ATV Music Publishing LLC & Anor v WPMC Ltd & Anor sends a clear message to parties considering seeking a Non-Party Costs Order ("NPCO") to notify the non-party in advance.
Mr Bailey was the sole director of a company, WPMC Ltd, which had been the unsuccessful Defendant in earlier proceedings brought by the Claimants (seeking a final injunction preventing WPMC Ltd from exhibiting a documentary film about the Beatles, which would have breached the Claimants' copyright interests in a number of the Beatles' songs). The Claimants had been notified before the trial that WPMC Ltd had no assets with which it could discharge an adverse costs order, but the action was pursued nonetheless. WPMC Ltd lost and was ordered to pay the costs arising out of the action, and although it was granted permission to appeal by the trial judge, the appeal was not pursued and it subsequently went into voluntary liquidation. The Claimants proved in the insolvency for their costs of pursuing the action, but were able to recover only a proportion of those costs. The outstanding costs were said to be in the region of £600,000.
Over a year after judgment in the earlier proceedings had been handed down, the Claimants applied for an NPCO against Mr Bailey personally, which was granted by Arnold J on the basis that he was the "real party" in the sense that he controlled WPMC Ltd, decided to maintain its defence in the hope that he would benefit financially as a result (that is, through acquiring the ability to exhibit the documentary), and had partly funded that defence.
WPMC Ltd appealed on four grounds, namely:
1. In order to make a NPCO it was necessary to show that Mr Bailey was acting otherwise than in the interests of WPMC Ltd; in this case, their interests aligned rather than diverged, so it was not possible to make the NPCO.
2. Arnold J erred in finding that Mr Bailey was the only stakeholder who stood to benefit from the successful defence of the action, since WPMC Ltd had a substantial creditor who also stood to benefit.
3. Mr Bailey's funding of the defence was de minimis (standing at less than £10,000) compared with the Claimants' costs, the defence having largely been funded by way of a CFA. Arnold J had failed to apply the principle in Arkin v Borchard Lines Ltd (Nos 2 and 3) [2005] EWCA Civ 655, to the effect that a non-party should only be liable under an NPCO to the extent of his funding of the claim or defence.
4. In exercising his discretion, Arnold J erred in according insufficient weight to the fact that Mr Bailey had not been warned that the Claimants might seek an NPCO against him personally.
The Court of Appeal rejected the first ground, finding that the authorities did not require any "divergence of interest" between the party and the non-party. Rather, the effect of Dymocks Franchise Systems (NSW) Pty Ltd v Todd and others [2004] UKPC 39 was that "generally speaking", if a non-party promotes and funds the defence of proceedings by an insolvent company solely or substantially for his own benefit, then he should be liable for the costs of the proceedings if his defence fails. That will not always be the case however, since where the non-party is a director who can realistically be regarded as acting "rather in the interests of the company (and more especially its shareholders and creditors) than in his own interests", the position may be different. Further, it was wrong as a matter of principle to require that there be a divergence of interest between the party and the non-party. For example, it could not be said (as WPMC Ltd had suggested) that allowing NPCOs where the company's and director's interests aligned amounted to "piercing the corporate veil", since the purpose of the doctrine of separate corporate personality was intended to deal with legal rights and obligations, whereas "the exercise of discretion to make [an NPCO] leaves rights and obligations where they are" and indeed the very fact that it is a matter of discretion "demonstrates that the question is not one of rights and obligations of a non-party". The extent to which there is real benefit to the company in pursuing an action or maintaining a defence will be a relevant consideration, but the fact that there may be such a benefit cannot of itself be fatal to the making of an NPCO. Indeed, in considering the related second ground of appeal, the Court of Appeal agreed that (a) there was a benefit to WPMC Ltd in successfully defending the action, and (b) there was another stakeholder which stood to benefit from the successful defence of the action, namely WPMC Ltd's creditor; but in light of what had been said in connection with the first ground, this was but one factor to take into account.
The Court of Appeal rejected the third ground: the proportionality principle enunciated in Arkin v Borchard Lines Ltd (Nos 2 and 3) was concerned to cap the potential liability of professional litigation funders under an NPCO, whose funding of the claim did not disturb the fact that the claimant was the party primarily interested in and in control of the litigation. That did not apply to cases such as the present, where the non-party was both a funder and the "real party" to the litigation.
As to the fourth ground, the Court of Appeal agreed that Arnold J had erred in failing to take into account the fact that Mr Bailey had not been warned that an NPCO might be sought. The case law was to the effect that a party seeking an NPCO should "warn the non-party at the earliest opportunity of the possibility that he may seek to apply for costs against him" (Symphony v Hodgson [1994] QB 179, per Balcombe LJ at pp.192-193), however failure to warn was but one factor to weigh in the mix (Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23, per Moore-Bick LJ at paragraph [32]), and it ought to be shown that the failure to warn made a difference to the conduct of the proceedings (Dymocks Franchise Systems (NSW) Pty Ltd v Todd and others, per Lord Brown at paragraph [31]).
Mr Bailey's evidence was that if he had been warned of the prospect of the NPCO, he would have, inter alia: instructed a legal team much earlier, rather than handling the defence himself for a time; looked into obtaining ATE insurance to protect against the risk of an adverse costs order; and/or compromised the claim notwithstanding that he considered WPMC Ltd had a good defence. The judge ought to have accepted that evidence, given that Mr Bailey was in the best position to assess how he would have behaved, there was no suggestion that his evidence was anything other than honest and sincere, and no application was made to cross-examine him on it.
The judge had therefore failed to take a number of relevant considerations into account, and it was appropriate to exercise the discretion afresh. In doing so, the Court of Appeal considered that the fact that Mr Bailey had partly funded the defence and stood to benefit from it if successful was "evenly balanced" against the fact that the defence was in both WPMC Ltd's and its creditor's interests. In those circumstances, the remaining factor, namely the failure to warn was "fatal to the application for the NPCO". The Claimants knew before trial that WPMC Ltd would not be able to discharge an adverse costs order, and they knew that WPMC Ltd and Mr Bailey were operating on the same assumption. In those circumstances the failure to warn was "manifestly unfair to Mr Bailey", depriving him as it did of realistic opportunities to abandon or settle the litigation, or to otherwise protect himself from the effects of an NPCO.
CIVIL PROCEDURE
Manzi v King's College Hospital NHS Foundation Trust [2018] EWCA Civ 1882
The Claimant brought a clinical negligence claim for a doctor's failure to remove part of the placenta from her uterus after childbirth. The trust accepted that a small piece of placenta may not have been removed but maintained that it was not substantial. The Appellant's evidence was that the doctor that treated her on the day of the operation had told her afterwards that the placenta removed was a lot larger than expected. That doctor had made a note of what had been said to the Claimant after the operation. The Defendant did not call the doctor to give evidence. The trial judge concluded that the retained placenta tissue was not substantial and rejected an argument by the Claimant that adverse inferences should be drawn from the fact that the doctor was not called to give evidence by the Defendant.
The Court of Appeal considered whether the trial judge had erred in his evaluation of the evidence and in his failure to draw an adverse inference against the Defendant. In relation to the judge's evaluation of the evidence, the Court of Appeal did not interfere with the trial judge's findings since it was inappropriate to interfere with the judge's contextual evaluation of the weight of evidence unless the evaluation was perverse. The judge could not be criticised for describing the doctor's role as tangential.
In relation to adverse inferences, the Court was critical of the Claimant's failure to seek an order that Dr Hooper file and serve a witness statement. The Court considered that the Claimant could have asked for a direction which contained a warning that an adverse inference may be drawn if the evidence was not provided. It would be disproportionate to compel the Defendant to file and serve a witness statement from the doctor simply because she had evidence, however tangential. The appeal was dismissed.
Cape Intermediate Holdings Ltd v Graham Dring (On behalf of Asbestos Victims Support Group) [2018] EWCA Civ 1795
The Appellant appealed against a master's decision to grant the Respondent's application under CPR 5.4C for access to documents. The Respondent represented an organisation which aided those suffering from asbestos-related diseases.
CPR 5.4C states:
"(1) The general rule is that a person who is not a party to proceedings may obtain from the court records a copy of -
(a) a statement of case, but not any documents filed with or attached to the statement of case, or intended by the party whose statement it is to be served with it;
(b) a judgment or order given or made in public (whether made at a hearing or without a hearing), subject to paragraph (1B)."
The master had given the Respondent permission to obtain copies of: the witness statements and their exhibits; expert reports; transcripts; disclosed documents relied on by the original parties at trial contained in the trial bundles; written submissions and skeleton arguments; and statements of case, to include requests for further information and answers if contained in the bundles relied on at trial.
It was held that "records of the court" were those documents kept by the court office as a record of the proceedings. The only documents in the master's order that the respondent was entitled to were the statements of case. The respondent was not entitled to trial bundles, trial witness statements, expert reports, skeleton arguments, submissions or trial transcripts. As such, the master's order was set aside.
As to the exercise of the court's discretion, it was held that the principle that anyone with a legitimate interest should generally be given permission where documents were read by the court as part of a decision-making process, applied in this case even though the case had settled before judgment. This was because there had been an "effective hearing" in which the documents were deployed and therefore the principle of open justice was engaged.
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Financial Services Law
James Purchas, 4 Pump Court, 020 7842 5555
Dr Sandradee Joseph-Urquhart, Three Stone, 020 7242 4937
Ukraine v Law Debenture Trust Corp Plc 14/9/18 (CA)
The state of Ukraine appealed against an order for summary judgment for the payment of US$3.075 billion plus interest obtained by the Trustee of Notes constituted by a Trust Deed governed by English law and whereby Ukraine waived sovereign immunity. Although listed on the Irish stock exchange and full tradeable, the sole subscriber and holder of the Notes was the Russian Federation. Following a missed interest payment, the Russian Federation gave the Trustee a direction to take enforcement proceedings. Summary judgment was granted based purely on issues of law on the basis that even if the allegations made by Ukraine as to the circumstances whereby the Notes were entered were true, they provided no sustainable defence to the claim. On appeal Ukraine contended that it lacked legal capacity to issue the Notes which were therefore void and unenforceable. That was to be assessed by reference to Ukrainian law. It was also contended that even if the state had legal capacity the ministers and officials who purported to act lacked to the actual or presumed knowledge of the Trustee the authority to do so. The second ground was a defence of duress on the basis that the Notes were procured by unlawful and illegitimate threats made and pressure exerted by Russia such as to vitiate the consent of Ukraine. The third ground was that if the defence of duress was not justiciable by the English court because of the foreign act of state doctrine, the proceedings should in any event have been sustained. The fourth ground was that there should be implied into the contractual arrangements a term that a holder of the Notes would not prevent or hinder performance by Ukraine of its performance under the Notes. The fifth ground was that if the other defences failed, Ukraine was as a matter of public international law entitled to refuse payment as a legitimate counter-measure to the effect of Russian interference on its territorial integrity and economy. Finally Ukraine contended that there were compelling reasons why the matter should go to trial. The Court of Appeal upheld the lower court's finding on capacity albeit for reasons that differed to some extent. However the Court of Appeal held that Ukraine did have a good arguable case that the public policy exception has effect to disapply the third rule of foreign act of state on which the Trustee relied and the appeal was granted. The Court of Appeal did not accept the argument that the Notes should be subject to an implied term or there were other compelling reasons why the matter should go to trial.
Financial Reporting Council Ltd v Sports Direct International Plc 11/9/18 (Ch)
The FRC obtained an order requiring a company to disclose certain documents for the purposes of the regulator's confidential investigation. The production would not infringe the company's legal professional privilege.
Insurance
James Purchas, 4 Pump Court, 020 7842 5555
Dr Sandradee Joseph-Urquhart, Thirteen Stone, 020 7242 4937
Cultural Foundation (T/A American School of Dubai) & Anr. v Beazley Furlonge Ltd 15/8/18 (Comm)
The court determined costs following its decision on 10 preliminary issues arising in respect of professional indemnity insurance policies.
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Intellectual Property Law
Christy Rogers, Ingenuity IP Chambers, 020 7936 4474
Trade Marks

Frank Industries Pty Ltd v Nike Retail BV & Ors, IPEC (Arnold J), 25/7/18
Frank's UK and EU trade marks consisting of the letters LNDR, registered in respect of clothing including sportswear, were infringed by Nike's "nothing beats a Londoner" advertising campaign which used the sign LDNR in combination with Nike's well-known "swoosh" device. Frank's marks were not invalid for descriptiveness. Evidence of the use of abbreviations in social media established that in an appropriate context in digital media, LNDR was understood by some consumers to mean "Londoner". However it was not established that the letters used in respect of clothing would be perceived in that way by the average consumer. In any event the letters were not understood to denote any characteristic of clothing. It was plain that LNDR and LDNR were confusingly similar, and it was likely that a significant number of consumers would think that Nike's use of LDNR indicated some form of collaboration with Frank. Frank's passing off claim also succeeded.
Copyright

Sprint Electric Ltd v Buyer's Dream Ltd & Anr, Ch Div (Richard Spearman QC), 30/7/18
In a claim for a declaration of ownership of copyright in source code, the court found that the true relationship between claimant and defendant had been one of employer and employee despite the relationship having been structured as a contract with a service company for tax avoidance reasons. The court expressed concern about the level of artificiality involved in the practice of using service companies in an employment context. Where a court considered that the labels chosen by the parties to apply to their relationship were intended to deceive HMRC the court should declare the true legal position and leave it to HMRC to claim any additional taxes.
Costs

Techinetix BV v Teleste Ltd, IPEC (Judge Hacon), 17/7/18
The claimant patentee's application, on the first day of a patent infringement trial, to adjourn the trial to allow time to serve an amended reply and defence to counterclaim, was granted subject to an exceptional costs order. Without the amendment and consequent adjournment, the claimant would have to concede that the patent had been anticipated. It was an extremely rare circumstance in which the balance of prejudice fell in favour of granting an adjournment at such a late stage, and the IPEC overall costs cap would not apply to the adjournment order. Following trial there would be an additional independent assessment of the costs thrown away because of the adjournment, including the costs occasioned by the amendments to the pleadings and expert reports, and these costs would be borne by the claimant on the standard basis.
Personal Injury
Scarlett Milligan, Temple Garden Chambers, 020 7583 1315
Daniel Laking, Temple Garden Chambers, 020 7583 1315
Tim Kevan, www.timkevan.com
Ecila Henderson (A Protected Party, by her Litigation Friend the Official Solicitor) v Dorset Healthcare University NHS Foundation Trust [2018] EWCA Civ 1841
This is the latest appellate authority concerning the implications of the Supreme Court's decision in Patel v Mirza [2016] UKSC 42 in the field of negligence. The Appellant suffered from paranoid schizophrenia and, during a serious psychotic episode, she had stabbed her mother to death. She pleaded guilty to manslaughter by reason of diminished responsibility and was subsequently detained under a hospital order, the sentencing judge having stated in his remarks that there was no suggestion that the Appellant should be treated as bearing a significant degree of responsibility for what she had done.
At the time of the killing, the Appellant had been under the care of the Defendant's mental health team. The Defendant accepted that the incident would not have happened but for its failure to respond to the Appellant's marked deterioration, and that its conduct amounted to a breach of its duty of care towards her. However, the judge at first instance decided that her claim against the Defendant (seeking, inter alia, damages for loss of liberty attendant on her detention under the hospital order, and for the loss of part of her inheritance under the Forfeiture Act 1982) was barred by the doctrine of illegality, following Clunis v Camden and Islington HA [1998] QB 978 and Gray v Thames Trains Ltd [2009] UKHL 33.
The Appellant appealed on the ground that the judge had wrongly treated himself as bound by Clunis v Camden and Islington HA and Gray v Thames Trains Ltd, and should have instead declined to follow those decisions as they were inconsistent with the discretionary approach set out in Patel v Mirza. The Court of Appeal upheld the judge's decision, noting that Clunis v Camden and Islington HA and Gray v Thames Trains Ltd were not criticised by the Supreme Court in Patel v Mirza. The ratio of Gray v Thames Trains Ltd admitted of a narrow principle of public policy which prevented a convicted killer from recovering damages in negligence against a person negligent act or omission allegedly caused claimant's unlawful conduct, namely that there could be no recovery for damage which flowed from loss of liberty or other punishment lawfully imposed, since it was the law which caused the damage and it would be inconsistent for the law to simultaneously require compensation for that damage. And it admitted of a wider principle of public policy, namely that if the tortious conduct of the defendant merely provided the occasion or opportunity for the killing, but (in causation terms) the immediate cause of the damage was the claimant's own criminal act, it was offensive to public notions of the fair distribution of resources that he or she should be compensated (often out of public funds) for such damage. The application of those principles of public policy was not inconsistent with the approach set down in Patel v Mirza.
Both the narrower and the wider form of public policy squarely applied in this case, and the Appellant could not be excused by dint of the fact that she was said not to bear a significant degree of responsibility for her actions. It could not be said that she did not know the 'nature and quality' of the act, since her mental state did not justify a verdict of 'not guilty by reason of insanity'. In the absence of such a verdict, the Court could not go behind the conviction in order to decide that the Appellant in fact bore no responsibility for the serious crime to which she had pleaded guilty.
Rhys Alan Williams v (1) McMurrays Haulage Ltd (2) WM Morrison Supermarkets Ltd [2018] EWHC 2079 (QB)
The Claimant was a senior employee of the Part 20 Defendant, Morrisons Supermarkets Ltd. The Claimant sustained a severe crushing injury to his forearm and hand when, having opened a gate to the yard of a supermarket, a heavy goods vehicle drove into the yard and reversed into the wall where the Claimant was standing, trapping the Claimant's right arm. The Claimant's claim against the Part 20 Claimant had been settled and the Claimant's claim against the Part 20 Defendant had been discontinued. These proceedings arose when the Part 20 Claimant sought a contribution from the Part 20 Defendant. It was alleged that as the Claimant's employer, the Part 20 Defendant provided insufficient training to the Claimant in relation to opening the yard gates and dealing with moving heavy goods vehicles.
The claim for contribution was dismissed. The Part 20 Defendant had not been negligent in providing the Claimant with a key to the yard and allowing him to open the yard gates and admit vehicles. The Claimant was properly trained in the procedure for opening gates and the need to stand in a safe place when near moving vehicles. The Court found that the overwhelming and primary cause of the accident was the negligence of the Part 20 Claimant's employee in manoeuvring the vehicle into an area where he knew the Claimant was standing, without checking or ensuring that the Claimant had moved. Any contributory negligence by the Claimant in standing against the wall was not due to the Part 20 Defendant's training but because of a failure to follow that training.
Caine Steven John Ellis (A child by his grandmother and litigation friend Janet Titley) v (1) Paul Kelly (2) Violet Ellis [2018] EWHC 2031 (QB)
The Claimant had been allowed by his mother to go to a playground without adult supervision, on the condition that he stayed with his cousins, stayed within a defined area and took care. The playground was situated in a quiet area, known to be popular with children. One of the cousins decided to go to the skateboard park which involved crossing a lane with a zebra crossing between the playground and skatepark. The Claimant later went after his cousin and ran towards the crossing, entering the road at an angle. When approaching the road, he looked at the Defendant's car but continued running. He was hit by the Defendant and suffered a brain injury. The Defendant accepted primary liability but sought a finding of contributory negligence against the Claimant and a contribution from the Claimant's mother.
It was held that whilst there is no strict rule as to the age when a child can be found to be contributorily negligent, it has to be judged by the standard of care reasonably expected of a child of the same age, intelligence and experience. The Claimant believed the zebra crossing to be a safe place to cross. Previously, cars had stopped to let him cross. The Defendant's driving had therefore been outside the Claimant's previous experience and it would be difficult for an eight-year-old child to realise that the car would not be able to stop before the crossing due to its speed. As such, the Court considered that it would not be just and equitable to find the Claimant contributorily negligent.
In relation to the Claimant's mother, the Court made no finding of liability. The Court found that she had been entitled to regard the playgrounds and the lane as a safe area to allow the Claimant to play, and had taken reasonable precautions by restricting where the Claimant went, telling the children to stay together and giving the Claimant road safety instructions. To hold her responsible would impose far too high a standard on an ordinary parent. The Court was reluctant to impose liability on the basis that it would interfere too greatly with parents' own assessments of when to allow children independence.
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Professional Negligence
James Purchas, 4 Pump Court, 020 7842 5555
Director of the SFO v Eurasian Natural Resources Corp Ltd 5/9/18 (CA)
The Court of Appeal considered the circumstances where litigation privilege and legal advice privilege in the context of potential criminal proceeding. Where documents were prepared for the purpose of settling or avoiding a claim, depending on the facts their dominant purpose could be for depending litigation.
Property
Victoria Seifert, Lamb Chambers, 020 7797 8300
Elizabeth Dwomoh, Lamb Chambers, 020 7797 8300
David Sawtell, Lamb Chambers, 020 7797 8300
Trillium (Prime) Property GP Limited v Elmfield Road Limited [2018] EWCA Civ 1556, Lewison LJ and Leggatt LJ
The issue on appeal concerned the interpretation of an index-linked rent review clause contained in a reversionary lease of offices. The dispute concerned the figure to which indexation was to apply.
The original lease contained an upwards only rent review clause, with a review every 5 years. On 25 December 2005 the parties entered into a reversionary lease. A deed of variation was also executed between the parties.
It was a term of the deed of variation that the rent would be reduced to £965,000 for the period 29 September 2005 to 24 March 2010. The rent review clause in the reversionary lease stated "the annual Rent for any Review Period is to be determined at the relevant Review Date by multiplying the Initial Rent by the Index for the month preceding the relevant Review Date and dividing the result by the Base Figure." The base figure was defined as 193.1 and the "index" was defined as the "index figure of the index of Retail Prices." The "Initial Rent" was defined as being the highest figure arising from three stated calculations or figures of which £1.2 million was agreed as the initial rent from 25 March 2010.
The March 2015 rent review resulted in an annual rent of £1,595,235.63. The tenant argued that the indexation should have applied to the rent that was payable immediately before the reversionary lease took effect. This would have resulted in an annual rent of £1,282,835.31. The tenant argued that there was an ambiguity in the language of the reversionary lease which precluded the court from applying the literal meaning of the rent view clause.
Landlord-Law
Online information and resources on residential landlord and tenant law.  For more information visit www.landlordlaw.co.uk.
The court held that there was no ambiguity in the application of the rent review clause. Where the language of a contract was unambiguous the court had to apply it. The tenant's proposed interpretation meant that once the Initial Rent had been determined it played no part in the review process, except that it acted as the "floor" below which the reviewed rent could not drop. That was an improbable interpretation. First, it was highly unusual for a rent review clause to operate by reference to a figure which did not feature in the lease and which bore no relation to the rent actually payable under the time being under the lease. Second, it sat unhappily with the terms of the reddendum in the lease that it was the Initial Rent (as defined) that was to be reviewed, rather than a wholly extraneous figure. Third, it was in direct contradiction to the express instructions that the multiplicand was the Initial Rent. Where the parties had gone to the trouble to define terms, it was all the more difficult to avoid giving effect to their chosen definition.
It was further argued that the commercial background and the commercial consequences of the literal interpretation showed that something had gone wrong with the language of the clause. In such circumstances the court could correct the mistake as a matter of interpretation. For the tenant to rely on this principle, it would need to show (a) that it was clear that something had gone wrong with the language and (b) that it was clear what a reasonable person would have understood the parties to have meant. In the present case, the error was a failure to think through the consequences of what the parties had agreed rather than any deficiencies in drafting. A failure of that kind could not be solved by the process of interpretation. Further, there was more than one possible solution to the alleged drafting error. In such circumstances it could not be said that it was clear what a reasonable person would have understood the parties to have meant.
Expert Witness Corner
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Clinical Psychology
Prof Hugh Koch
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Psychiatry
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Email:  gaius.davies@btopenworld.com.  Tel:  020 8650 8764.
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