66 I should first deal briefly with the status of the Deed of Consent. The Agreed Facts record that while no dated copy of that agreement is in evidence, "it is clear that it was executed by MI Design and Dunecar about the same time as the other transaction documents". A copy of the executed agreement signed by lessor and lessee is an annexure to the affidavit of Paul Collins on behalf of the Bank dated 26 September 2000.
67 As to any alleged lack of delivery, the sealing by the lessor and lessee, both corporations, prima facie imports delivery there being no evidence of any contrary intention express or implied. Moreover, it is expressed to be executed as a deed, reinforcing that delivery has occurred. Second, the evidence allows further inferences to be drawn. That evidence is CX15 and Mr Gianesi's affidavit on behalf of the Bank of 10 October 2000. The first available inference is that irrespective of physical delivery, sealing was intended to constitute delivery because by reference to his practice Mr Gianesi must at least have been told all the requisite documents had been signed to allow the transaction to proceed. Second, CX15 and the letter attached to Mr Gianesi's affidavit allow an inference of actual physical delivery to be drawn of the "CBA Bank Copy" attached to Mr Gianesi's affidavit, even though the document cannot be located by the Bank after search.
68 The lessor does not deny that no notice was given to the Bank.
69 The lessor contends however that firstly the clause as a matter of its proper construction does not apply in the events that have happened and secondly that even if it were otherwise, the Court should not grant specific performance by reinstating the lessee in the circumstances that obtain including the insolvency of the lessee and the circumstances and gravity of the breaches. The lessor contends that the Bank is not entitled to possession as against the lessor who has validly re-entered because the Bank cannot obtain what is in effect ejectment in favour of the lessee, nor can it do so on its own account since the relevant security confers no term being not by way of under-lease but by way of charge. It appears that the lessor abandoned the specious argument that because the Bank's Deed of Consent refers only to the original lease and not the Variation it was somehow never perfected, or applied to the wrong lease. To accept such an argument would allow the lessor to profit by its own wrong in failing, as required by clause 8(c) of the Deed of Consent, to "obtain the Bank's consent prior to varying any provision of the lease." It was not disputed that that consent was never sought or obtained. Indeed the Bank relies upon that as a further reason for contending that the lessor cannot rely, as against the Bank, upon a right of re-entry which depends upon a Variation that should have received the Bank's consent and never did. While, in light of the conclusions I have earlier reached, it is not necessary for me to reach a conclusion on that last proposition, I would consider it well founded were the Variation, contrary to my view, capable of absolving the need for any notice in the circumstances.
70 Nor could any argument seriously be pressed that because the Variation was not registered, reference to "the lease" in the Deed of Consent could not, post Variation, refer to the present lease since that was a lease only in equity and not in law. It also involves the absurdity that a registered lease becomes a mere tenancy at will, if a subsequent variation to it is not registered as required by s55A of the Real Property Act 1925.
71 Returning to the first contention concerning the proper construction of clause 7 of the Deed of Consent, the lessor's argument is essentially that because the default in relation to breach of the Liquor Act cannot be rectified, and because the lessor's damages from the default are not reasonably quantifiable, clause 7.1 by reason of paragraph (h) thereof was not capable of application to the present circumstances.
72 The short answer to that argument is that the lessor's damages from the relevant defaults are certainly reasonably quantifiable in circumstances where there is no practical likelihood of suspension or loss of the liquor licence. In those circumstances the lessor suffers no damage such that any reasonable quantification would not exceed a nominal sum to cover the lessor's costs in investigating the breach and, if this were thought warranted, obtaining a no action letter from the licensing authorities. Were the licence really in jeopardy, the reasonable compensation could also accommodate that contingency if it occurred, by stating a value for the licence in the alternative based on an expert valuation. But as I have said, I do not consider it in jeopardy at the relevant time.
73 Clearly enough compensation for a default in payment of past rent is readily quantifiable, even if its lateness be treated as a default that cannot otherwise be cured.
74 It follows that I do not consider that the argument based on the construction of clause 7 has any validity.
75 The second argument turns on whether, accepting that the clause was breached, nonetheless specific performance of it now by ordering the reinstatement of the lessee should as a matter of discretion be denied, or else denied by reason of some inherent limitation based on the proposition that the Bank cannot obtain what is in effect ejectment in favour of the lessee.
76 Take discretionary aspects first. The starting point is the clear purpose of clause 7 of the Deed of Consent. The parties clearly recognise that unless the Bank is given an opportunity to rectify a breach or pay reasonable compensation otherwise for the lessor's damages where reasonably quantifiable, the Bank is at risk of losing the whole benefit of its security. Damage in those circumstances would not be an adequate remedy because the value of that which had been thereby forfeited would be not only difficult of ascertainment but would deny the Bank the opportunity either to leave the existing tenant in occupation or exercise power of sale, doing so moreover in a situation where the Bank has incomplete knowledge about which option would best suit its commercial interests. Equity would expect the lessor to abide by the negative covenant, not attempt to buy its way out by breaching and then claiming damages would be an adequate remedy. As Lord Wilberforce said in Shiloh Spinners Limited v Harding (1973) AC 691 at 723: "equity expects men to carry out their bargains and will not let them buy their way out by uncovenanted payments", though that did not preclude relief against forfeiture in appropriate cases. Clearly enough the negative covenant in clause 7.2 was intended to confer upon the Bank a protection against that very contingency which denial of specific performance would render nugatory.
77 It could not be said that to reinstate the lessee, which involves putting back in occupation an insolvent tenant, is a futility either for the lessor or indeed for the Bank. I have already referred to the guarantee which the Bank has proffered in relation to future rent and the temporary moratorium in relation to debt service. That bears heavily in the Bank's favour as a discretionary consideration. This, as clause 7 no doubt intended, gives the Bank and the lessee the opportunity to assess whether there is a viable basis for it continuing in occupation pursuant to a Deed of Company Arrangement, if creditors adopt one.
78 Indeed to deny specific enforcement on the basis that it is a futility fails to recognise that, as Spry in "Equitable Remedies" Fifth Edition (LBC, 1997) at 133-4 points out, futility is a question of degree. As Spry puts it (at 134) "prima facie a party to a contract is entitled to performance of its terms and should not be denied relief on the ground that he will obtain little benefit thereby, unless some special discretionary consideration renders specific enforcement unjust."
79 It could not be said that the Bank would obtain little benefit from reinstatement of the lessee. It is entitled to consider its options with the greater information it will derive as to the lessee/mortgagor's viability once reinstated. The Bank faces on the one hand almost total loss of its security if the lessee is not reinstated whilst on the other it has the prospect of retaining the benefit of its security while seeing whether an appropriate arrangement can be made either to maintain the existing tenant or see that tenant replaced by exercise of power of sale. In that regard, clause 6 of the Deed of Consent provides a mechanism permitting such assignment by the Bank subject to the conditions there provided.
80 Spry at 137 puts the analogous case where the plaintiff seeks specific performance of the contract to enter into a lease that is determinable by the defendant, either through a breach by the plaintiff of the condition of the proposed lease or from any other cause. He says:
"In cases of this nature it was sometimes said that the intervention of courts of equity would not place the plaintiff in a better position than if he were left to remedies in damages.20 But if there was a substantial doubt, so that it could not be said with certainty that the lease in question could be terminated by the defendant after execution, then specific performance would be ordered and any questions as to breaches of covenant or condition or as to the determination of the lease could if necessary be dealt with in subsequent proceedings for damages, where any material facts could be finally determined in an appropriate manner.21 "
20 Jones v Jones (1803) 12 Ves. 186, 33 ER 71; Gregory v Wilson (1852) 9 HA 683, 68 ER 687; Swain v Ayres (1888) 21 QBD 289