Bank of New York Mellon (International) Ltd & Ors v Cine-UK Ltd & Ors [2021] EWHC 1013 (QB)

“The court may give summary judgment against a defendant...on the whole of a claim or on a particular issue if –(a) it considers that –(ii) that defendant has no real prospect of successfully defending the claim or issue... and (b) there is no other compelling reason why the case or issue should be disposed of at a trial”

“3. John and Frank applied for summary judgment on all the claims made against them. That application came before Beatson J (as he was then) who summarily dismissed some of the claims, but refused to dismiss others on the summary basis. Both sides now appeal. Our task is not to decide whether the claimants are right. Our task is to decide which parts of the case (if any) are fit to go to trial. If I may repeat something I have said before (Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), approved by this court in AC Ward & Son v Catlin (Five) Ltd [2009] EWCA Civ 1098): “The correct approach on applications by defendants is, in my judgment, as follows: i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91; ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8] iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10] v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550; vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63; vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.”

“34. The Claimant has a real prospect of successfully contending that its interpretation gives the Policy a more reasonable commercial meaning and one more likely to be that intended by the parties, by limiting the “protections provided for the safety of the insured property” to those in the Original Proposal, and any burglar alarm system within the BAMW to a burglar alarm stated in the Schedule and which was approved by the Defendants, and by limiting the Warranties, as the Judge was inclined to do, to defects within the knowledge or reasonably capable of being within the knowledge of the Claimant and its agents. So far as concerns the former contentions, the Claimant may derive some support from the “General Condition” that “the Proposal and/or the particulars in writing by which the Insured has applied to the Insurers for an Insurance in the terms stated in this Policy and which the Insured has agreed shall be the basis of this Contract shall be held to be incorporated herein.” 35. I agree with the Defendants that neither the Claimant nor the Judge has articulated clearly any evidence relevant to interpretation which is likely to exist and, although not available on the hearing of the Application, can be expected to be available at trial. Had this been the only ground for dismissing the Application, it would not, in my judgment, have been sufficient: ICI Chemicals & Polymers v TTE Training: [2007] EWCA Civ 725 at paragraph [14] (Moore-Bick LJ). Mr Stuart-Smith accepted, however, as I have said that it is apparent from paragraph [46] of the Judgment that the Judge’s decision included the arguability of the Claimant’s submissions on interpretation. Furthermore, I bear in mind that the Warranties are standard terms of the Defendants’ Multiline Commercial Combined Policy, which may affect many other policyholders, and that provisions in the Warranties such as “be in full and effective operation at all times” and “put into full and effective operation at all times” are said to have even wider currency in the insurance market. In those particular circumstances, combined with the arguability of the Claimant’s points on interpretation, I can understand why the Judge considered it would also be appropriate to give the Claimant the opportunity to seek and adduce any relevant and admissible factual material available by the date of the trial. 36. For all those reasons I would dismiss this appeal. I would make no order on the Respondent’s Notice.”

“otherwise than for the Permitted Use or the Permitted Sublet Use described in paragraph (a) of that definition during the first five years of the Term in accordance with the requirements and conditions of any planning permission authorising such use from time to time save that following the expiration of the first five years of the Term the Tenant subject to the other constraints as to the use of the Property in this clause 5.17 and as contained in the Superior Lease shall be entitled to change the use of the Property to any leisure use not being the then current primary permitted use or the Permitted Sublet Use of any other premises on the Estate or to any other use with the prior written consent of the Landlord not to be unreasonably withheld or delayed” b. In the Mecca Lease: i. “the Permitted Use” is defined as “Use of the Smoking Area as a smoking shelter for patrons and staff only and for uses ancillary to the Tenant’s use of the Property but not so as to involve any gaming equipment other than the playing of portable mechanised or video based bingo games. Use of the Ground Floor and part first floor, Unit 6:- as a bingo Hall with ancillary activities it being agreed that such activities may include (without limitation to the generality of the foregoing) the operation on any part or parts of the Property of concessions in accordance with clause 4.11.8(b) relating to the sale for consumption on or off the Property of food beverages (alcoholic and/or non-alcoholic) and other edible items and all merchandise related to bingo use and the provision of gaming or amusement machines; and/or as a casino with ancillary activities it being agreed that such activities may include (without limitation to the generality of the foregoing) the operation on any part or parts of the Property of concessions in accordance with clause 4.11.8(b) relating to the sale for consumption on or off the Property of food beverages (alcoholic and/or non-alcoholic) and other edible items and all merchandise related to bingo use and the provision of gaming or amusement machines; and/or For any other use within Class D2 of the Town and Country Planning (Use Classes) Order 1987; and/or with the Landlord’s written consent (which consent shall not be unreasonably withheld or delayed ) for any other leisure and/or entertainment use [with a Proviso restricting cinema and certain other specific uses] ii. Clause 4.18.1 is a covenant “Not to use the whole or any part of the Property: …(d) otherwise than for the Permitted Use in accordance with the requirements and conditions of any planning permission authorising such use from time to time …” c. In the SportsDirect Lease: i. “the Authorised Use” is defined at clause1.1 as “1(a) use as a shop for the retail sale of sports and leisure goods ... and related ancillary goods; and (b) use for an ancillary cafe or such other non-food retail use within Class A1 …as approved by the landlord (such approval not to be unreasonably withheld or delayed)” and ii. Clause 3.7 is a covenant “Not to use the premises other than for the Authorised Use...”

“4.3.1 In relation to the insurance of the Building maintained by the Superior Landlord, the Landlord shall: (a) use all reasonable endeavours to procure that the interest of the Tenant is noted or endorsed on the policy;… 4.3.2 In case of destruction to or damage to the Building or any part or parts thereof by any of the Insured Risks the Landlord shall use all reasonable endeavours to enforce the covenant given by the Superior Landlord in clause 4.2.5 of the Headlease … 4.3.3. If the Property is wholly or substantially damaged by any of the Insured Risks the Landlord shall use reasonable endeavours to procure that the Superior Landlord obtains deeds of collateral warranty in favour of the Tenant from the building contractor …engaged to carry out the works of rebuilding or reinstatement …” b. In clause 5.3 headed “Rent suspension” it is provided that: “5.3.1 If the Building or the Premises are damaged or destroyed by an Insured Risk so that they are rendered unfit for occupation or use or inaccessible, then provided that insurance of the Building has not been vitiated or payment of the insurance money is not refused wholly or in part through an act or default of the Tenant the rent firstly reserved under clause 2.3.1 (or a fair proportion according to the nature and extent of the damage )will not be payable until the earliest of the date that: (a) the Premises are again fit for occupation and use and are accessible; or (b) until three years from the date the damage occurred, whichever is the earlier.”

“BUILDINGS means the BUILDINGS at the PREMISES and include various items e.g. fixtures and fittings. The PREMISES is a reference to the properties listed in the Schedule and which are used by the Insured for the purposes of the BUSINESS. BUSINESS means the BUSINESS of the INSURED shown in the Schedule and including … “the provision of services to the TENANTS”

“If any BUILDINGS suffer DAMAGE by any causes not excluded the Insurer(s) will pay to the Insured the amount of loss in accordance with the provisions of the insurance Provided that the Insurer(s) liability in any one Period of Insurance shall not exceed in respect of each item on BUILDINGS the Sum Insured and any other stated Limit of Liability”

“The emergence of COVID-19 and initial Government response 7.On 12 January 2020, the World Health Organization (“WHO”) announced that a novel coronavirus had been identified in samples obtained from cases in China. This announcement was subsequently recorded by Public Health England. The virus was named severe acute respiratory syndrome coronavirus 2, or “SARS-Co V-2”, and the associated disease was named “COVID-19”. 8.On 30 January 2020, the WHO declared the outbreak of COVID-19 a “Public Health Emergency of International Concern”. 9.On 31 January 2020, the Chief Medical Officer for England confirmed that two patients had tested positive for COVID-19 in England. The first case confirmed in Northern Ireland was on 27 February 2020, the first in Wales on 28 February 2020 and the first in Scotland on 1 March 2020. 10.On 10 February 2020, the Health Protection (Coronavirus) Regulations 2020 (SI 2020/129) were made by the Secretary of State for Health and Social Care, pursuant to powers under the Public Health (Control of Disease) Act 1984 (“the 1984 Act”). In broad terms, these Regulations provided for the detention and screening of persons reasonably suspected to have been infected or contaminated with the new strain of coronavirus. The Regulations were subsequently repealed on 25 March 2020 by the Coronavirus Act 2020 (“the 2020 Act”). 11.On 2 March 2020, the first death of a person who had tested positive for COVID-19 was recorded in the UK, although the first death from COVID19 was publicly announced by the Chief Medical Officer for England on 5 March 2020. 12.On 4 March 2020, the UK Government published guidance titled “Coronavirus (COVID-19): What is social distancing?”

“contain”, “delay”, “research” and “mitigate”

“I want to repeat that everyone -everyone -must follow the advice to protect themselves and their families, but also -more importantly-to protect the wider public.” 19.On 20 March 2020, the Prime Minister made a further statement… In this statement he thanked everyone for following the “guidance” issued on 16 March 2020 but said that further steps were now necessary. He said that across the UK cafes, pubs, bars and restaurants were being told to close as soon as they reasonably could and not open the following day. He added that: “We’re also telling nightclubs, theatres, cinemas, gyms and leisure centres to close on the same timescale.”

“loss resulting from] interruption of or interference with the business arising from:(a) any human infectious or human contagious disease (excluding Acquired Immune Deficiency Syndrome (AIDS) or an AIDS related condition) an outbreak of which the local authority has stipulated shall be notified to them manifested by any person whilst in the premises or within a twenty-five (25) mile radius of it;..”

“85.The wording of QBE 1 is something of an outlier in that, unlike the clauses we have considered so far, the clause has as its subject a disease, rather than an occurrence of illness sustained by a person resulting from a disease. Nevertheless, we think the wording makes it sufficiently clear that the insured peril is not any notifiable disease occurring anywhere in the world but only in so far as it is manifested by any person whilst in the premises or within a 25 mile radius of the premises. The words “manifested by any person” etc are indeed, as the court below described them “adjectival”

“any human infectious or human contagious disease ... on condition that and from the time when the disease is manifested by any person whilst in the premises or within a 25 mile radius of it. 86.To read the clause as if it contained such words in our view involves unjustifiable manipulation of the language. It also involves treating the insured peril as subject to no geographical limit at all provided only that at least one person manifests the disease within the specified area. That seems to us an improbable form of cover for insurers to provide, as well as one which would be out of line with all the other limbs of the clause. Each of the other sub-clauses covers something happening at, or a consequence of something happening at, the insured premises: for example, injury or illness sustained by any person arising from food or drink provided in the premises; or the presence of vermin or pests in the premises. Sub-clause (a) is naturally understood as operating in a similar way. The only difference from the other sub-clauses is that the risk covered is not confined solely to something happening at the insured premises but extends to something happening within a specified distance away from the insured premises. Thus, it is not only disease manifested by any person whilst in the premises that is covered, but also disease manifested by any person whilst within a 25-mile radius of the premises.”

“212.We conclude that, on the proper interpretation of the disease clauses, in order to show that loss from interruption of the insured business was proximately caused by one or more occurrences of illness resulting from COVID-19, it is sufficient to prove that the interruption was a result of Government action taken in response to cases of disease which included at least one case of COVID-19 within the geographical area covered by the clause. The basis for this conclusion is the analysis of the court below, which in our opinion is correct, that each of the individual cases of illness resulting from COVID-19 which had occurred by the date of any Government action was a separate and equally effective cause of that action (and of the response of the public to it). Our conclusion does not depend on the particular terminology used in the clause to describe the required causal connection between the loss and the insured peril and applies equally whether the term used is “following” or some other formula such as “arising from” or “as a result of”

“Interpretation of contractual provisions 14. Over the past 45 years, the House of Lords and Supreme Court have discussed the correct approach to be adopted to the interpretation, or construction, of contracts in a number of cases starting with Prenn v Simmonds [1971] 1 WLR 1381 and culminating in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 . 15. When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101, para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn [1971] 1 WLR 1381 , 1384-1386; Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE HansenTangen) [1976] 1 WLR 989 , 995-997, per Lord Wilberforce; Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 , para 8, per Lord Bingham of Cornhill; and the survey of more recent authorities in Rainy Sky [2011] 1 WLR 2900 , paras 21-30, per Lord Clarke of Stone-cum-Ebony JSC. 16. For present purposes, I think it is important to emphasise seven factors. 17. First, the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook [2009] AC 1101, paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision. 18. Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning. That is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve. 19. The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made. Judicial observations such as those of Lord Reid in Wickman Machine Tools Sales Ltd v L Schuler AG [1974] AC 235 , 251 and Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB (The Antaios) [1985] AC 191 , 201, quoted by Lord Carnwath JSC at para 110, have to be read and applied bearing that important point in mind. 20. Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party. 21. The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties. 22. Sixthly, in some cases, an event subsequently occurs which was plainly not intended or contemplated by the parties, judging from the language of their contract. In such a case, if it is clear what the parties would have intended, the court will give effect to that intention. An example of such a case is Aberdeen City Council v Stewart Milne Group Ltd 2012 SC (UKSC) 240 , where the court concluded that “any … approach” other than that which was adopted “would defeat the parties' clear objectives”, but the conclusion was based on what the parties “had in mind when they entered into” the contract: see paras 21 and 22. 23. Seventhly, reference was made in argument to service charge clauses being construed “restrictively”

“69. In Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2004] 1 AC 715 the mistaken omission of words in a clause was apparent because the bill of lading had been modelled on a standard clause. The person who had transposed the standard clause into the bill of lading had omitted a phrase in the standard clause in which the same word had appeared at the end of two consecutive phrases. The mistake was clear and it was apparent what correction was called for (paras 22 and 23 per Lord Bingham). 70. In Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 a definition, which contained a grammatical ambiguity, made no commercial sense if interpreted in accordance with the ordinary rules of syntax. The background to the deal and the internal context of the contract showed that there was a linguistic mistake in the definition, which the court was able to remove by means of construction. In his speech Lord Hoffmann (at p 1114) referred with approval to the judgment of Carnwath LJ in KPMG LLP v Network Rail Infrastructure Ltd [2007] Bus LR 1336. In that case, which concerned a rent review clause in a lease, it was clear from the terms of the clause that its wording did not make sense. The court was assisted by an earlier agreement which set out the then intended clause containing a parenthesis, of which only part had remained in the final lease. It was not clear whether the parties had mistakenly deleted words from the parenthesis, which they had intended to include, or had failed to delete the parenthesis in its entirety. But that uncertainty as to the nature of the mistake, unusually, did not matter as the outcome was the same on either basis. 71. In Aberdeen City Council v Stewart Milne Group Ltd [2011] UKSC 56, 2012 SCLR 114 the internal context of the contract provided the answer. The sale contract provided for the payment to the vendor of a further sum on disposal of the land by the purchaser. Two of the methods of disposal required the parties to ascertain the market value of the property on disposal in calculating the additional payment and the other used the "gross sales proceeds" in calculating that payment. The purchaser sold the site at an under-value to an associated company, a circumstance which on the face of the contract the parties had not contemplated. The courts at each level interpreted the provision, which used the gross sales proceeds in the calculation, as requiring a market valuation where there was a sale which was not at arm's length. They inferred the intention of the parties at the time of the agreement from the contract as a whole and in particular from the fact that the other two methods of disposal required such a valuation. While this line of reasoning was criticised by Professor Martin Hogg ((2011) Edin LR 406) on the ground that it protected a party from its commercial fecklessness, it seems to me to be the correct approach in that case as the internal context of the contract pointed towards the commercially sensible interpretation.” the correct approach in that case as the internal context of the contract pointed towards the commercially sensible interpretation.”

“20 The question then is whether there is anything in the definition of the expression "Open Market Valuation" which shows that this method cannot be used in the case of a sale. The definition directs attention to the open market value of the subjects "or the relevant part thereof as specified in the notice at the date of the notice served in accordance with clause 9.5". There is no requirement for a notice in accordance with clause 9.5 in the case of a sale. But the absence of a notice does not make the valuation exercise directed by this definition unworkable. In the case of a sale the information that a notice would provide is to be found in the contract, just as in the case of lease it seems not to have been thought necessary to identify the date as at which the subjects were to be valued in order to arrive at the Lease Value. It seems to me therefore that there would be no difficulty in implying a term to the effect that, in the event of a sale which was not at arms length in the open market, an open market valuation should be used to arrive at the base figure for the calculation of the profit share. I see this as the product of the way I would interpret this contract… 22… I would not, for my part, view the present case in that way. It seems to me that the position here is quite straightforward. The context shows that the intention of the parties must be taken to have been that the base figure for the calculation of the uplift was to be the open market value of the subjects at the date of the event that triggered the obligation. In other words, it can be assumed that this is what the parties would have said if they had been asked about it at the time when the missives were entered into. The fact that this makes good commercial sense is simply a makeweight. The words of the contract itself tell us that this must be taken to have been what they had in mind when they entered into it. The only question is whether effect can be given to this unspoken intention without undue violence to the words they actually used in their agreement. For the reasons I have given, I would hold that the words which they used do not prevent its being given effect in the way I have indicated.”

“28. In the course of argument some reference was made to the recent decision of the Supreme Court in Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900. That appeal was concerned with the role of commercial good sense in the construction of a term in a contract which was open to alternative interpretations. It was held that in such a case the court should adopt the more, rather than the less, commercial construction. The court applied the principle that the ultimate aim in construing a contract is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant; the relevant reasonable person being one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. 29. This appeal is concerned with a somewhat different problem from that which arose in Rainy Sky. Under the missives the respondent sellers were entitled to "the Profit Share" arising out of the on sale of the subjects by the appellant buyers. The expression "Profit Share" was defined as "the Gross Sale Proceeds", which were in turn defined as "the aggregate of the sale proceeds of the Subjects received by the Purchasers for the Subjects". 30. Lord Hope has drawn attention in para 9 to certain infelicities of drafting. However, the critical language in clause 9.4 is the promise on the part of the appellants to pay 40% of 80% of the gross sale proceeds "within 14 days after receipt of the gross sale proceeds". On the face of it the reference to the gross sale proceeds is a reference to the "actual sale proceeds" received by the appellants. 31. It is not easy to conclude, as a matter of language, that the parties meant, not the actual sale proceeds, but the amount the appellants would have received if the on sale had been an arm's length sale at the market value of the property. Nor is it easy to conclude that the parties must have intended the language to have that meaning. As Baroness Hale observed in the course of the argument, unlike Rainy Sky, this is not a case in where there are two alternative available constructions of the language used. It is rather a case in which, notwithstanding the language used, the parties must have intended that, in the event of an on sale, the appellants would pay the respondents the appropriate share of the proceeds of sale on the assumption that the on sale was at a market price. 32. In this regard I entirely agree with Lord Hope's conclusions at para 22 above. As he puts it, the context shows that the parties must be taken to have intended that the base figure for the calculation of the uplift was to be the open market value of the subjects at the date of the event that triggered the obligation. In other words, it can be assumed that this is what the parties would have said if they had been asked about it at the time when the missives were entered into. The parties expressly agreed that in the case of a buy out or lease the profit would be arrived at by reference to market value. Rather like counsel for the respondent bank in Rainy Sky, Mr Craig Connal QC was not able to advance any commercially sensible argument as to why the parties would have agreed a different approach in the event of an on sale. I have no doubt that he would have done so if he had been able to think of one. As Lord Hope says at para 17, on the appellants' approach, it would be open to them to avoid the provisions relating to the open market value of a lease by selling the subjects to an associate company at an undervalue and arranging for the lease to be entered into by that company. The parties could not sensibly have intended such a result. 33. Lord Hope says at para 20 that there would be no difficulty in implying a term to the effect that, in the event of a sale which was not at arm's length in the open market, an open market valuation should be used to arrive at the base figure for the calculation of the profit share. I agree. If the officious bystander had been asked whether such a term should be implied, he or she would have said "of course". Put another way, such a term is necessary to make the contract work or to give it business efficacy. I would prefer to resolve this appeal by holding that such a term should be implied rather than by a process of interpretation. The result is of course the same.”

“16. There have, of course, been many judicial observations as to the nature of the requirements which have to be satisfied before a term can be implied into a detailed commercial contract. They include three classic statements, which have been frequently quoted in law books and judgments. In The Moorcock (1889) 14 PD 64, 68, Bowen LJ observed that in all the cases where a term had been implied, "it will be found that ... the law is raising an implication from the presumed intention of the parties with the object of giving the transaction such efficacy as both parties must have intended that at all events it should have". In Reigate v Union Manufacturing Co (Ramsbottom) Ltd [1918] 1 KB 592, 605, Scrutton LJ said that "[a] term can only be implied if it is necessary in the business sense to give efficacy to the contract". He added that a term would only be implied if "it is such a term that it can confidently be said that if at the time the contract was being negotiated" the parties had been asked what would happen in a certain event, they would both have replied "'Of course, so and so will happen; we did not trouble to say that; it is too clear'". And in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, 227, MacKinnon LJ observed that, "[p]rima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying". Reflecting what Scrutton LJ had said 20 years earlier, MacKinnon LJ also famously added that a term would only be implied "if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common 'Oh, of course!'". 17. Support for the notion that a term will only be implied if it satisfies the test of business necessity is to be found in a number of observations made in the House of Lords. Notable examples included Lord Pearson (with whom Lord Guest and Lord Diplock agreed) in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601, 609, and Lord Wilberforce, Lord Cross, Lord Salmon and Lord Edmund-Davies in Liverpool City Council v Irwin [1977] AC 239, 254, 258, 262 and 266 respectively. More recently, the test of "necessary to give business efficacy" to the contract in issue was mentioned by Lady Hale in Geys at para 55 and by Lord Carnwath in Arnold v Britton [2015] 2 WLR 1593, para 112. 18. In the Privy Council case of BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 52 ALJR 20, [1977] UKPC 13, 26, Lord Simon (speaking for the majority, which included Viscount Dilhorne and Lord Keith) said that: "[F]or a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract." 19. In Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472, 481, Sir Thomas Bingham MR set out Lord Simon's formulation, and described it as a summary which "distil[led] the essence of much learning on implied terms" but whose "simplicity could be almost misleading". Sir Thomas then explained that it was "difficult to infer with confidence what the parties must have intended when they have entered into a lengthy and carefully-drafted contract but have omitted to make provision for the matter in issue", because "it may well be doubtful whether the omission was the result of the parties' oversight or of their deliberate decision", or indeed the parties might suspect that "they are unlikely to agree on what is to happen in a certain ... eventuality" and "may well choose to leave the matter uncovered in their contract in the hope that the eventuality will not occur". Sir Thomas went on to say this at p 482: "The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong. [He then quoted the observations of Scrutton LJ in Reigate, and continued] [I]t is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred ..." 20. Sir Thomas's approach in Philips was consistent with his reasoning, as Bingham LJ in the earlier case The APJ Priti [1987] 2 Lloyd's Rep 37, 42, where he rejected the argument that a warranty, to the effect that the port declared was prospectively safe, could be implied into a voyage charterparty. His reasons for rejecting the implication were "because the omission of an express warranty may well have been deliberate, because such an implied term is not necessary for the business efficacy of the charter and because such an implied term would at best lie uneasily beside the express terms of the charter". 21. In my judgment, the judicial observations so far considered represent a clear, consistent and principled approach. It could be dangerous to reformulate the principles, but I would add six comments on the summary given by Lord Simon in BP Refinery as extended by Sir Thomas Bingham in Philips and exemplified in The APJ Priti. First, in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459, Lord Steyn rightly observed that the implication of a term was "not critically dependent on proof of an actual intention of the parties" when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting. Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term. However, and thirdly, it is questionable whether Lord Simon's first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable. Fourthly, as Lord Hoffmann I think suggested in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 198 8, para 27, although Lord Simon's requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied. Fifthly, if one approaches the issue by reference to the officious bystander, it is "vital to formulate the question to be posed by [him] with the utmost care", to quote from Lewison, The Interpretation of Contracts 5th ed (2011), para 6.09. Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of "absolute necessity", not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon's second requirement is, as suggested by Lord Sumption in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence. 22. Before leaving this issue of general principle, it is appropriate to refer a little further to Belize Telecom, where Lord Hoffmann suggested that the process of implying terms into a contract was part of the exercise of the construction, or interpretation, of the contract. In summary, he said at para 21 that "[t]here is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?". There are two points to be made about that observation. 23. First, the notion that a term will be implied if a reasonable reader of the contract, knowing all its provisions and the surrounding circumstances, would understand it to be implied is quite acceptable, provided that (i) the reasonable reader is treated as reading the contract at the time it was made and (ii) he would consider the term to be so obvious as to go without saying or to be necessary for business efficacy. (The difference between what the reasonable reader would understand and what the parties, acting reasonably, would agree, appears to me to be a notional distinction without a practical difference.) The first proviso emphasises that the question whether a term is implied is to be judged at the date the contract is made. The second proviso is important because otherwise Lord Hoffmann's formulation may be interpreted as suggesting that reasonableness is a sufficient ground for implying a term. (For the same reason, it would be wrong to treat Lord Steyn's statement in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459 that a term will be implied if it is "essential to give effect to the reasonable expectations of the parties" as diluting the test of necessity. That is clear from what Lord Steyn said earlier on the same page, namely that "[t]he legal test for the implication of ... a term is ... strict necessity", which he described as a "stringent test".) 24. It is necessary to emphasise that there has been no dilution of the requirements which have to be satisfied before a term will be implied, because it is apparent that Belize Telecom has been interpreted by both academic lawyers and judges as having changed the law. Examples of academic articles include C Peters The implication of terms in fact [2009] CLJ 513, P Davies, Recent developments in the Law of Implied Terms [2010] LMCLQ 140, J McCaughran Implied terms: the journey of the man on the Clapham Omnibus [2011] CLJ 607, and JW Carter and W Courtney, Belize Telecom: a reply to Professor McLauchlan [2015] LMCLQ 245). And in Foo Jong Peng v Phua Kiah Mai [2012] 4 SLR 1267, paras 34-36, the Singapore Court of Appeal refused to follow the reasoning in Belize at least in so far as "it suggest[ed] that the traditional 'business efficacy' and 'officious bystander' tests are not central to the implication of terms" (reasoning which was followed in Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] SGCA 43). The Singapore Court of Appeal were in my view right to hold that the law governing the circumstances in which a term will be implied into a contract remains unchanged following Belize Telecom. 25. The second point to be made about what was said in Belize Telecom concerns the suggestion that the process of implying a term is part of the exercise of interpretation. Although some support may arguably be found for such a view in Trollope at p 609, the first clear expression of that view to which we were referred was in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191, 212, where Lord Hoffmann suggested that the issue of whether to imply a term into a contract was "one of construction of the agreement as a whole in its commercial setting". Lord Steyn quoted this passage with approval in Equitable Life at p 459, and, as just mentioned, Lord Hoffmann took this proposition further in Belize Telecom, paras 17-27. Thus, at para 18, he said that "the implication of the term is not an addition to the instrument. It only spells out what the instrument means"; and at para 23, he referred to "The danger ... in detaching the phrase 'necessary to give business efficacy' from the basic process of construction". Whether or not one agrees with that approach as a matter of principle must depend on what precisely one understands by the word "construction". 26. I accept that both (i) construing the words which the parties have used in their contract and (ii) implying terms into the contract, involve determining the scope and meaning of the contract. However, Lord Hoffmann's analysis in Belize Telecom could obscure the fact that construing the words used and implying additional words are different processes governed by different rules. 27. Of course, it is fair to say that the factors to be taken into account on an issue of construction, namely the words used in the contract, the surrounding circumstances known to both parties at the time of the contract, commercial common sense, and the reasonable reader or reasonable parties, are also taken into account on an issue of implication. However, that does not mean that the exercise of implication should be properly classified as part of the exercise of interpretation, let alone that it should be carried out at the same time as interpretation. When one is implying a term or a phrase, one is not construing words, as the words to be implied are ex hypothesi not there to be construed; and to speak of construing the contract as a whole, including the implied terms, is not helpful, not least because it begs the question as to what construction actually means in this context. 28. In most, possibly all, disputes about whether a term should be implied into a contract, it is only after the process of construing the express words is complete that the issue of an implied term falls to be considered. Until one has decided what the parties have expressly agreed, it is difficult to see how one can set about deciding whether a term should be implied and if so what term. This appeal is just such a case. Further, given that it is a cardinal rule that no term can be implied into a contract if it contradicts an express term, it would seem logically to follow that, until the express terms of a contract have been construed, it is, at least normally, not sensibly possible to decide whether a further term should be implied. Having said that, I accept Lord Carnwath's point in para 71 to the extent that in some cases it could conceivably be appropriate to reconsider the interpretation of the express terms of a contract once one has decided whether to imply a term, but, even if that is right, it does not alter the fact that the express terms of a contract must be interpreted before one can consider any question of implication. 29. In any event, the process of implication involves a rather different exercise from that of construction. As Sir Thomas Bingham trenchantly explained in Philips at p 481: "The courts' usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract. The implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision. It is because the implication of terms is so potentially intrusive that the law imposes strict constraints on the exercise of this extraordinary power." 30. It is of some interest to see how implication was dealt with in the recent case in this court of Aberdeen City Council v Stewart Milne Group Ltd 2012 SLT 205. At para 20, Lord Hope described the implication of a term into the contract in that case as "the product of the way I would interpret this contract". And at para 33, Lord Clarke said that the point at issue should be resolved "by holding that such a term should be implied rather than by a process of interpretation". He added that "[t]he result is of course the same". 31. It is true that Belize Telecom was a unanimous decision of the Judicial Committee of the Privy Council and that the judgment was given by Lord Hoffmann, whose contributions in so many areas of law have been outstanding. However, it is apparent that Lord Hoffmann's observations in Belize Telecom, paras 17-27 are open to more than one interpretation on the two points identified in paras 23-24 and 25-30 above, and that some of those interpretations are wrong in law. In those circumstances, the right course for us to take is to say that those observations should henceforth be treated as a characteristically inspired discussion rather than authoritative guidance on the law of implied terms.”

“I agree with Lord Neuberger and Lord Carnwath that the critical point is that in Belize the Judicial Committee was not watering down the traditional test of necessity. I adhere to the view I expressed at para 15 of my judgment in the Mediterranean Salvage & Towage case (which is quoted by Lord Carnwath at para 62) that in Belize, although Lord Hoffmann emphasised that the process of implication was part of the process of construction of the contract, he was not resiling from the often stated proposition that it must be necessary to imply the term and that it is not sufficient that it would be reasonable to do so. Another way of putting the test of necessity is to ask whether it is necessary to do so in order to make the contract work: see the detailed discussion by Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239, 253-254.”

“33. The Court of Appeal in England decided to follow "this impressive series of North American authorities" (see page 232 E). It rejected the insurer's arguments that the purpose of the landlord's covenant to insure and to apply the insurance monies for reinstatement, was simply to relieve the tenant's liability under its repairing covenant, but not a liability for fire caused through its negligence (in the absence of an express exemption). The Court stated: "An essential feature of insurance against fire is that it covers fires caused by accident as well as by negligence. This was what the plaintiff agreed to provide in consideration of, inter alia, the insurance rent paid by the defendant. The intention of the parties, sensibly construed, must therefore have been that in the event of damage by fire, whether due to accident or negligence, the landlord's loss was to be recouped from the insurance monies and that in that event they were to have no further claim against the tenant for damages in negligence. Another way of reaching the same conclusion ... is that in situations such as the present the tenant is entitled to say that the landlord has been fully indemnified in the manner envisaged by the provisions of the lease and that he cannot therefore recover damages from the tenant in addition, so as to provide himself with what would in effect be a double indemnity." In this judgment I refer to the words I have italicised in that passage as the Rowlands principle (see also the headnote at [1986] QB 212 B-C). 34. The Court of Appeal also relied upon considerations of "justice, reasonableness and public policy" as providing complementary support for its conclusion (p 233C), which was based essentially upon the proper construction and effect of the lease itself. 35. Mr Butler submitted that in applying the principle in Rowlands in this case, for the word "fire" one should read "flood". Mr Davis agreed with that proposition. 36. The defendant also submitted that the Rowlands principle applies to the tenant's contractual liability under the tenancy just as much as to negligence on her part. The claimant accepted this proposition. Although the landlord and tenant cases referred to by the parties concerned claims in negligence for damages, there is clear authority to support the defendant's contention that the Rowlands principle applies to contractual liabilities as well as to negligence (see for example Guard Marine and Energy v China National Chartering Company Limited (The Ocean Victory) [2015] 1 Lloyds Reports 381 at paragraphs 74 to 75). In other words, the legal issue in this case depends upon the proper construction and effect of the tenancy agreement.”

“48. In my judgment, the following principles may be derived from the authorities:- (1) The court should construe the terms of the tenancy agreement in order to determine how the parties have agreed to allocate risk between themselves; (2) A covenant by a landlord with his tenant to insure the demised premises in return for mutual obligations by the tenant is an important indicator that the parties intended that the tenant (a) need not take out insurance for the risk covered by the landlord and, (b) would not be liable for any loss or damage suffered by the landlord falling within the scope of that which the landlord has agreed to cover; (3) The strength of that indicator will depend upon the other terms of the tenancy, including whether they provide some alternative explanation for the covenant to insure; (4) The strength of that indicator is greater where the tenant is contractually obliged to pay for, or to contribute towards, the cost incurred by the landlord of insuring the premises; (5) Other relevant indicators include terms of the tenancy which relieve the tenant from repairing or other contractual obligation in the event of damage by an insured risk, or which require the landlord to lay out insurance monies on remedying damage caused by an insured risk, or which suspend the obligation to pay rent whilst damage from an insured risk prevents use of the demised premises. But the application of the principle in Rowlands does not depend upon the inclusion of all or any of these terms in the tenancy agreement; (6) Where applicable the principle in Rowlands will defeat a claim brought against the tenant in negligence even in the absence of a clause expressly exonerating the tenant from liability for negligence. I would add that Woodfall's Law of Landlord and Tenant also treats the covenants discussed in Rowlands as factors or indicators in deciding whether the court should infer that the parties' common intention was that the landlord would look to an insurance policy rather than the tenant for indemnification, rather than as prerequisites for drawing that conclusion (see paragraph 11-104).”

“Where performance for some balance of the contract period remains (or is likely to remain) possible, and a claim is made in respect of that balance, the tests which have so far been discussed in relation to temporary impossibility obviously cannot apply… The test, in cases of the present kind, appears to turn rather on the ratio which the part remaining possible bears, or is likely to bear, to the whole of the specified performance; the lower that ratio, the more likely it is that the contract will be discharged. It will be convenient to refer to this test as “the proportionality test””; c. In the specific context of frustration of purpose, paragraph 9-002 states: “The general rule is that the question whether the contract is discharged is to be determined by reference to the time of the occurrence of the allegedly frustrating event. The contract will be discharged if at that time a reasonable person would have taken the view that the event would lead to a sufficiently serious interference with performance to bring about discharge. It is not necessary to wait and see whether such interference actually takes place or would have taken place if attempts to perform had not been abandoned; indeed, the contract will be discharged even though subsequent events show that there would have been no such interference.”

“Apart from the Law Reform (Frustrated Contracts) Act 1943 , the doctrine of frustration brings the whole contract to an end, and in the present case, apart from any adjustment under that Act and any statutory right to compensation under the closure order, the effect of frustration, had it been applicable, would have been to throw the whole burden of interruption for 20 months on the landlord, deprived as he would be of all his rent and imposed as he would have upon his shoulders the whole danger of destruction by fire and the burden of reletting after the interruption. As it is, with the same qualification as to possible compensation, the tenant has to pay the entire rent during the period of interruption without any part of the premises being usable at all, together with the burden (such as it may be) of the performance of the other tenant's covenants which include covenants to insure and repair. These are no light matters.”

“1. Frustration of a contract takes place when there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such case the law declares both parties to be discharged from further performance.”

“I would, however, presume to suggest that consideration should be given to whether the English doctrine of frustration could be made more flexible in relation to leases. The Act of 1943 seems unlikely to vouchsafe justice in all cases. As often as not there will be an all-or-nothing situation, the entire loss caused by the frustrating event falling exclusively on one party, whereas justice might require the burden to be shared. Nor is this situation confined to leases.” both parties to be discharged from further performance.”

"... the doctrine of frustration is modern and flexible and is not subject to being constricted by an arbitrary formula."

"Doubtless God could have made a better berry, but doubtless God never did."

“My Lords, no doubt, even with this limited interruption the appellant's business will have been severely dislocated. It will have had to move goods from the warehouse before the closure and to acquire alternative accommodation. After reopening the reverse process must take place. But this does not approach the gravity of a frustrating event. Out of 10 years it will have lost under two years of use: there will be nearly three years left after the interruption has ceased. This is a case, similar to others, where the likely continuance of the term after the interruption makes it impossible for the lessee to contend that the lease has been brought to an end. The obligation to pay rent under the lease is unconditional, with a sole exception for the case of fire, as to which the lease provides for a suspension of the obligation. No provision is made for suspension in any other case: the obligation remains. I am of opinion therefore that the lessee has no defence to the action for rent, that leave to defend should not be given and that the appeal must be dismissed.”

“The appellants were undoubtedly put to considerable expense and inconvenience. But that is not enough. Whenever the performance of a contract is interrupted by a supervening event, the initial judgment is quantitative - what relation does the likely period of interruption bear to the outstanding period for performance? But this must ultimately be translated into qualitative terms: in the light of the quantitative computation and of all other relevant factors (from which I would not entirely exclude executed performance) would outstanding performance in accordance with the literal terms of the contract differ so significantly from what the parties reasonably contemplated at the time of execution that it would be unjust to insist on compliance with those literal terms? In the instant case, at the most favourable to the appellants' contention, they could, at the time when the road was closed, look forward to pristine enjoyment of the warehouse for about two thirds of the remaining currency of the lease. The interruption would be only one sixth of the total term. Judging by the drastic increase in rent under the rent review clause (more than doubled), it seems likely that the appellants' occupation towards the end of the first quinquennium must have been on terms very favourable to them. The parties can hardly have contemplated that the expressly-provided-for fire risk was the only possible source of interruption of the business of the warehouse - some possible interruption from some cause or other cannot have been beyond the reasonable contemplation of the parties. Weighing all the relevant factors, I do not think that the appellants have demonstrated a triable issue that the closure of the road so significantly changed the nature of the outstanding rights and obligations under the lease from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations.”

“111. In my judgment, the application of the doctrine of frustration requires a multi-factorial approach. Among the factors which have to be considered are the terms of the contract itself, its matrix or context, the parties' knowledge, expectations, assumptions and contemplations, in particular as to risk, as at the time of contract, at any rate so far as these can be ascribed mutually and objectively, and then the nature of the supervening event, and the parties' reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances. Since the subject matter of the doctrine of frustration is contract, and contracts are about the allocation of risk, and since the allocation and assumption of risk is not simply a matter of express or implied provision but may also depend on less easily defined matters such as “the contemplation of the parties”, the application of the doctrine can often be a difficult one. In such circumstances, the test of “radically different” is important: it tells us that the doctrine is not to be lightly invoked; that mere incidence of expense or delay or onerousness is not sufficient; and that there has to be as it were a break in identity between the contract as provided for and contemplated and its performance in the new circumstances. 112. What the “radically different” test, however, does not in itself tell us is that the doctrine is one of justice, as has been repeatedly affirmed on the highest authority. Ultimately the application of the test cannot safely be performed without the consequences of the decision, one way or the other, being measured against the demands of justice. Part of that calculation is the consideration that the frustration of a contract may well mean that the contractual allocation of risk is reversed. A time charter is a good example. Under such a charter, the risk of delay, subject to express provision for the cessation of hire under an off-hire clause, is absolutely on the charterer. If, however, a charter is frustrated by delay, then the risk of delay is wholly reversed: the delay now falls on the owner. If the provisions of a contract in their literal sense are to make way for the absolving effect of frustration, then that must, in my judgment, be in the interests of justice and not against those interests. Since the purpose of the doctrine is to do justice, then its application cannot be divorced from considerations of justice. Those considerations are among the most important of the factors which a tribunal has to bear in mind. 113. Mr Hamblen submitted that whereas the demands of justice play an underlying role, they should not be overstated. He referred the court to Chitty at para 23–008 (“But this appeal to the demands of justice should not be taken to suggest that the court has a broad absolving power whenever a change of circumstances causes hardship to one of the contracting parties … Such a test is too wide, and gives too much discretion to the court”). I respectfully agree. Mr Hamblen also referred to Treitel at para 16–009 (“The “theory” does not, in other words, supersede the rules which determine the circumstances in which the doctrine of frustration operates”). I would again respectfully agree, as long as it is not sought to apply those rules as though they are expected to lead one automatically, and without an exercise of judgment, to a determined answer without consideration of the demands of justice.”

“Now the argument on behalf of the plaintiffs is this: the effect of the Proclamation was to render the export of the goods illegal, and the exporter or shipper would be liable to a penalty of 100l., and therefore the plaintiffs were released from further proceeding with the contract. The general rule of law is that where the performance of a contract has been rendered illegal and therefore impossible by Act of Parliament passed after the contract was made, or by an act of State, which of course would include the Proclamation, then the promisor is excused from performing his promise. In Barker v. Hodgson 33 Lord Ellenborough said: “If indeed the performance of this covenant had been rendered unlawful by the Government of this country, the contract would have been dissolved on both sides, and this defendant, inasmuch as he had been thus compelled to abandon his contract, would have been excused for the non-performance of it, and not liable to damages.”

“Now the plaintiffs relied upon cases such as Esposito v. Bowden 42 which show that where a contract involves trading with an enemy it is illegal. No doubt that is so: a contract involving trading with the enemy becomes at once ipso facto illegal; and the ground of that is put by Lush J. in Geipel v. Smith 43 as “a state of war must be presumed to be likely to continue so long, and so to disturb the commerce of merchants, as to defeat and destroy the object of a commercial adventure like this.”

“On the high authority of these dicta and as a matter of principle I hold that there may exist lawful excuses for non performance of a building covenant in a long lease and such excuses would provide a defence to an action for forfeiture for breach of covenant even though they would not provide the defence to a claim for rent.”

“The result is that John Lewis is not in breach of its obligations in clause III. I should add this, however; my finding does not discharge John Lewis from its obligations. The leases continue for over 930 years. Circumstances will change. There may come a time when John Lewis no longer has a lawful excuse for non-performance of the obligation to demolish and rebuild.”

“The Tenant will pay to the Landlord yearly during the Term (and proportionately for any part of a year) the following sums, each by way of rent. 2.3.1 Firstly, from and including 31 August 2007 to and including 15 February 2008 a peppercorn (if demanded) and from and including 16 February 2008 a yearly rent of THREE HUNDRED AND FIVE THOUSAND POUNDS (£305,000). This rent shall be paid clear of all deductions, counterclaims set off whatsoever (except as may be required by statute) by equal quarterly payments in advance on or before the usual quarter days in every year. The first payment of this rent for the period from 31 August 2007 to 24 December 2007 (both dates being inclusive) shall be made on the date of this Lease. The rent shall increase on every fifth anniversary of 31 August 2007 by two per cent per annum compounded over the previous five year period. The increased rent in each case shall become payable from and including the fifth anniversary of 31 August 2007. 2.3.2 Secondly, from and including the Service Charge Commencement Date, a service charge calculated and payable in the manner specified in Schedule 4 (provided that the Landlord shall not be entitled to exercise the remedy of distress in the case of a bona fide dispute of balancing service charge payments made pursuant to paragraph 6 of Schedule 4 of this Lease). 2.3.3 Thirdly, the sums specified in clause 3.29 (interest). 2.3.4 Fourthly, any VAT chargeable on the yearly rents and Service Charge.”

“The Defendant is the tenant of premises known as part of the Woolworth Building, Bank Hey Street, Blackpool, Lancashire pursuant to a lease dated 28 March 2008 made between (1) Development Securities (Blackpool Developments) Limited and (2) Sports World International Limited. The Claimant is the Landlord. Pursuant to Clause 3.1.1 of the Lease, the Defendant agreed to pay the rent of £305,000 plus VAT per annum (equating to £76,250 plus VAT per quarter). The Defendant has failed to make payments of rent in the sum of £92,948.75. The claimant claims interest under section 69 of the County Courts Act 1984 at the rate of 8% a year from 25/03/2020 to 16/06/2020 on £92,948.75 and also interest at the same rate up to the date of judgment or earlier payment at a daily rate of £20.31.”

“13. In King v. Hoare (1844) 13 M & W 494 , Parke B said at page 504: "If there be a breach of contract, or wrong done, or any other cause of action by one against another, and judgment be recovered in a court of record, the judgment is a bar to the original cause of action, because it is thereby reduced to a certainty, and the object of the suit attained, so far as it can be at that stage; and it would be useless and vexatious to subject the defendant to another suit for the purpose of obtaining the same result. Hence the legal maxim, 'transit in rem judicatam,' – the cause of action is changed into matter of record, which is of a higher nature, and the inferior remedy is merged in the higher." 14. As Lord Sumption observed, the principle of merger produces the same effect as cause of action estoppel but is a discrete rule of law in its own right.”

“17. Accordingly, the proper approach to this case is as follows: 17.1 The starting point is to consider whether the second claim is brought upon the same cause of action as the first. 17.2 The focus is upon comparing the causes of action relied upon in each case and not the particulars of breach or loss and damage. New particulars are not particulars of a new cause of action if they seek to plead further particulars of breach of the same promise or tort or further particulars of loss and damage. 17.3 Both cause of action estoppel and merger operate to prevent a second action based on the same cause of action. Such bar is absolute and applies even if the claimant was not aware of the grounds for seeking further relief, unless the judgment in the first case can be set aside. 17.4 Even if the cause of action is different, the second action may nevertheless be struck out as an abuse under the rule in Henderson v. Henderson where the claim in the second action should have been raised in the earlier proceedings if it was to be raised at all. In considering such an application: a) The onus is upon the applicant to establish abuse. b) The mere fact that the claimant could with reasonable diligence have taken the new point in the first action does not necessarily mean that the second action is abusive. c) The court is required to undertake a broad, merits-based assessment taking account of the public and private interests involved and all of the facts of the case. d) The court's focus must be on whether, in all the circumstances, the claimant is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. e) The court will rarely find abuse unless the second action involves "unjust harassment" of the defendant.”

“In times of uncertainty the law must provide a solid practical and predictable foundation for the resolution of disputes and the confidence necessary for an eventual recovery… Contractual rights are to be evaluated by applying settled principles to the contract in question. Legal certainty remains paramount and gives the surest basis for resolution.”