Euroresins UK Limited v TLC Investment Limited [2026] EWHC 2105 (Ch)

[2026] EWHC 2105 (Ch)Case No BL-2023-001116
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Venue The Rolls Building, Fetter Lane, London EC4A 1NLDate 07/08/2026
Before
HHJ CADWALLADER
Between
EURORESINS UK LIMITEDClaimantTLC INVESTMENT LIMITEDDefendant
Max Thorowgood (instructed by South Bank Legal Limited) for ClaimantMike Wilkinson (instructed by Athena Law) for DefendantHearing Hearing dates: 30 June 2026
JUDGMENT

HHJ Cadwallader :

[1]By an underlease dated 9 December 2015 (“the lease”) the defendant let certain warehouse premises in Ellesmere Port to the claimant for a term expiring on 19 May 2025. The claimant covenanted to keep the property in good repair and condition, and at the end of the term to return the property to the landlord in the repair and condition required by the lease. The lease also provided that the tenant should not assign the whole of the lease without the consent of the landlord, such consent not to be unreasonably withheld or delayed, and that the landlord might refuse its consent if, among other things, there were a material breach of covenant by the tenant which had not been remedied.[2]In 2022, and again subsequently, the claimant had sought the defendant’s consent to an assignment but did not obtain it. In 2023 it sued the defendant for damages, including exemplary damages, and declaratory or injunctive relief, for failure to give consent. The defendant defended the proceedings on the basis, among other things, that there was a material breach of the claimant’s covenant to repair, so that it was entitled to refuse its consent.[3]The parties compromised their differences on the terms of a Tomlin order dated 6 December 2023, to which a professionally drawn Settlement Agreement dated 4 December 2023 was annexed. The Settlement Agreement provided for the lease to be surrendered over six months early, on 29 September 2024; for the claimant to deliver up the premises in repair; and for an independent expert surveyor to be appointed to determine what works would be required for that purpose.[4]The Tomlin order included a provision, at paragraph (2), purporting to give the court’s sanction to the agreement for surrender contained in the Settlement Agreement for the purposes of s.38 Landlord and Tenant Act 1954.[5]The parties applied to the President of the RICS for the appointment of an independent expert surveyor under the settlement agreement. A Mr Woudman was appointed who, on 11 March 2024, prepared a schedule of the works he considered were required to put the premises into repair. Further disputes then arose and when the claimant attempted to surrender the lease on 29 September 2024, the defendant refused to accept it. Mr Woudman produced a further determination dated 11 February 2025 addressing the adequacy of the works which had by then been undertaken. He concluded that the claimant was obliged to carry out further remedial works.[6]In May 2025 the defendant applied for the stay of proceedings imposed by the Tomlin order to be lifted, claiming that the claimant was in breach of its obligations under the settlement agreement and the lease. The defendant also pointed out that paragraph (2) of the Tomlin order did not address s.38A Landlord and Tenant Act 1954.[7]A Consent Order dated 21 October 2025 provided as follows:
“a. The Application seeks to lift the stay imposed by the Tomlin Order dated 6 December 2023 (“Tomlin Order”) and invites the Court to give directions to resolve the disputes arising out of their respective allegations of non-compliance with the terms of the Settlement Agreement attached to the Tomlin Order and/or the covenants of the lease dated 9 December 2015 (“the Lease”) as referred to by the parties’ witness statements filed and served in relation to the Application and which includes the Defendant’s claim for relief arising out of terminal dilapidations as well as rents and other sums of money alleged to be owing (“the New Dispute”); b. The New Dispute also includes issues as to: i) Whether the surrender agreement contained within the Settlement Agreement is void and, if it is, what the effect thereof is upon the Settlement Agreement and the expert adjudication agreement (“the S38 Issue”); and ii) Whether Mr Woudman’s reports dated 11 March 2024 and/or 11 February 2025 constitute determinations of any disputes between the parties as to the matters purportedly determined therein which are binding upon the parties (“the Adjudication Issue”).”
The Consent Order lifted the stay of proceedings which had been imposed by the Tomlin order “for the purpose of resolving the New Dispute,” and gave directions.[8]A further order dated 2 March 2026 directed that the S38 Issue and the Adjudication Issue be tried as preliminary issues. This is my judgment on the trial of those preliminary issues. The parties’ positions The S38 Issue and the Adjudication Issue

The parties’ positions

[9]The parties now agree that the surrender agreement contained within the Settlement Agreement is void for failure to comply with s.38A Landlord and Tenant Act 1954. The extent of what is void has not been agreed.[10]In summary, the Claimant contends that because the surrender agreement is void, the Settlement Agreement and the expert adjudication agreement it contains are likewise void; and that accordingly the Adjudication Issue falls away (that is, that the reports of Mr Woudman are not binding determinations).[11]The Defendant argues, in contrast, that parts of the Settlement Agreement and the expert adjudication agreement remain valid and effective, and that Mr Woudman’s reports are binding determinations, either pursuant to those parts, or under a free-standing agreement entered into by the parties when he was appointed.

Procedural

[12]The parties also differ as to whether, if the Settlement Agreement is entirely void, the Claimant needs to make a separate application to lift the stay of proceedings imposed by the Tomlin Order in order to pursue the underlying proceedings (as the Defendant contends), or whether (as the Claimant contends) no such application is required; and as to whether that issue should be determined as part of this trial.

The Tomlin Order

[13]The Tomlin Order provided as follows. “UPON THE APPLICATION of the Parties AND UPON the Parties having agreed to the terms set forth in the annexed Settlement Agreement BY CONSENT IT IS ORDERED THAT:(1) All further proceedings in this action be stayed upon the terms set out in the Settlement Agreement between the Parties dated 4 December 2023 (the Settlement Agreement) except for the purpose of carrying such terms into effect.(2) This Order shall constitute the sanction of the Court for the purposes of section 38 of the Landlord and Tenant Act 1954 for the efficacy of the agreement to surrender contained within the Settlement Agreement.(3) Each party shall have permission to apply to the Court as to carrying such terms into effect without the need to issue fresh proceedings. BY CONSENT IT IS ORDERED THAT:(4) Each party shall bear its own costs.(5) This Order shall be served by the Defendant on the Claimant.” It was therefore in an entirely standard form apart from paragraph (2).

The Settlement Agreement

[14]The Settlement Agreement recited the dispute and the proceedings mentioned above, and that the parties had settled the dispute and had agreed terms for its full and final settlement, and that they wished to record those terms of settlement, on a binding basis, in the Settlement Agreement.[15]It continued:
“2. Effect of this agreement The parties hereby agree that upon signing, this Settlement Agreement shall immediately be fully and effectively binding on them. 3. Terms… 3.2 The Lease shall be surrendered without premium or additional surrender fee by Euroresins and shall terminate on the 29 September 2024 and no rent or service charge shall be due from Euroresins in respect of any period after that date and Euroresins will have no rights of occupation whatsoever under the Lease or in respect of the Premises from that date. 3.3 Euroresins shall give up vacant possession of the Premises fully in repair on the 29th September 2024 in accordance with the provisions of the Lease. 3.4 Following signing of this Settlement Agreement and for the purposes of ensuring Euroresins obligation to deliver up the Premises fully in repair on 29th September 2024 as referred to in 3.3 immediately above, the parties shall: 3.4.1 Apply jointly forthwith for the appointment of an independent expert by the President for the time being of the Royal Institution of Chartered Surveyors. 3.4.2 The independent expert so appointed (the Expert) shall be instructed to a) draw up a schedule of works which are required to remedy all current dilapidations or wants of repair according to the terms of the Lease (the Expert's Schedule); and b) upon receipt of the Expert’s Schedule the parties shall forthwith jointly submit the same to up to 4 suitably qualified contractors (each party nominating 2) with capacity to carry out the works therein listed in a timely fashion for tender (and any dispute on who is an acceptable contractor shall be referred to the Expert for his determination); and c) all tenders received shall be referred to the Expert for his review to decide which contractor is the most economic having regard to capbility [sic] of delivery of the works listed on the Expert’s Schedule and to be completed by the 31st March 2024 to an appropriate standard (Experts Selected Contractor); and d) Euroresins will thereupon forthwith contract and engage with the Expert's Selected Contractor and effect the works of repair on the Expert's Schedule and complete the same by the 31st March 2024 (and so as to permit TLC to have a reasonable period for marketing the Premises), at its entire expense; and e) Any dispute or difference on the quality of the works of repair done or their adequacy shall be referred to the Expert for determination. 3.5 The costs of the Expert shall be borne equally between Euroresins and TLC. 3.6 TLC or their professional representative shall, upon the giving of no less than 48hrs notice to Euroresins, have the right to inspect the Premises at all times during the execution of the said works. 3.7 The Parties agree to be bound by the determinations of the Expert. 3.8 Except as stated in clause 3.5 above, the parties shall bear their own costs to date in connection with the Dispute, the Proceedings and the negotiation of this Settlement Agreement… 5. Release This agreement is in full and final settlement of, and each party hereby releases and forever discharges, all and/or any actions, claims, rights, demands and set-offs, whether in this jurisdiction or any other, whether or not presently known to the parties or to the law, and whether in law or equity, that it, its Related Parties or any of them ever had, may have or hereafter can, shall or may have against the other party or any of its Related Parties arising out of or connected with: (a) the Dispute; (b) the underlying facts relating to the Dispute; and (c) the Proceedings. (Collectively the Released Claims). 6. Agreement not to sue 6.1 Each party agrees, on behalf of itself and on behalf of its Related Parties not to sue, commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against the other party or its Related Parties any action, suit or other proceeding concerning the Released Claims, in this jurisdiction or any other… 7. Costs 7.1 The parties shall each bear their own legal costs in relation to the Dispute, the Proceedings and this Settlement Agreement… 9. Indemnities Each party hereby indemnifies, and shall keep indemnified, the other party against all costs and damages (including the entire legal expenses of the parties) incurred in all future actions, claims and proceedings in respect of any of the Released Claims which it or its Related Parties or any of them may bring against the other party or its Related Parties or any of them… 11. Severability If any provision or part-provision of this agreement is or becomes invalid, illegal or unenforceable, it shall be deemed modified to the minimum extent necessary to make it valid, legal and enforceable. If such modification is not possible, the relevant provision or part-provision shall be deemed deleted. Any modification to or deletion of a provision or part-provision under this clause shall not affect the validity and enforceability of the rest of this agreement… 17. Co-operation The parties shall deliver or cause to be delivered such instruments and other documents at such times and places as are reasonably necessary or desirable, and shall take any other action reasonably requested by the other party for the purpose of putting this agreement into effect...”
The parties hereby agree that upon signing, this Settlement Agreement shall dilapidations or wants of repair according to the terms of the Lease (the Expert's Schedule); and

The S38 Issue

[16]Pt II Landlord and Tenant Act 1954 provides security of tenure for business tenants. A tenancy to which the provisions apply does not come to an end (save by tenant’s notice to quit, surrender or forfeiture) unless the landlord serves notice pursuant to s. 25 of the Act or the tenant makes a request for a new tenancy under s.26 of the Act. In either case, the tenant may apply to the Court for a new tenancy as of right, unless the landlord can establish one or more specific grounds of opposition. Until the application is determined, the old tenancy automatically continues (though the Court can substitute an interim rent). Compensation is payable where a new tenancy is precluded on certain grounds.[17]The Act restricts agreements excluding the provisions of Pt II. Section 38 of the 1954 Act provides “(1) Any agreement relating to a tenancy to which this Part of this Act applies (whether contained in the instrument creating the tenancy or not) shall be void (except as provided by section 38A of this Act) in so far as it purports to preclude the tenant from making an application or request under this Part of this Act or provides for the termination or the surrender of the tenancy in the event of his making such an application or request or for the imposition of any penalty or disability on the tenant in that event. (2) Where—(a) during the whole of the five years immediately preceding the date on which the tenant under a tenancy to which this Part of this Act applies is to quit the holding, premises being or comprised in the holding have been occupied for the purposes of a business carried on by the occupier or for those and other purposes, and(b) if during those five years there was a change in the occupier of the premises, the person who was the occupier immediately after the change was the successor to the business carried on by the person who was the occupier immediately before the change, any agreement (whether contained in the instrument creating the tenancy or not and whether made before or after the termination of that tenancy) which purports to exclude or reduce compensation under section 37 of this Act shall to that extent be void, so however that this subsection shall not affect any agreement as to the amount of any such compensation which is made after the right to compensation has accrued. (3) In a case not falling within the last foregoing subsection the right to compensation conferred by section 37 of this Act may be excluded or modified by agreement.” Agreements to surrender at a future date a tenancy to which Pt II of the Act applies are caught by the provision about agreements purporting to preclude the tenant from making an application or request under Pt II of the Act: Joseph v Joseph [1967] Ch. 78.[18]Before 1 June 2004, the references to s. 38A of the Act in this provision had been to sub-section (4) of s. 38 itself. That sub-section had provided inter alia for the Court, on the joint application of the landlord and the tenant, to “…authorise an agreement for the surrender of the tenancy on such date or in such circumstances as may be specified in the agreement and on such terms (if any) as may be so specified…” and that “…an agreement contained in or endorsed on an instrument in pursuance of an authorisation given under this subsection shall be valid notwithstanding anything in the preceding provisions of this section.”[19]In the present case, paragraph (2) of the Tomlin Order reads as if it were an order made pursuant to this provision so as to authorise a surrender agreement which would otherwise have been rendered void by s.38(1) of the Act. As from 1 June 2004, however, s.38 had been amended by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003/3096 to substitute references to s. 38A of the Act for references to subsection (4), to delete that subsection, and to introduce a new section, s. 38A, which reads as follows. “(1) The persons who will be the landlord and the tenant in relation to a tenancy to be granted for a term of years certain which will be a tenancy to which this Part of this Act applies may agree that the provisions of sections 24 to 28 of this Act shall be excluded in relation to that tenancy. (2) The persons who are the landlord and the tenant in relation to a tenancy to which this Part of this Act applies may agree that the tenancy shall be surrendered on such date or in such circumstances as may be specified in the agreement and on such terms (if any) as may be so specified. (3) An agreement under subsection (1) above shall be void unless–(a) the landlord has served on the tenant a notice in the form, or substantially in the form, set out in Schedule 1 to the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (“the 2003 Order”); and(b) the requirements specified in Schedule 2 to that Order are met. (4) An agreement under subsection (2) above shall be void unless– (a) the landlord has served on the tenant a notice in the form, or substantially in the form, set out in Schedule 3 to the 2003 Order; and (b) the requirements specified in Schedule 4 to that Order are met.”[20]The Court had not had jurisdiction to make the order in paragraph (2) of the Tomlin Order dated 6 December 2023 since 1 June 2004, so the surrender agreement was not authorised by that; and the parties had not used the saving procedure specified by s.38A(4) of the Act. Accordingly, the surrender agreement was void.[21]At the hearing of the preliminary issues, I raised, without objection, the question of what exactly it was that s. 38A provided should be rendered void. The question arose because what it renders void is stated to be the ‘agreement under subsection (2).’ The ‘agreement under subsection (2)’ is the agreement ‘that the tenancy shall be surrendered on such date or in such circumstances as may be specified in the agreement and on such terms (if any) as may be so specified’. I asked whether it followed that the statute itself provided that the whole of an agreement containing an agreement that a tenancy should be surrendered was void. In that case, the question of severability would not arise. Counsel for the Claimant suggested it did; Counsel for the Defendant said not. Neither had the opportunity to develop submissions upon it or cite authority. Having since become aware of the case of Ultimate Leisure Ltd v Tindle [2007] EWCA Civ 1241, referred to at 6.058 in Aldridge on Leasehold Law, which might have been understood to decide inter alia that, in a transaction of which the proposed surrender is only one part, the effect of the Act can be to render the agreement to surrender void while leaving the other elements of the transaction in place and enforceable, I invited and received written submissions on the point.[22]Before the introduction of s.38A, s.38(1) provided that any agreement relating to a tenancy to which this Part of this Act applied should be void (except as provided by subsection (4) of this section) in so far as it purports to preclude the tenant from doing the specified acts. Thus, to the extent that the agreement did not purport to preclude the tenant from doing the specified acts, it would not be rendered void by this provision.[23]So far as an agreement would otherwise be rendered void by the provision, the exception in sub-section (4) was for an agreement contained in or endorsed on an instrument in pursuance of a Court authorisation given under that subsection. The Court could authorise an agreement for the surrender of the tenancy on such date or in such circumstances as might be specified in the agreement and on such terms (if any) as might be so specified. Such an agreement was to be valid notwithstanding anything in the preceding provisions of the section.[24]It appears, therefore, that subsection (4) contemplated that, not only that part of an agreement which provided for a surrender on a date or in certain circumstances would be rendered void by s. 38(1), but also all the terms on which the surrender was agreed. The question is how far that goes.[25]It seems plain that it only goes as far as to avoid the terms of the agreement for surrender, and not the rest of any agreement of which those terms form part. The question can be tested by considering the case of a lease containing a provision requiring a tenant who wished to assign the premises to first offer to surrender the lease. It would be absurd to treat the lease as void, since that is precisely what s.38 was intended to protect; yet the offending provision was in the lease. Those were the facts in Allnatt London Properties Ltd. v. Newton(1983) 45 P. & C.R. 94 (a case not cited before me). While that provision was held to be void by virtue of s. 38 of the 1954 Act, there was no suggestion that the lease itself was void.[26]In Joseph v Joseph, the Court of Appeal had held that an agreement requiring business tenants to give up possession on a future date was void to the extent that it purported to deprive them of the statutory security of tenure conferred by Part II of the 1954 Act. The court focused on the offending provision (clause 6) and did not hold that the entirety of the wider agreement or transaction was rendered void.[27]In Ultimate Leisure Ltd v Tindle [2007] EWCA Civ 1241 the freeholder and its tenant (a wholly owned subsidiary) entered into an agreement granting an option to purchase to a third party. The agreement included a provision that after exercise of the option and before the transfer of the freehold to the buyer, the tenant would surrender its lease. The tenant's agreement to surrender was void by virtue of s.38(1), but the option was not: the freeholder's obligation to the buyer to procure the surrender was unaffected. In considering the effect of s. 38 of the Act on particular obligations in the option agreement, Chadwick LJ repeatedly asked himself, whether there was anything in the obligation which purported to preclude the tenant from making an application or a request for a new tenancy. If there was not, the obligation was not void. May LJ and Moore-Bick LJ agreed, for the reasons given by Chadwick LJ. That was consistent with the approach in Joseph v Joseph [1967] Ch. 78.[28]The exercise did not turn on the separate question whether the buyer would be entitled to specific performance of the option agreement (including delivery of the deed of surrender): it was held that it would be, because the freeholder could in practice procure that its subsidiary performed it, if only by procuring an agreement satisfying s.38A of the 1954 Act.[29]This was not a case in which the Court considered the common law doctrine of severance. I conclude that it did not need to, because statute itself provided that what was void was what purported to preclude the tenant from doing the specified acts. To the extent that the agreement did not purport to preclude the tenant from doing the specified acts, it would not be rendered void by this provision. It must follow that on the facts of that case, the terms on which the surrender was agreed did not include the rest of the option terms.[30]In the present case, both sides have approached the matter on the basis that what is determinative is whether s.38A renders the Settlement Agreement void, not s. 38(1): para 16 of the Defendant’s Points of Claim; paras. 5.1, 5.2 of the Claimant’s Points of Defence.[31]Save to the extent that it was relevant to the question of specific performance, Ultimate Leisure was not a case about s. 38A but s. 38(1).[32]I turn at last to s. 38A of the 1954 Act. It is an exception to s. 38(1). The claimant argues that it does more, though, because it does not say that a particular kind of agreement which would otherwise be rendered void by s. 38(1) (a surrender agreement) will not be rendered void by that provision if the relevant notice is given and specified requirements are met: it positively says that unless the relevant notice is given and specified requirements are met, the agreement will be void.[33]Further, it does not say that the agreement will be void ‘in so far as’ it is an agreement of the kind described, it simply says the agreement will be void. So it is a free-standing provision rendering certain agreements void, independently of s. 38(1), albeit also an exception to it.[34]Moreover, the agreement which it renders void includes the terms on which the surrender is agreed. Cll. 3.2, 3.3 and 3.4 of the Settlement Agreement are terms on which the surrender was agreed, and so void; and the remaining provisions are merely ancillary to those terms and fall with them.[35]I find myself unable to accept these arguments.[36]The agreements to which s.38A(1) and(2) apply are a subset of the agreements to which s.38(1) applies. Section 38A is, in a sense a relaxation of the requirements for validity of that subset: they are less stringent than the previous requirement for a Court order. It is hard to see why Parliament should have been concerned to make more of any agreement containing agreements within that subset void than other agreements to which s. 38(1) applied in any event.[37]It is noteworthy that it does not appear to have been argued in Ultimate Leisure, although the point was available, that s.38A rendered any part of the option agreement void independently of, or to a greater extent than s.38(1) did, although the reference to s. 38(4) in paragraph 7 of the judgment of Chadwick LJ is evidently a reference to s. 38A (4). No distinction was drawn between an agreement’s being ‘void (except as provided by section 38A of this Act) in so far as’ it offended the provision, and its being ‘void unless’ the various requirement were met.[38]When considering what the draftsman intended, it is worth remembering the structure of s. 38(1) and s. 38A. Section 38(1) provides that an agreement of a certain kind shall be void (except as provided by s. 38A) in so far as it has certain characteristics. By way of that exception, s. 38A (3) and (4) each provide that particular kinds of such agreements shall be void unless certain requirements are satisfied. Both sets of provisions state that the agreement shall be void. Section 38A does not say they are void only in so far as they have certain characteristics: it is merely repeating s. 38(1) when it says they will be void; and it does not need to say they are void in so far as it has certain characteristics because it is an exception to s. 38(1), which does say it.[39]In other words, as the Defendant argues, s. 38A is governed by s. 38(1); s. 38A (2) and (4) set out the conditions under which an agreement escapes s 38(1).[40]But, it is argued, the agreement which s. 38A (2) renders void is explicitly to include the terms on which the surrender is agreed. In fact, this appears not to be in dispute between the parties.[41]The ambit of what may be saved by s. 38A (2) (“agree that the tenancy shall be surrendered on such date or in such circumstances as may be specified in the agreement and on such terms (if any) as may be so specified”) is just the same as what might be saved under the repealed provision in s. 38(4) which it replaced (“an agreement for the surrender of the tenancy on such date or in such circumstances as may be specified in the agreement and on such terms (if any) as may be so specified”). One would not expect there to be a difference. Again, the question is how far this goes.[42]In view of the conclusion to which I have come about the relationship between s.38(1) and s.38A(4), I do not accept the Claimant’s submission that Ultimate Leisure is to be distinguished when considering how to apply s. 38A (4). On the contrary, the approach in Ultimate Leisure is the right approach. To hold otherwise would be to make a distinction between the effect of those provisions where none was intended.[43]Accordingly, I conclude that the effect of s. 38A of the 1954 Act is not, as a matter of construction, to render the whole of the Settlement Agreement void merely and necessarily because it is a single agreement containing a surrender agreement. Ultimate Leisure establishes that the statutory voidness analysis is directed at the offending surrender arrangement, and the terms of that arrangement, not at every contractual obligation found in the same transaction.[44]One has therefore to consider, in relation to each term which is not itself an agreement for surrender, whether it is a term upon which the surrender is agreed, as opposed to a term directed to something else. But sometimes - and, for the following reasons, in the present case – this is a distinction without a difference.

Clause 3.2

[45]Cl. 3.2 purports to preclude the making of the relevant application or request under Pt II of the 1954 Act, because it is the agreement to surrender, and is void.

Clause 3.3

[46]Cl. 3.3 does not purport to preclude the making of the relevant application or request because, I consider, where it refers to the giving up of vacant possession on 29September 2024 it does not impose an obligation to surrender, but merely refers to that for which Cl.3.2 provides. I nonetheless conclude that it is void because, even though it does not contain an obligation to surrender, it is a term on which the parties agreed the surrender: the surrender was to involve delivery up in repair.[47]If I were wrong in saying that it did not contain an obligation to surrender, then of course it would be void for that very reason.

Clause 3.4

[48]Cl.3.4 does not purport to preclude the making of the relevant application or request either, but is expressed to be made ‘for the purposes of ensuring Euroresins obligation to deliver up the Premises fully in repair on 29th September 2024 as referred to in 3.3 immediately above’. Given that the agreement to surrender is void, Cl.3.4 has no application, and is ineffective. If I were wrong about that, I would conclude, for the same reasons as in relation to Cl. 3.3, that it is void because it is a term on which the parties agreed the surrender: the surrender was to involve delivery up in repair, and this is a provision for ensuring that.[49]Clauses 3.2, 3.3 and 3.4 were not simply provisions associated with a wider commercial arrangement. They were the core of the settlement which the parties reached. Clause 3.2 provided for the early surrender of the lease. Clause 3.3 defined the condition in which the premises were to be delivered up on that surrender. Clause 3.4 established the machinery by which that result was to be achieved. Together, those provisions constituted the substantive bargain which the Settlement Agreement was intended to implement.[50]The Defendant argues that if (contrary to its submissions) Cll.3.3 and 3.4 do indeed consist of terms of a surrender agreement, then statute only avoids Cll. 3.3 and/or 3.4 ‘in so far as’ they consist of the agreement to surrender or purport to limit the tenant’s rights. It suggests that the obligation to give up vacant possession on 29 September 2024 is the only part to be made void, and the remainder of the clause can survive. as if it reads:
“3.3 Euroresins shall give up vacant possession of the Premises fully in repair on the 29th September 2024 in accordance with the provisions of the Lease. 3.4 Following signing of this Settlement Agreement and for the purposes of ensuring Euroresins obligation to deliver up the Premises fully in repair on 29th September 2024 as referred to in 3.3 immediately above, the parties shall…”
[51]On the conclusions to which I have come, the question does not arise, however. They are void, not because they consist of the agreement to surrender, but because they are terms of the surrender agreement. I would in any event regard the approach as involving the re-writing of the parties’ bargain in a way which is outwith the contemplation of the statute. Such re-writing will have to be considered again in the context of severability, however.

The other provisions

[52]The Claimant submits that the other provisions of the Settlement Agreement are void because they are essentially ancillary to Cll. 3.2, 3.3 and 3.4, which are the core provisions. The substantive provisions concern the costs of the expert (3.5), the right to inspect the premises (3.6), being bound by the determination of the expert (3.7), the parties’ bearing their own costs of the dispute (3.8), the release of the claims (5), agreement not to sue (6), costs again (7), mutual indemnities (9), severability (11) and co-operation (17).[53]These provisions do not stand apart from that bargain in Cll. 3.2, 3.3 and 3.4. They regulate its consequences, provide machinery for its performance, allocate costs, release claims arising out of the parties' previous dispute and require the parties to give effect to what they had agreed. None has any evident commercial purpose independent of the agreed early surrender and the arrangements for delivering up the premises in repair upon that surrender. Although section 38A does not automatically render void the entirety of every agreement containing a surrender provision void, I consider that in the present case the Settlement Agreement contains nothing but terms upon which the surrender was agreed.[54]In view of the extensive argument before me in relation to the effect of Cl. 11 I should say more about why I conclude this applies to Cl. 11 too.[55]I have concluded that the Settlement Agreement is void in its entirety because all of its substantive provisions formed part of a single bargain the essential purpose of which was to secure the surrender of the lease on 29 September 2024 in repair. Cl. 11 was part of that bargain, and was not a free-standing agreement capable of operating independently of the Settlement Agreement as a whole. The Defendant submits that Cl. 11 survives and can be used to save the remainder of the Settlement Agreement. I do not accept that submission. Clause 11 is a contractual mechanism for preserving invalid provisions within an otherwise effective agreement. It cannot operate where the agreement containing it is itself void. Once the Settlement Agreement falls, Cl. 11 falls with it and is incapable of saving any part of it.[56]Accordingly, I conclude that Cl. 11 cannot affect the result produced by section 38A and does not preserve any part of the Settlement Agreement.

Conclusion

[57]Accordingly, subject to the question of severability, I conclude that the entire Settlement Agreement offends s. 38A and is void. Severability The law

Severability

[58]The law on severability is set out in Egon Zehnder Ltd v Tillman [2019] UKSC 32. An employee had a written contract of employment and after her employment ceased she wanted to work for a competitor. The former employer contended that to do so would breach a covenant in her employment contract. She answered that the covenant was void because part of it was in unreasonable restraint of trade. One of the issues was whether the part of the covenant that was in unreasonable restraint of trade could be severed and removed from the remainder of the covenant, which would still prohibit the proposed employment.[59]In that case, Cl. 13 of the agreement was entitled ‘covenant’ and contained five 6-month post-termination restraints: not to entice senior employees; not to solicit custom from or deal with specified suppliers; not to seek to interfere with supplies to the employer; not to use a name likely to be confused with any recent name of the employer; and not “…directly or indirectly [to] engage or be concerned or interested in any business carried on in competition with any of the businesses of the company or any group company which were carried on at the termination date or during the period of 12 months prior to that date and with which you were materially concerned during such period.” As the headnote to the report at [2020] AC 154 states, “…on the assumption that the word “interested” in the restrictive covenant purported to restrain the claimant from holding shares in the specified businesses, it fell within the doctrine of restraint of trade, since it was part of the restraint on her ability to work in the immediate aftermath of her employment; that, in the context of standard non-competition covenants, the natural meaning of “interested in” included a shareholding, whether large or small, which was an unreasonable restraint of trade; and that, therefore, the clause in the defendant’s contract which included those words was void unless the words could be severed and removed from the rest of the clause.”[60]The Supreme Court considered the authorities on the question of the enforceability of the remainder, where part of a contract is unenforceable. It was, it observed, an issue which arises far more widely than in contracts of employment. At paragraphs 85 to 87 of the judgment of the Court, it identified the approach to the question whether the offending provision could be severed as follows. “The first [criterion] is that “the unenforceable provision is capable of being removed without the necessity of adding to or modifying the wording of what remains. This is the so-called “blue pencil” test.” “The second criterion is that “the remaining terms continue to be supported by adequate consideration”. “The third criterion is that “the removal of the unenforceable provision does not so change the character of the contract that it becomes ‘not the sort of contract that the parties entered into at all’”. This is the crucial criterion…But I suggest, with respect, that the criterion would better be expressed as being whether removal of the provision would not generate any major change in the overall effect of all the post-employment restraints in the contract. It is for the employer to establish that its removal would not do so. The focus is on the legal effect of the restraints, which will remain constant, not on their perhaps changing significance for the parties and in particular for the employee.” removed without the necessity of adding to or modifying the wording of what remains. This is the so-called “blue pencil” test.” provision does not so change the character of the contract that it becomes

Distinguishing the enforceable from the unenforceable

[61]In order to consider the question of severance at all, one needs first to consider what parts of any agreement are bad and what are good. That depends on what has rendered the bad part bad. In Egon Zehnder Ltd v Tillman it was a matter of identifying what parts were in unreasonable restraint of trade. In the present case it is a matter of identifying what parts offend s. 38A. I have already concluded that the entire Settlement Agreement offends s. 38A and is void. It is a matter of the effect of the statute. It follows that the question of the severability of the good from the bad does not arise in this case, because the effect of the statute on the Settlement Agreement is that there are no potentially good parts.

Application of the severability criteria, if applicable

[62]In case I am wrong about this, however, I turn to consider the particular provisions of the Settlement Agreement as if those provisions which I have characterised as, not ‘an agreement for the surrender of the tenancy,’ but terms on which the surrender is agreed, are not after all rendered void by the statute.

The first criterion: the ‘blue pencil’ test

[63]Since Clause 3.2 of the Settlement Agreement is void in its entirety as an agreement to surrender, the first question is whether it is capable of being removed without the necessity of adding to or modifying the wording of what remains.[64]In Cl. 3.3 of the Settlement Agreement, deletion of the words “Euroresins shall give up vacant possession of the Premises… on the 29th September 2024” leaves only “fully in repair on the 29th September 2024 in accordance with the provisions of the Lease,” which makes no sense. But deletion of the words “on the 29th September 2024” (because that is the surrender date) leaves, “Euroresins shall give up vacant possession of the Premises fully in repair … in accordance with the provisions of the Lease.” That meets the first severability criterion.[65]Cl. 3.4 meets the first criterion in the same way, since deletion of “on 29th September 2024” leaves, “Following signing of this Settlement Agreement and for the purposes of ensuring Euroresins [sic] obligation to deliver up the Premises fully in repair … as referred to in 3.3 immediately above, the parties shall [take the steps specified]”. On that footing, this provision can also meet the first severability criterion.[66]In the same way, the other provisions meet the first criterion.

The second criterion: adequate consideration

[67]It is not in dispute that the second criterion would be met, in that there would still be adequate consideration for the provisions which meet the first criterion, notwithstanding the loss of the surrender agreement.

The third criterion: the effect on the agreement

[68]As noted above, it is for the party seeking to rely on the remaining provisions (that is, the Defendant) to demonstrate that removal of these parts of the provisions would not generate any major change in their overall legal effect.[69]It is on this ground that the offending provisions cannot in any event be severed under the above principles. What one started with was an agreement for early surrender, delivery up in repair on surrender, and a machinery for achieving repair in good time for that surrender. What one would end up with is no early surrender; an obligation which added nothing to that under the lease for delivery up at the end of the term (either contractual or as extended under the 1954 Act); and more or less free-standing machinery for bindingly identifying, and achieving before termination of the lease, the repair which would be required on termination, but while the term continued. That is a major change in the overall legal effect of the Settlement Agreement. It is not the sort of contract that the parties entered into at all, and it is hard to see why anyone would have entered into, or would enter into, such an agreement.[70]No doubt carrying out the works of repair required under the Settlement Agreement would improve the state of repair when the lease ended (and perhaps still meet the repairing requirement at that point if nothing much had changed in the interim), particularly if the lease turned out to terminate at the end of the contractual term (rather than continuing under Pt II of the 1954 Act), but that does not appear to affect the answer to the question whether it is still the sort of contract the parties entered into, which is in the negative; or to reduce the major change which I find it would make to its legal effect.

Conclusion

[71]Accordingly, I conclude that even if the general law of severability were capable of application here, the Settlement Agreement as a whole would be rendered void by the failure to meet the requirement for a valid agreement to surrender under s.38A of the 1954 Act.

Clause 11

[72]Had Cl. 11 of the Settlement Agreement survived, the question would then have been whether it could save any part of it, whether against the effects of s.38A Landlord and Tenant Act 1954, or by way of a relaxation of the severability requirements.[73]This provision may be regarded as falling into three sections.(1) If any provision or part-provision of this agreement is or becomes invalid, illegal or unenforceable, it shall be deemed modified to the minimum extent necessary to make it valid, legal and enforceable.(2) If such modification is not possible, the relevant provision or part-provision shall be deemed deleted.(3) Any modification to or deletion of a provision or part-provision under this clause shall not affect the validity and enforceability of the rest of this agreement.[74]This clause is to be read in the context of the law of void contractual provisions and their severability discussed above, since it is directed to modifying its effects.[75]In particular, I consider that the third element of Cl. 11 would have done away with the third severability criterion under the general law so far as it concerns the Settlement Agreement. It differs in that way from the saving provision in Cl. 13.4 of the agreement in Egon Zehnder Ltd v Tillman [2019] UKSC 32, which contained no equivalent: see para. 9 of that judgment.[76]In my judgment, it would fall to be read as “Any modification to or deletion of a provision or part-provision under this clause shall not adversely affect the validity and enforceability of the rest of this agreement.” That is because it is directed to saving, not avoiding, contractual provisions.

Conclusion

[77]However, I have concluded that the entire Settlement Agreement offends s. 38A and is void because that is the effect of the terms of the statute, and that that includes Cl.11. For that reason, it is not capable of saving anything.

Discussion in the alternative

[78]Since the effect of Cl. 11 was fully argued, I should nonetheless address it briefly. What follows proceeds on the assumption, contrary to my conclusion, that Cl. 11 survives the invalidity which I have found affects the remainder of the Settlement Agreement.[79]If, apart from Cl.11, the other terms of the Settlement Agreement would be void because of the terms of the statute, then the question is whether it could save them. No modification of Clause 3.2 could make it valid, legal and enforceable. Accordingly, it would be deemed to be deleted. That deletion would not (adversely) affect the validity and enforceability of the rest of the Settlement Agreement, however.[80]Cll.3.3 of the Settlement Agreement is likewise void. The deletion of Cl 3.2 and the modification of Cl. 3.3 to delete reference to it would not improve the position, because now it would contain a free-standing obligation to deliver vacant possession on 29 September 2024, which would be a void surrender agreement. The question would then be whether and how it can be deemed modified to the minimum extent necessary to make it valid, legal and enforceable. The Defendant proposed the following modification. “3.3 Euroresins shall give-up vacant possession ofput the Premises fully in repair onby the 29th September 2024 in accordance with the provisions of the Lease.” I would have been inclined to accept that this modification would make it valid, legal and enforceable; and that it would be a modification to the minimum extent necessary to render it valid legal and enforceable. Under Cl. 11, this modification to the provision would not affect the validity and enforceability of the rest of the agreement. I would probably have accepted that the Settlement Agreement would fall to be read as containing the modified Cl. 3.3.[81]Cl.3.4 of the Settlement Agreement is likewise void. The deletion of Cl 3.2 and the modification of Cl. 3.3 would not improve the position, because now it would contain a free-standing obligation to deliver vacant possession on 29 September 2024, which is a void surrender agreement; or it would refer to a non-existent obligation to that effect. The question would then be whether and how it could be deemed modified to the minimum extent necessary to make it valid, legal and enforceable. The Defendant proposed the following modification. “3.4 Following signing of this Settlement Agreement and for the purposes of ensuring Euroresins obligation to deliver upput the Premises fully in repair onby 29th September 2024 as referred to in 3.3 immediately above, the parties shall: ...” Again, I would have been inclined to accept that this modification would make it valid legal and enforceable, and that it would be a modification to the minimum extent necessary to render it valid legal and enforceable. Under Cl. 11, again, this modification to the provision would not affect the validity and enforceability of the rest of the agreement. I would probably have concluded that the Settlement Agreement would have fallen to be read as containing the modified Cl. 3.4.[82]In this case, the remaining provisions of the Settlement Agreement would be unaffected and stand as written.[83]This would have involved the Court in re-writing the parties’ bargain, but there is diminished force in the submission that it could not do so where, as here, the parties have provided that it should and if (contrary to my conclusion above) the clause by which they have done so is capable of taking effect.[84]Providing for the Court to re-write the parties’ bargain to the minimum extent necessary to achieve a specified purpose might well cause insuperable difficulties, particularly where it is unclear what would count as ‘the minimum extent necessary’ and where there are perhaps several approaches; but I am inclined to the view that the difficulty is not insuperable here.

Conclusion

[85]Given that I conclude that Cl. 11 does not have the effect contended for by the Defendant, however, I conclude that the Settlement Agreement is void in toto. I therefore determine the Section 38 Issue in favour of the Claimant.

The Adjudication Issue

[86]It follows from the above conclusion that the provisions pursuant to which Mr Woudman was appointed and his reports prepared were likewise void and that the Settlement Agreement is incapable of making his reports binding determinations of the disputes between the parties as to the matters purportedly determined therein.

Separability

[87]Accordingly, the question of the separability of those provisions from the rest of the Settlement Agreement does not arise, therefore, but for the sake of completeness I should deal with it briefly.[88]On the basis of Dandara South East Ltd v Medway Preservation Ltd [2024] EWHC 2318 (Ch), a decision of Master Brightwell which is not binding on this Court, it was argued that the expert determination provisions of the Settlement Agreement were separable from it and survived it if it otherwise failed.[89]In the case of arbitrations, s. 7 of the Arbitration Act 1996 provides that, unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid or did not come into existence or has become ineffective, and should for that purpose be treated as a distinct agreement. That provision does not, of course, apply to expert determination agreements, however.[90]Nonetheless, I agree with the learned Master that if (unusually) an expert determination clause is, as a matter of construction, intended to embrace the determination of all disputes arising under or in relation to the contract in which it is to be found, it may well follow that it survives the ineffectiveness of the agreement.[91]That is not the case here. The expert determination provision is expressed to be for “the purposes of ensuring Euroresins [sic] obligation to deliver up the Premises fully in repair on 29th September 2024 as referred to in 3.3 immediately above”. It is for specific and limited purposes which have failed. Since the obligation to deliver up the Premises fully in repair on 29 September 2024 does not survive, the expert determination provision serves no contractual purpose and is not separable in any event.

Free-standing agreement

[92]Alternatively, the Defendant contends, the parties created a free-standing agreement (that is, one capable of standing independently of the Settlement Agreement) to refer such disputes to the expert and be bound by them.[93]I entirely accept of course that, as a matter of law, such an independent contract may arise. The first point to note in the present case, however, is that the disputes referred to him did not even arise independently of the Settlement Agreement. He was concerned to establish ‘works which are required to remedy all current dilapidations or wants of repair’ ‘for the purposes of ensuring Euroresins [sic] obligation to deliver up the Premises fully in repair on 29th September 2024’. That was not a matter which required to be determined under the lease of the premises and apart from the Settlement Agreement.[94]The second point is that the referral was explicitly pursuant to the Tomlin Order (and the Settlement Agreement).[95]The third point is that the Defendant argues that the RICS application for the appointment of an expert expressly provides that it gives rise to a contract in its own right between the parties and the President of RICS:
‘this application is the contract.’
It refers to the ‘Dispute Resolver’ acting either as arbitrator or independent expert (p316) and states that, if there is no contract or agreement conferring power to appoint an expert ‘both parties must agree, in writing to an appointment’ and ‘[s]ignatures from both parties on this application form will be sufficient for this purpose.’ However, an agreement between the parties on the one hand and the President on the other for the appointment of an expert under the RICS appointment mechanism and pursuant to the Settlement Agreement is not a free-standing (and apparently quite redundant) agreement to be bound by the expert determination of the expert to be appointed. The fact that the form can be made into one if there is no underlying agreement for expert determination reinforces that point.[96]The fourth point is that although no doubt there was an independent contract with Mr Woudman as to the terms of his appointment, there is nothing independent of the Settlement Agreement binding them to his conclusions. The obligation in his terms and conditions to ‘take up’ his determination, is an obligation to get it from him once it has been made (and so to pay his fees for it): see e.g. Russell on Arbitration 24th ed. 6-054, 6-065. Taking an award up is separate from, and postdates, an arbitration award’s becoming binding, which occurs (unless otherwise stipulated) on the date it is signed. If this were an arbitration rather than an expert determination, this provision would not amount to a free-standing agreement to be bound by the award. Although these terms and conditions concern expert determination rather than arbitration, the language here must have been intended to have the same effect.[97]Although the obligation to take up an award assumes that it will have been a valid and binding award, it does not make it so.[98]The Defendant relies on ZVI Construction Co LLC v University of Notre Dame [2016] EWHC 1924 (TCC) for the proposition that participation by words and conduct can confer ‘jurisdiction’ and (it is submitted) in other words give rise to agreement to be bound. I cannot accept that participation by both parties in a process of expert determination which both thought was binding by virtue of the Settlement Agreement should be rendered binding regardless of what turns out to have been the invalidity of the entire Settlement Agreement merely by virtue of their participation in that process. The position in ZVI Construction was entirely different.[99]Accordingly, I am unable to find a free-standing agreement to be bound by Mr Woudman’s reports dated 11 March 2024 or 11 February 2025 as determinations of disputes between the parties as to the matters purportedly determined therein.

Conclusion

[100]I therefore determine the Adjudication Issue in favour of the Claimant.

Conclusion

[101]On the preliminary issues, the Claimant succeeds on both the S38 Issue and the Adjudication Issue. Procedural matters RICS Professional Standard

Procedural matters

[102]There was an issue between the parties as to whether the RICS Professional Standard of December 2016 on Independent Expert Determination should be allowed in evidence for the purpose of determining the preliminary issues. Since I have not found it necessary to refer to it, I do not consider the issue needs to be determined.

The effect of this judgment on the stay

[103]As already noted, the Consent Order lifted the stay of proceedings which had been imposed by the Tomlin order “for the purpose of resolving the New Dispute,” of which these preliminary issues form part. I am not clear what issues remain to be determined in the New Dispute, and the matter should go back to a Master for directions.[104]If and to the extent that it is sought to re-open the underlying proceedings which were purportedly compromised by the Tomlin order and the Settlement Agreement, the stay has not already been lifted for that wider purpose, and, to the extent that the Tomlin Order itself can be regarded separately from the Settlement Agreement it does not form part of the S38 Issue for my determination. A further application is required. That could more conveniently be heard by a Master. I express no view upon the merits of any such application.