Oakrock Ltd v Travelodge Hotels Ltd & Ors [2015] EWHC 30 (TCC)

Case No HT-2013-000014(formerly HT-13-399)[2015] EWHC 30 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Rolls Building, 7 Rolls BuildingsDate 16 January 2015
London EC4A 1NL
Before
MR. JUSTICE EDWARDS-STUART
Between
Oakrock LimitedClaimant
Michael Todd Esq QC and Robert Clay Esq(instructed by Carter Lemon Camerons LLP) for ClaimantAnthony Tanney Esq (instructed by Addleshaw Goddard LLP) for First DefendantHearing Hearing dates: 2 nd December 2014
JudgmentMr. Justice Edwards-Stuart:Introduction
[1]This is an application by the first defendant (“Travelodge”) for summary judgment against the claimant for the whole of the claim on the ground that the claim has no real prospect of success and that there is no other compelling reason why the case should be disposed of at trial.[2]The claimant is a company owned and controlled by Mr. and Mrs. Cappellazzi, who have spent their working lives in the hospitality business. In about 2001 the claimant bought, refurbished and then ran a hotel known as The New Wellington Hotel, Tunbridge Wells. Travelodge is the well-known hotel chain. In 2007 the Cappellazzis decided that they had too much work and so they decided to let the hotel. In November 2007 the claimant entered into a Business Sale Agreement (“the Agreement”) with Travelodge by which the claimant agreed to grant a 35 year lease to Travelodge on the understanding that Travelodge would carry out refurbishment work at the hotel in order to make it suitable for trading under the Travelodge brand. The claimant was to fund the work up to a limit of £1.8 million, in return for which the amount invested would be “rentalised” at 7%. In other words, for each £100,000 that the claimant put in the rent would be increased by £7,000.[3]The claimant alleges that the refurbishment work was not fully or properly carried out and has brought claims against Travelodge, as first defendant, against Wakemans Limited, as second defendant, and against Anglo-Holt Construction Ltd, as third defendant. The third defendant was a building contractor who carried out the work and the second defendant, as project manager, was responsible for supervising the work. The claimant alleges also that Travelodge was significantly overcharged for the work that was carried out. It is alleged, as against Travelodge, that these failures constituted breaches of the Agreement. The second and third defendants, who are sued under direct warranties, took no part in this application.[4]Following the recession the Travelodge Group, which was the tenant of over 500 hotels in the United Kingdom, found itself in serious financial difficulty so that major restructuring of its obligations and resources was required if it was to continue to trade. As a result it entered into a Company Voluntary Arrangement (“CVA”), for which a proposal was issued to its creditors on 17 August 2012. The proposals were approved and the CVA was entered into on 5 September 2012. The hotels of which Travelodge was the tenant were divided into five categories having regard to their financial viability and value to the Travelodge brand. The strongest hotels financially, which were assessed as being viable on current trading performance, were classed as Category 1. For those hotels arrangements continued as before. Hotels which were not considered financially viable on the basis of current performance, but which were considered to be capable of operating at a profit if the rent payable was reduced by 25% were classed as Category 2. It is not necessary to say any more about Categories 3, 4 and 5.[5]The claimant’s hotel was classed as Category 2 and so, from the effective date of the CVA, the rent was reduced by 25% for a period of three years. Thereafter, the rent could be adjusted upwards in line with an agreed formula.[6]This was obviously a serious blow to Mr. and Mrs Cappellazzi. It was not until they were faced with the proposals for the CVA that they visited the hotel and found, as they contend, that the work had been badly carried out and that some work had not been carried out at all. The claimant’s claim against Travelodge is put in several ways, but at the root of it is a contention that if the refurbishment work had been fully and properly carried out the hotel would have been placed in Category 1, so that there would have been no loss of rent. Alternatively, since the CVA gave the claimant the option of vacating the lease, it would have been able to adopt that course and to relet the hotel for a rent greater than that payable under the terms of the CVA.[7]Travelodge submits that these claims are misconceived because they are bound to fail by virtue of the terms of the CVA. It has therefore applied to strike them out. There is an additional claim by the claimant in respect of furniture and equipment that was in the hotel on completion of the sale but which would not be required by Travelodge following completion of the refurbishment work and which, it submits, it was entitled to have returned to it. Travelodge does not contend that this claim is barred by the terms of the CVA, but seeks to strike it out on the basis that, having regard to the terms of the Agreement, it too is bound to fail.[8]Travelodge was represented by Mr. Anthony Tanney, instructed by Addleshaw Goddard, and the claimant was represented by Mr. Michael Todd QC and Mr. Robert Clay, instructed by Carter Lemon Camerons.

The law

[9]In Easyair Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) Lewison J (as he then was) summarised the principles which the court should bear in mind when considering an application for summary judgment by a defendant. He said, at [15]:
“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.”
[10]I propose to approach this application in the light of these principles.

The claims in respect of the work that was not fully or properly carried out

[11]By Clause 9.5 of the CVA, the claimant had the right to take back the Lease by giving Travelodge a Notice to Vacate by a certain date. Once given, the notice could not be withdrawn without Travelodge’s agreement. The claimant contends that, as a result of the omission of some of the work that should have been carried out and/or the fact that such work as was carried out was of a poor quality, it would not have been possible to relet the hotel at any rent approaching the reduced rent which Travelodge was liable to pay under the terms of the CVA. Accordingly, it says that it suffered a recoverable loss and claims damages in respect of it.[12]It is perhaps worth considering what that loss would have been. On one footing it would have been based on the difference between the rent that would have been obtainable on the open market if the work had been fully and properly carried out and the rent obtainable because it was not properly carried out. However, if the rent obtainable if the work had been properly carried out would have been lower than or equal to the rent payable pursuant to the terms of the CVA, the claimant would suffer no loss because it could do as well or better by accepting the rent payable under the CVA.[13]On this scenario the claimant only has a claim if it can prove that, had the work been properly carried out, the rental income that it would have obtained from an alternative tenant would have been greater than 75% of the rent of £434,000 which was the sum that Travelodge was originally required to pay following completion of the works.[14]There are two other ways in which the case is put arising out of the operation of the CVA. The first is that, if Travelodge had carried out the work properly, the hotel would have traded much more profitably so as to put it in Category 1 under the CVA. In this event, Travelodge would have continued to pay the full rent payable following the works. The second way of putting the case is based on an allegation that Travelodge was overcharged for the work with the result that the claimant advanced more money than it should have done, thereby increasing the rent payable by Travelodge. Had the claimant been charged the proper and lower amount, the rent payable under the lease would have been correspondingly less and so the hotel would have been more profitable and, as a result, would probably have been placed in Category 1.[15]Finally, the claimant has a different argument based on overcharging that has nothing to do with the CVA. This is because Travelodge was overcharged for the work (according to the claimant) so that the claimant paid more than it should have done by way of its investment in the refurbishment works in 2008 and thereby suffered a loss. Subject to one point (referred to as the “floor” point), this argument is to my mind hopeless. As I have already explained, the claimant received consideration for advancing the money for the works in the form of an income stream (by way of rentalisation of that money) of 7% of the sums advanced. The claimant does not argue, and in my view could not argue in the circumstances of this case, that this was an inadequate return. I consider that, by advancing more than it should have done by way of capital, the claimant suffered no immediate loss because it received an agreed consideration for that advance. The loss that the claimant has actually suffered is that it is no longer receiving 7% of the money invested but, in effect, only 75% of 7% - at least for the 3 year Rent Concession Period.[16]The “floor” argument is based on the fact that, irrespective of the amount spent by Travelodge, the Agreement provides that the figure for “Total Development Costs” was not to be less then £1.45 million. Thus, suppose that Travelodge spent £1.25 million on the refurbishment, it would still have to pay rent based on a notional expenditure of £1.45 million. Thus, says the claimant, based on these figures it would have received a 7% income on the £200,000 that it never spent: a loss of £14,000 per annum. This, of course, depends on the claimant being able to prove that the true amount of the Total Development Costs, if properly spent, would have been less than £1.45 million.[17]Travelodge’s answer to this head of claim is that it could never have been the intention of the parties that such a loss would be recoverable. Travelodge submits that it is inherently improbable that the parties anticipated that the claimant should be able to recover interest on money that it never spent or that Travelodge should pay rent based on the costs of improvements that were never incurred. At paragraph 89 of his skeleton argument, Mr. Tanney then developed the argument as follows: i) The rentalisation provisions were carefully drafted so that if there was money unspent at the end of the project, the rent under the Lease would be adjusted by a further Deed of Variation so that Travelodge did not pay rent on the unspent sums. Thus, if the total works had cost £90,000 less than the claimant had paid, it would have got that sum back, and the rent would have been adjusted downwards accordingly. This suggests that the parties did not intend the claimant to get a rental benefit, nor Travelodge to assume a rental burden, in respect of money that the claimant never spent. ii) The parties expressly provided that Travelodge should use reasonable endeavours to procure that the Refurbishment Costs did not exceed £1.8 million (by virtue of Schedule 10 to the Agreement, at paragraph 3.7). Below that figure, Travelodge had no obligation. Travelodge contends that the claimant’s contention sits very uneasily with this provision.[18]For the purpose of this application, I can deal with this point shortly. The points made by Travelodge may or may not be correct, but in the light of the principles that I have already set out I consider that the court should not decide a point that turns on the presumed intention of the parties, unless it is satisfied that all the evidence that might be necessary to determine the point is before the court or the answer is absolutely clear. I do not consider that this is a case in which I can be confident that all the evidence that may be relevant is before the court or that it is one where the answer is sufficiently clear to be capable of determination by way of summary judgment.[19]I will now turn to the relevant provisions of the CVA.[20]By Section 2, “Terms of the Proposal”:
“3. MORATORIUM 3.1 Save as provided in Clause 3.3, with effect from the Effective Date [which was 4 September 2012], no Landlord or Compromised Contingent Property Creditor or Expired Lease Creditor shall be entitled to take or continue any legal process against [Travelodge] or its Assets (whether by way of demand, legal proceedings, alternative determination process (including an expert determination process), the levying of distress, execution of judgment or otherwise) in any jurisdiction whatsoever for the purpose of: (a) obtaining payment of any Liability relating directly or indirectly to a Lease or Previous Lease or taking any action in relation to the enforcement of any covenant or obligation of [Travelodge] under a Lease or Previous Lease, licence, authorised guarantee agreement or other document supplemental to a Lease or Previous Lease; or (b) placing [Travelodge] into liquidation, administration or any analogous proceedings in any jurisdiction. … 5. THE EFFECT OF THE CVA ON ORDINARY UNSECURED CREDITORS 5.1 Subject to Clauses 5.2 and 5.3 below, the CVA shall not affect the rights of the Ordinary Unsecured Creditors in respect of Ordinary Unsecured Liabilities.”
The expression “Ordinary Unsecured Creditors” was defined as excluding any person claiming as a Landlord. (a) obtaining payment of any Liability relating directly or indirectly to a Lease or Previous Lease or taking any action in relation to the enforcement of any covenant or obligation of [Travelodge] under a Lease or Previous Lease, licence, authorised guarantee agreement or other document supplemental to a Lease or Previous Lease; or (b) placing [Travelodge] into liquidation, administration or any analogous proceedings in any jurisdiction.[21]Clause 9 of Section 2, “The Effect of the CVA on Category 2 Landlords”, contained the following provisions:
“9.1 During the Rent Concession Period, [Travelodge] will not be obliged to pay Compromised Lease Rent to the Category 2 Landlords in the amounts provided for in the Category 2 leases. Instead, [Travelodge] shall be obliged to pay Compromised Lease Rent in accordance with Clause 9.2 and Clause 14 (Rent Concession Agreement). 9.2 The amount payable to each Category 2 Landlord under each Category 2 Lease shall be 75% (seventy-five per cent.) of the Contractual Rent and of the Turnover Rent (if any) in the period from the Payment Date until expiry of the Rent Concession Period, plus all contractual amounts payable in respect of insurance, service charge, any applicable Superior Landlord Rent and, separately, Rates. 9.3 ... 9.4 [Travelodge’s] obligation to make the payments referred to in this Clause 9 and Clause 17 (The THL Compromised Leases Fund) shall be accepted in full and final satisfaction of any Liability to a Category 2 Landlord under or arising out of or in relation to the relevant Category 2 Lease during the Rent Concession Period, and whether in respect of the Contractual Rent, Turnover Rent, service charge, insurance, dilapidations, any applicable Superior Landlord Rent, termination amount or otherwise. 9.5 If a Category 2 Landlord requires [Travelodge] to vacate a Category 2 Premises during the Rent Concession Period, it shall be entitled to deliver to [Travelodge] a notice to vacate (‘Notice to Vacate’) in the form set out at Schedule 23 (Notice to Vacate) together with any additional notice(s) as may be required by law to constitute a valid surrender, forfeiture or irritancy (as the case may be), giving not less than 45 days’ notice to that effect and such notice shall be given no later than 45 days prior to 4 March 2013 (the ‘Notice Period’). No Notice to Vacate may require [Travelodge] to vacate a Category 2 Premises later than the expiry of the Rent Concession Period. Once given, a Notice to Vacate may not be withdrawn, save by agreement with [Travelodge].”
The “Rent Concession Period” was defined as a period of three years commencing on 29 September 2012. Clause 9.11 was also relied on, which provided as follows:
“(a) each Category 2 Landlord waives and releases [Travelodge] from any breaches or defaults of any terms of a Category 2 Lease that may have arisen or may arise as a result of any CVA Related Event; (b) the Category 2 Landlords shall not be entitled as a result of any CVA Related Event: ... (iii) to enforce any other contractual or other right that they may have in their capacity as Category 2 Landlords in respect of Category 2 Leases.” (iii) to enforce any other contractual or other right that they may have in their capacity as Category 2 Landlords in respect of Category 2 Leases.”
[22]Travelodge relies on clauses 3, 9.4 and 9.11. It now accepts that it cannot rely on a limitation argument based on clause 3.1 in the light of an unreported decision of Mann J in Tanner v Everitt [2004] EWHC 1130 (Ch): Mr. Tanney concedes that this decision suggests that a CVA may include an implied term to the effect that the company will not rely upon the expiry of the limitation period whilst the CVA is in force. Whilst this decision is not binding on me, Mr. Tanney realistically accepts that there is no basis upon which he could properly submit that I should not follow it. I should say that Mr. Tanney discovered this case shortly before the hearing and very properly drew my attention to it.[23]However, Travelodge submits nevertheless that the claimant is seeking to obtain payment “… of any Liability relating directly or indirectly to a Lease ... or other document supplemental to a Lease” so that the claim is barred by clause 3. Mr. Tanney submitted, first, that the Agreement is itself a “Lease” under the CVA because of the definition of a Category 2 Lease in the CVA and, second, in the alternative, that the actual lease is the Lease for the purposes of the Moratorium and the Agreement is an “… other document supplemental to the Lease”. I reject the first submission for the reasons which I give below. As to the alternative submission, I do not consider that the Agreement is an “… other document supplemental to the Lease”: if anything, it is the Lease that is supplemental to the Agreement. But in any event I consider that this alternative submission also fails for the reasons given below in relation to the first submission.[24]In both his skeleton argument and his oral submissions Mr. Tanney relied strongly on clause 9. This is because Clause 9.4 is expressed to be in full and final settlement of any Liability to a Category 2 Landlord under or arising out of or in respect of a Category 2 Lease during the Rent Concession Period.[25]In so far as the claimant is claiming for the loss of the rent following the making of the CVA on the ground of Travelodge’s breach of the Agreement, the question is whether it is a claim in respect of a “Liability” arising under a Category 2 Lease during the Rent Concession Period. The term “Liability” is defined as meaning:
“… any obligation of a person, whether it is present, future or contingent, whether or not its amount is fixed or liquidated, whether or not it is disputed, whether or not it involves the payment of money, whether it is secured or unsecured and whether it arises at common law, in equity, by contract, or by statute in England ...”
[26]In my view this wording is apt to cover a loss that arises out of an obligation to pay the rent due under a Category 2 Lease during the Rent Concession Period. Travelodge’s obligation under the Lease was to pay the contractual rent (and Turnover Rent, if any). From the effective date of the CVA its provisions relieved Travelodge from that obligation to the extent of 25% during the Rent Concession Period. It seems to me therefore that the claim for the 25% rent lost during the Rent Concession Period is caught by clause 9.4, so that the claimant has no claim for the difference between the original rent and the reduced rent during the Rent Concession Period.[27]However, I do not consider that the same consequence follows in relation to the claimant’s claim for the loss of rent that would have resulted from the giving of a Notice to Vacate. As I have said, the claimant’s case is that the condition of the hotel was so poor as a result of Travelodge’s failure to carry out the work properly that it could not be let for even 75% of the original contractual rent.[28]Thus the claim under this head proceeds on the footing that, if the work been properly carried out, the claimant would have given notice under clause 9.5 and would have been able to let the hotel for a rent a greater than the reduced rent payable during the Rent Concession Period. So analysed, I do not consider that this is a claim in respect of any obligation owed by Travelodge arising under or in relation to the Lease during the Rent Concession Period because there would, by definition, no longer be such a lease in existence.[29]In my view, therefore, a claim put on this basis is not excluded by clause 9.4.[30]For similar reasons, I consider that it is not caught by clause 9.11 either. Sub-clauses 9.11(a) and 9.11(b) both refer to breaches of or enforcement of contractual rights in relation to Category 2 Leases arising as a result of a CVA Related Event. It is clear in my view that the claimant’s claim on this basis is not for breach of a term of the Category 2 Lease or to enforce a right under it. The claimant’s claim is for breach of the Agreement.[31]However, Mr. Tanney had an answer to this. He submitted that because a Category 2 Lease was defined to mean the “real estate leases or agreements for lease the details of which are listed in Schedule 6” (my emphasis), this meant that clause 9.11 excluded liability for breach of contract in relation both leases and agreements for lease.[32]In fact, Schedule 6 does not identify any agreements or leases, but only the site, the site address and the direct landlord. On page v of the CVA Proposal it is recorded that Travelodge is tenant of 505 hotel sites and is currently a party to contracts for the development of or agreements for lease in relation to 52 new hotels. The latter category are stated to be the subject of Schedule 5 (in which 52 sites are listed).[33]The definitions of “Leases” in categories 1-4 each refer to “real estate leases or agreements for lease”, whereas the definition for Category 5 refers only to any “agreement for lease”. By way of example, the definition of “Category 1 Leases” is as follows:
“… those real estate leases or agreements for lease the details of which are listed in Schedule 5 (List of Category 1 Leases) and any Category 5 Leases in respect of which a real estate lease is completed pursuant to an agreement for lease relating to a Category 5 Premises after the date of this Proposal but in advance of the Effective Date ...”
[34]The effect of this definition is that any leases completed pursuant to the Agreements for Lease in Category 5 prior to the Effective Date become Category 1 Leases (this is put beyond any doubt by clause 13.3).[35]Read literally, in relation to a Category 5 property the definition of Category 1 Leases can only incorporate the Agreement for Lease because that is the only type of contract that falls within the definition of a Category 5 Lease. However, since it is the grant of the lease that triggers the transfer of a property from Category 5 to Category 1, it must have been the intention of the parties that it was the lease itself that became a Category 1 Lease with the result that the Agreement for Lease drops out of the picture.[36]It is clear from the terms of the CVA Proposal that the reason behind it was that the Travelodge Group’s existing financial and lease obligations were no longer sustainable (see clauses 3.4 and 3.15). What was required was a solution to the Group’s “… impending covenant defaults and upcoming maturities of the Expiring Facilities” (clause 3.5). In my view, the object of the CVA was to reduce Travelodge’s expenditure on rent for the immediate future and to restructure its borrowings.[37]Taking its provisions as a whole, I consider that the use of the disjunctive “or” in the definition of Category 2 Leases means that a Category 2 Lease is either the agreement for lease or the lease itself - it must be one or the other - but it will be the lease itself once it has been executed. Accordingly, I reject Mr. Tanney’s submission that clause 9.11 excludes a liability that arises under an agreement for lease in the case of a property in respect of which the lease had been entered into prior to the CVA. For the same reasons, I reject Mr. Tanney’s submissions based on the Moratorium provision as I have already mentioned.[38]In his skeleton argument Mr. Tanney also mentioned clause 22.1, which comes under the heading “Full and Final Settlement”. This provides as follows:
“Upon the Effective Date, the provisions of the CVA shall constitute a compromise of all CVA Claims and the payments to be made pursuant to the CVA (including pursuant to the Leases as modified or varied) to any CVA Creditor shall be in full and final settlement of any CVA Claim.”
A “CVA Claim” is defined as meaning any claim against Travelodge in respect of a CVA Liability. A “CVA Liability” means any liability of Travelodge which would be provable under rule 12.3 of the Insolvency Rules against Travelodge if it had been wound up on the Creditors’ Meeting Date.[39]However, in his skeleton argument Mr. Tanney did not pursue any arguments based expressly on this provision. In his oral submissions he did not mention it at all. This may have been because it was arguable that the claimant had suffered no loss (or at least no loss that would justify the making of a claim and therefore being capable of proof in a winding up) until the CVA was made. Mr. Tanney having made no mention of this clause in his oral submissions, Mr. Todd, quite understandably, did not make any submissions on it. In the circumstances, it seems to me that it would be inappropriate for the court to express any conclusions on the effect of clause 22.1 on this application. I therefore decline to do so.

The inventory claim

[40]This claim is based on clause 13.8 of the Agreement. This provides as follows:
“The Buyer and the Seller acknowledge that there may be items in the Inventory which the Buyer may in its absolute discretion not require post Completion. Following completion of the Inventory, the Buyer will notify the Seller in writing of such items (if any) and the Seller shall have 5 Business Days from receipt of such notice in which to notify the Buyer that it wishes to take such items. Such items shall be transferred to the Seller at no cost and the Seller shall be responsible for the collection and removal of such items from the Premises and all costs associated with such collection and removal.”
[41]The claimant’s case, as set out in the witness statement of Mr. Cappellazzi, is that it was the intention of the parties that Travelodge would take over the hotel in November 2007 as a going concern and would continue to trade as an unbranded hotel until the refurbishment work started in about January 2008. There were therefore many items belonging to the claimant that Travelodge would need during this short period of unbranded trading, but for which it would have no need once the refurbishment work was completed and the hotel had begun trading under the Travelodge banner. It is the claimant’s contention that, once the refurbishment work started, Travelodge was obliged to notify it of any items that it would not require following completion of the refurbishment so that the claimant could collect it if they so wished. This, it is alleged, did not happen. The claim is for the value of a number of items that the claimant asserts were not required by Travelodge but which, in breach of the Agreement, the claimant was given no opportunity to recover.[42]The Agreement was entered into on 2 November 2007. Completion took place on 12 November 2007 and the new lease was entered into on the same day. In a witness statement prepared for this application, Mr. John Hardy, who worked as a consultant for Travelodge, stated that he met Mr. Cappellazzi on site on 12 November 2007 in order to agree the inventory, which had already been prepared in draft, prior to completion later that day.[43]I did not understand Travelodge to be suggesting that the inventory claim was affected by the CVA. Its argument, based on a proposed amendment to its application, was that Travelodge must have required all of the items on the inventory in order to be able to trade during the short period between completion on 12 November 2007 and the start of the refurbishment works early the following year. Indeed, Mr. Hardy said in his witness statement that Travelodge used all the furniture in the hotel during that short period of trading (a fact which was not challenged by Mr. Cappellazzi in his witness statement). However, he says that notwithstanding the legal position, attempts were made to return to the claimant certain items that Travelodge did not want after the refurbishment.[44]The short point raised by Travelodge is that the only items that could be the subject of this claim would be those which Travelodge did not require - for any purpose however short - following completion. Since it required all (or almost all) the items listed on the inventory during the short period of unbranded trading following completion, there was nothing, or virtually nothing, upon which clause 13.8 could bite. The Furniture and Equipment which was to be transferred to Travelodge under the Agreement was:
“… the furniture, equipment, tools, office and computer equipment and all other chattels, owned or used by the Seller at the Completion Date in connection with the Business being the items listed in the Inventory together with all licences, permits, approvals, registrations and similar rights with respect thereto.”
[45]If Travelodge is right, then clause 13.8 is rendered almost empty of content, as both parties appear to accept. The issue is whether the words “… which the Buyer may in its absolute discretion not require post Completion” (my emphasis) refer to items that were not required the moment completion took place or to items for which Travelodge would have no long-term requirement (ie. following the interim period of unbranded trading). If Travelodge’s argument is correct, it is hard to see why any unwanted items which were not in current use at the hotel would have found their way into the inventory in the first place. It would have made far more sense to prepare a list (in parallel with the preparation of the inventory) of those items that Travelodge would not require at all.[46]Is seems to me that the submissions on behalf of Travelodge do not sit easily with ordinary notions of business common sense. I consider that it is far more likely that clause 13.8 was intended to deal with items that Travelodge did not want in the long term, in other words once the refurbishment work had been completed and the hotel had begun trading under the Travelodge brand. However, I can see that it might not have been immediately apparent to Travelodge whether or not it would have a long term use for some items of furniture and so clause 13.8 was concerned with what was to be done with any items which Travelodge might decide that it did not want in the refurbished hotel.[47]However, at its lowest I do not consider that this is a claim which is bound to fail on the basis of the submissions put forward by Travelodge. The claimant’s position is at least reasonably arguable, and in any event I consider that it is an issue that should not be determined until the court has heard all the relevant evidence and considered all the contemporaneous documentation. For these reasons, I refuse the application for summary judgment on this head of claim.

Conclusions

[48]For these reasons, I consider that Travelodge’s application for summary judgment on the whole claim fails and must be dismissed. However, I have concluded that the claimant’s claims to which I have referred at paragraph 14 above are excluded by Clause 9.4 of the CVA for the reasons given at paragraph 26 above. Accordingly, but subject to any submissions that counsel may wish to make, it seems to me that the appropriate course is for these two heads of claim to be struck out.[49]I will hear counsel on any questions in relation to the form of relief or costs that cannot be agreed.

Cited in 1 later judgment