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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> PCE Investors Ltd. v Cancer Research UK [2012] EWHC 884 (Ch) (04 April 2012) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2012/884.html Cite as: [2012] EWHC 884 (Ch) |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| PCE Investors Ltd |
Claimant |
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| - and - |
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| Cancer Research UK |
Defendant |
____________________
Katharine Holland QC (instructed by Squire Sanders (UK) LLP) for the Defendant
Hearing dates: 16 and 23 February 2012
____________________
Crown Copyright ©
Peter Smith J:
INTRODUCTION
THE ISSUES
"The Tenant may determine this Underlease on the expiration of the fifth year of the term ("the Termination Date") by satisfying the following conditions:
The Tenant must have served not less than 6 months prior written notice to determine on the Landlord; and
The Tenant must have paid the rents reserved and demanded by this Lease up to the Termination Date; and
The Tenant must have given to the Landlord full vacant possession of the Premises
AND provided such conditions are satisfied the Underlease shall cease and come to an end at 12 noon on the Termination Date but that termination shall not affect any claim by either party against the other for breaches of obligations under this Underlease".
APPLICATIONS
1) The Tenant's application by an Application Notice dated 26th September 2011 for summary judgment under CPR Part 24 against the Landlord for a declaration that the Underlease was determined on 11th October 2010.
2) The Landlord's application by an Application Notice dated 2nd November 2011 for summary judgment under CPR Part 24 against the Tenant on the whole of the claim and for summary judgment against the Tenant for the amount set out in the Counterclaim and interest.
3) The Tenant's application by an Application Notice dated 31st January 2012 that if its summary judgment application is unsuccessful (1) that it might be granted permission to amend the Defence to Counterclaim in the form set out and (2) an order that the Landlord do give further information as set out in a request dated 20th January 2012 within 14 days.
FACTUAL BACKGROUND
SEPARATE PROCEEDINGS
THE ISSUES
1) Did clause 11.2 require the Tenant to pay a full quarter's rent?
2) Were the rents as required by clause 11.2 extended to include service charges?
3) Can the court determine on a summary judgment application that the Tenant did give full vacant possession?
4) If issue (1) is resolved in favour of the Landlord should the Tenant be given permission to plead that the Landlord is estopped from contending the exercise of the break notice was ineffectual.
"(i) The court must consider whether the [defendant] 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 [defendant] 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".
"The claim at point (3) rests on the contention that, upon the determination of the lease on 18th December 2010 pursuant to the valid exercise of the option under the break clause, the lessee became entitled to restitution of that part of the rent paid in advance on the previous quarter day which was attributable to the few days of the quarter that post-dated the determination of the lease. That entitlement is said to arise either as a matter of the true construction of clause 2.2 of the lease or under the general law of unjust enrichment—presumably on the ground of failure of consideration.
No authority was cited in direct support of the defendant's contention. The reason for that, in my judgment, is that the contention is unsound.
The common law does not permit apportionment of rent in respect of time. The Apportionment Act 1870 does not affect the date on which rent is payable and does not authorise apportionment in respect of time of rent payable in advance. The general principle is that rent payable in advance is payable in full on the due date, notwithstanding that the lease subsequently determines before the expiry of its term: see, for example, Ellis v Rowbotham [1900] 1 QB 740 and Canas Property Co. v K.L. Television Services [1970] 2 Q.B. 433. I do not consider that the case of termination of a lease by the lessee's exercise of a contractual option is properly to be treated differently; rights of restitution for failure of consideration do not depend on the absence of fault of the claimant: see, for example, Dies v British and International Mining and Finance Corpn. 1939] 1 K.B. 724. The landlord's entitlement to recover as rent the full amount due in advance, notwithstanding the subsequent termination of the lease before the expiry of the term, is sufficiently explained by the fact that the contractual obligation to pay the rent had accrued before termination and that the law of unjust enrichment does not operate to circumvent the scheme of obligations and entitlements contained in a valid contract.
A claim for recovery of the rent referable to the period between the termination of the lease and the end of the quarter must therefore rest on the terms of the lease itself. Clause 2.2 is set out in paragraph 9, above. Mr Stockill relies particularly on the words: "and so in proportion for any period less than a year" In my judgment the words will not bear that reliance. In Capital and City Holdings Ltd v Dean Warburg Ltd and others (1988) 58 P. & C.R. 346, it was argued that, upon the true construction of the under-lease, the under-lessee was not liable for rent in respect of any period of time after the date of termination of the under-lease by forfeiture. The words relied upon were: "yielding and paying therefor during the term … yearly (and proportionately for any part of a year) the rent which shall be payable by equal quarterly payments in advance on the quarter days the first of such payments or a proportionate part thereof to be due on the date specified in the particulars and to be in respect of the period therein mentioned …" Ralph Gibson LJ, with whom Nicholls LJ agreed, said at 351:
The term was from July 7, 1987 to June 23, 1991. The quarter days were stated to be March 25, June 24, September 29, and December 25, in each year. The tenant covenanted to pay the rent at the times and in the manner provided. [Counsel for the respondents] argued that, despite the clear obligation to pay a quarter's rent on December 25, 1987, the words "proportionately for any part of a year" and "or a proportionate part thereof" caused that liability to be reduced by the serving of the writ. I do not agree. It seems to me that the references to the proportionate part of a year were included to deal with the fact that the term commenced on July 7, and called for a proportionate payment down to the first following quarter day. The presence of those words does not, in my judgment, modify in any way the obligation imposed by the lease on the tenant to pay a full quarter's rent on December 25, 1987.
Similarly in the present case, the term of the lease was from 18th December 2000 until 17th December 2015 and the rent was due on the usual quarter days. I consider that the words relied on by Mr Stockill do no more than deal with the fact that the commencement and expiry of the term did not coincide with the quarter days, so that proportionate payments would be required at either end of the lease. No such proportionate payment would be required in respect of the break clause, because the validity of the exercise of the option under that clause would not be capable of ascertainment at the preceding quarter day and because the lease makes no provision for a proportionate payment or for the pro rata recovery of any moneys attributable to the period after the expiry of the notice under the break clause".
PRINCIPLES OF CONSTRUCTION
WORDING OF THE UNDERLEASE
OTHER AREAS
CASES ON SHIP CHARTER
"It is, of course, well established that a judicial conclusion as to the meaning of words in the context of one document is not binding or conclusive as to the meaning of similar words in another document, even where the words being construed and the nature, and indeed the terms, of the two documents are very similar. There are numerous cases where the courts have deprecated attempts to construe a contract by reference to judicial decisions as to the meaning of similar words in another contract: see, for instance, per Lord Roskill in Pioneer Shipping v BTP Tioxide Ltd ('The Nema') [1982] AC 724, at p749G and the graphic observations of Sir George Jessel MR in Aspden v Seddon (1875) 10 Ch App 394, at pp396 to 397n–398n. In the context of rent review clauses themselves, this approach was approved by Dillon LJ himself; in Equity & Law Life Assurance Society plc v Bodfield Ltd [1987] 1 EGLR 124, at p125C, he said:
to refer to authorities on other documents merely for the purpose of ascertaining the construction of a particular document is to be deplored as a wrong approach and likely to lead to confusion and error.
Where the Court of Appeal has reached a clear and reasoned conclusion on an identical, or very similar, issue relating to a rent review clause in very similar terms, it is highly desirable for a judge at first instance to follow that reasoning, in the absence of unusually compelling reasons to the contrary. Consistency of reasoning and certainty of outcome are obviously desirable features of any civilised system of law and, if inferior tribunals are prepared to depart from the decisions and principles laid down by superior ones too readily, it is detrimental to the public interest: see the observations to this effect of May LJ in Ashville Investments Ltd v Elmer Contractors Ltd [1989] QB 488, at p495A–".
"Lord Denning MR was influenced in reaching his view by two mistaken beliefs as to the law. He believed that after withdrawal the charterers would not be entitled to recover from owners the over-payment of hire. But there is long-standing authority to the contrary: Wehner v Dene Steam Shipping Co, which, though only at first instance, has not been doubted over the years: see Scrutton on Charterparties. Counsel for the charterers did not seek to challenge the authority of that decision; nor, apparently, was any argument for or against its soundness canvassed in the Court of Appeal: see Geoffrey Lane LJ ([1979] 1 All ER 657 at 671, [1978] 1 WLR 1257 at 1289). This, therefore, was an error by Lord Denning MR. Though in itself not a decisive reason for rejecting his view that there was a waiver on 26 March, it is significant: for obviously there would be injustice in a situation where an owner, who withdrew his ship while retaining the hire, could deny the charterer the right to recover the money which he had paid for a use which he never had. If such were the law, retention of the advance hire might well be thought to amount to a waiver of the right to withdraw.
Nor do I think it possible to doubt that his judgment was also influenced by a second erroneous belief. He regarded this Baltime 1939 withdrawal clause as a forfeiture clause. But in The Laconia your Lordships' House specifically declared that this, and other similar clauses in other well-known forms of time charter, are not forfeiture clauses; and that it is wrong to attribute legal consequences associated with forfeiture to the exercise of a contractual right to withdraw a ship under time charter from the service of the charterer: see Lord Wilberforce ([1977] 1 All ER 545 at 550, [1977] AC 850 at 869).
Influenced by such errors, the view of Lord Denning MR that retention of the hire paid in advance in respect of future use of the ship is, by itself, a waiver of the right to withdraw is necessarily suspect. Indeed, if I have understood his argument correctly counsel for the charterers does not seek to support it. He did not challenge the view expressed on the point by Eveleigh LJ in his judgment where he said ([1979] 1 All ER 657 at 674, [1978] 1 WLR 1257 at 1293):
'I do not say that the retention of money is of itself an election, even though there may be no right to keep it. Even after withdrawal there may be grounds for retaining the money. There may be other matters against which the money can be put … Each case must depend on its own facts.'
In my opinion, this is the correct view, so far as it goes".
FURTHER DECISIONS
77 Despite the view expressed by Mason & Carter, I believe I am bound by authority to hold that s144 of the Conveyancing Act has no direct application to this case. I consider I am bound by Ellis v Rowbotham, and cases following and approving it, to hold that where the lease provides for rent payable in advance, that rent is to be treated as having accrued in full and being payable in full at the date payment is required; so that there is no room for application of a provision providing for rent to be considered as accruing from day to day. However, in my opinion the general approach and policy underlying s144 can be adopted as one factor relevant to whether some kind of apportionment should be given effect to, without applying the statute itself: see Carmody v Delehunt at 669 to 670. "
78 Furthermore, there are indications in the lease itself that rent is to be considered as applicable to periods less than a whole year. For example, if the lessor elected pursuant to clause 11.1(b) to convert the lease into a tenancy from month to month, with a monthly rent payable for each month, and if this happened shortly after $1.5 million rent had been paid in advance, it would indeed be absurd if the lessor could simply retain the whole of that $1.5 million. Similarly, clauses 12.13.2 and 12.18 contemplate that rent is applicable to periods of less than one year.
79 I do not read the lease as expressing an intention that the consideration of $1.5 million payable by the lessee at the beginning of each lease year is paid for a bundle of rights, which includes the possibility of early termination without fault of the lessee, pursuant to clause 20.2. In my opinion, the intention as disclosed by the lease is that $3-million is payable for each year's possession of the demised premises, that $1.5 million paid in advance is paid in respect of one-half of one year's occupation, that is for 182½ days or, where as in this case there is a Leap Year, 183 days, and that the consideration to be received by the lessee is severable by reference to the period of occupation; so that there was a total failure of consideration at least in relation to 83 days out of the 183 days in respect of which the $1.5 million was paid. I do not think such an interpretation of this lease is inconsistent with Ellis v. Rowbotham and the other cases referred to, which did not address questions of severability of consideration under the particular leases being dealt with and consequent failure of consideration. On that basis, Colly is entitled to recover $680,327.80 as money paid under a contract discharged without breach, in respect of which there has been a total failure of consideration. There is no defence of change of position raised.
80 If I were wrong in my finding of total failure of consideration, in my opinion a term having the same effect would be implied in this lease. The term I would imply is a term having the effect that, if in any year a first instalment of rent of $1.5 million is paid, and the lease is subsequently terminated before one-half of that year has elapsed, without fault of the lessee, then there should be refunded to the lessee a sum of money which bears the same proportion to $1.5 million as the number of days between the termination of the lease and the expiry of one-half of the year, bears to one-half of the year. Such a term is plainly reasonable and equitable. In my opinion it would be necessary give business efficacy to the contract, and so obvious that it goes without saying. It is capable of clear expression, and it does not contradict any express term of the lease. In particular, the term requiring payment without deduction is not inconsistent with a term requiring a refund in specified circumstances.
81 In my opinion, Ellis v. Rowbotham does not require a different result. Although I have held that this case is authoritative as to the interpretation of s.144, in my opinion it is not conclusive against recovery of a proportionate part of the rent in this case. It is distinguishable, at least on the ground that the termination of the lease in Ellis v. Rowbotham was for breach by the lessee. Further, the law on penalty and forfeiture has developed significantly since that case was decided; and it may well be that now a provision in a lease purporting to entitle a lessor to retain the whole of rent paid in advance for a substantial period, where the lease is terminated for breach of the lessee, is in substance a penalty, so that the lessor would be entitled only to so much as represented its actual damages for breach: see O'Dea v. Allstates Leasing System (WA) Pty. Ltd. [1983] HCA 3; (1983) 152 CLR 359.
82 It remains to consider whether Colly has any rights based upon more general grounds of unjust enrichment. There are, in the further amended cross-claim, claims for something over $2 million in respect of the preparations made for the planting of cotton on the demised premises, as improvements under the Agricultural Tenancies Act 1990; and for something over $500,000 in respect of water in storage on the properties, as being tenant's products under the Agricultural Tenancies Act. In my opinion it is not possible to assess a general claim for unjust enrichment without at the same time dealing with those claims.
83 The final matter I should mention is that a claim was put forward that there was a total failure of consideration in respect of the whole of the $1.5 million paid. That was put on the basis that the substance of what was bargained for in respect of each year of the tenancy was the right, or at least the chance, to have the benefit of a cotton harvest obtained in about May of each year. As shown by cases such as Rowland v Divall (1923) 2 KB 500 and Rover International Ltd v Cannon Film Ltd (1989) 1 WLR 912, the circumstance that a contracting party has received some benefit as a result of a contract does not preclude there being a total failure of consideration, where the party has not received any part of that which he contracted to receive. In this case, it is put that what in substance Colly contracted to receive was the opportunity to have a cotton harvest in May of each year. In my opinion, I cannot find in favour of Colly on this basis, at least in the absence of a more general consideration of unjust enrichment, which would involve consideration of the Agricultural Tenancies Act claim. I do not have any evidence as to the value to Colly of the dwellings which were included in the lease, or of the value to Colly of the benefit of the sharefarming agreement. Furthermore, if Colly gets some substantial benefit for the work which it did on the demised premises in the months leading up to the termination, through compensation under the Agricultural Tenancies Act, that too would be relevant to whether there was a total failure of consideration relating to the whole of the period for which the $1.5 million was paid. I do not think it would be appropriate now to reject outright this claim of unjust enrichment, because, in my opinion, the exclusion by agreement of the parties from the hearing of the Agricultural Tenancies Act claim simply made it impossible for that claim to be properly considered. In my opinion, it should be considered along with the Agricultural Tenancies Act claim".
CONCLUSION ON QUESTION (1)
ISSUE (2) DOES RENT INCLUDE SERVICE CHARGES?
ISSUE (3) DID THE TENANTS DELIVER VACANT POSSESSION?
ISSUE (4) IS THE LANDLORD ESTOPPED?
"74. I believe that Mr Sumption is correct. Procedural rules should be the servant not the master of the rule of law. Lord Woolf, by his Reports on Access to Justice, brought about a sea change in the attitude of the courts to such rules. This included the adoption of the "overriding objective" with which the new CPR begins. CPR 1.1 states that the overriding objective of the Rules is to enable the court to deal with cases justly, and that this involves saving expense and ensuring that cases are dealt with expeditiously.
75. Where an application is made to amend a pleading the normal approach is to grant permission where to do so will cause no prejudice to the other party that cannot be dealt with by an appropriate order for costs. This accords with the overriding objective. Where all that a refusal of permission will achieve is additional cost and delay, the case for permitting the amendment is even stronger."
1) The Tenant believed it only had to pay apportioned rent up to the Termination Date.
2) The Landlord knew of that belief.
3) The Landlord thought the break would only be effective if a full quarter's rent was paid.
"Of course as Mr Weekes acknowledged if the Landlords had simply acknowledged receipt of the Notice and said nothing more it would have been open to them to challenge the validity of the Notice. There is no duty in my view on a Landlord served with a document to inform the server that he believes that it has not been validly served. However a Landlord receiving such a Notice must not give any indication that the notice is accepted despite its defects. In the present case but for the acceptance set out in the first part of Mr Ekanayake's email the Landlords would subsequently be able in my view to challenge the validity of the Notice. However given his opening words it is in my view not open to them so to do for the reasons that I have said."
"110. Although I am not able to find a positive statement which could give rise to an estoppel by representation, the tenant submitted that the present case was one of those cases where the landlord had a duty to speak and to tell the tenant that it owed Default Interest. It was said that the landlord's failure to inform the tenant of this amounted to a representation that the tenant did not owe Default Interest. I think that I can summarise the essentials of that submission as follows:
(1) the tenant believed on the 11th August 2009 and on 16th March 2010 that it did not owe the landlord any sums under the lease;
(2) that general belief must have included a belief that the tenant did not owe Default Interest;
(3) the landlord knew of the tenant's belief because the tenant had expressed that belief in its letters of 11th August 2009 and 16th March 2010;
(4) the landlord did not correct the tenant's belief as expressed in those letters;
(5) in particular, the landlord did not demand Default Interest; and
(6) if the landlord had demanded Default Interest, then the tenant would have paid the sum demanded to avoid any argument over the operation of the break clause.
111. The tenant then relied upon passages in Spencer Bower on Estoppel by Representation, 4th ed., at pages 46 – 53. In summary, the textbook states that in some circumstances silence or inaction can constitute a representation for the purpose of an estoppel. This is where there is a legal duty to make a disclosure or take steps, the omission of which is relied upon as creating the estoppel. The textbook then discussed the decision of Bingham J in The Lutetian [1982] 2 Lloyd's Rep 140. At page 50, various examples are given of implied representations said to be made by a failure to correct a manifested belief as to a certain matter. One such matter was where the mistaken party believed that he had complied with a contractual term. It was submitted that the passages in the text book and in The Lutetian covered this case. The tenant believed that it had complied with clause 45.4.4, it had manifested that belief to the landlord and the landlord had remained silent, not correcting what was now said to be a mistaken belief.
112. In The Lutetian, the facts in brief summary were that the charterers of a ship believed that they had paid the sum of money which they were due to pay by a certain deadline. The owners of the ship knew that that was the belief of the charterers but the owners also knew that the charterers had underpaid and that that fact gave the owners the right to withdraw the ship. The owners did not correct the charterers' mistaken belief. Bingham J cited a passage from the previous edition of Spencer Bower. He then referred to Freeman v Cooke (1848) 2 Ex 654 at 663 where Baron Parke referred to a duty to disclose a fact being cast upon a person "by usage of trade or otherwise". Bingham J then referred to the speech of Lord Wilberforce in Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890 at 903 in which he said was:
"… persuasive authority for the proposition that the duty necessary to found an estoppel by silence or acquiescence arises where a reasonable man would expect the person against whom the estoppel is raised, acting honestly and responsibly to bring the true facts to the attention of the other party known by him to be under a mistake as to their respective rights and obligations."
Bingham J then considered the facts and said at page 158:
"The relationship of owner and charterer is not one of the utmost good faith. One must be careful not to impute unrealistically onerous obligations to those who may choose to conduct their relations in a tough and uncompromising way. There is nonetheless a duty not to conduct oneself in such a way as to mislead. I have no doubt that the owners knew that the charterers believed that they had paid the right amount. It was their duty, acting honestly and responsibly, to disclose their own view as to the charterers. They did not do so and indeed thwarted the charterers' attempts to discover their views. Their omission to disclose their own calculation led the charterers to think, until a very late stage, that no objection was taken to the calculation. It would in my view be unjust in the circumstances if the owners could rely on the incorrectness of a deduction which they had every opportunity to point out at an earlier stage and which their failure to point out caused the charterers to overlook."
113. I am able to find that many of the ingredients which were found to exist in The Lutetian also exist in the present case. The tenant believed it had paid all sums due. The landlord knew of that belief because the tenant had told the landlord of that belief. If the landlord had said to the tenant that the tenant owed Default Interest, then I would find on the balance of probability that the tenant would have paid Default Interest to avoid an argument as to its ability to determine the lease. I am satisfied that the tenant was very concerned to ensure that it had succeeded in determining the lease. Even though the letter of 16th March 2010 put forward an argument that the rent in the fifth year was £44,100 and not £67,500, the tenant did not take the risk involved in paying a sum equivalent to 6 months at the lower rate and it paid at the higher rate. Further, if the landlord had told the tenant on the 16th or 17th March 2010 that it had to pay Default Interest in order to comply with clause 45.4.4, I find that the tenant could have reacted to that information quickly and transferred the money by bank transfer on the same day or even, in view of my earlier findings about the ability to pay sums due under the lease by cheque, delivered a cheque by hand to the landlord.
114. I have so far omitted one ingredient which existed in The Lutetian and which now needs to be considered in this case. Did the landlord know at any point before the end of 17th March 2010 that the tenant's belief was wrong because the tenant owed Default Interest to the landlord? If I were able to hold that the landlord did know that matter, then I would hold in the same way as was held in The Lutetian that the landlord cannot take advantage of the tenant's mistake which at the time the landlord knew that the tenant was making. Whether one calls it an estoppel by representation through silence or an estoppel by acquiescence may not matter. In such a case, I would hold that the landlord is estopped from taking advantage of the tenant's mistake".
THE LAW
"Where a man is under a duty—that is, a legal duty—to disclose some fact to another and he does not do so, the other is entitled to assume the non-existence of the fact. In such circumstances the conduct of the first man amounts to a representation by conduct to the second that the fact does not exist. In Bell v. Marsh [1903] 1 Ch 528, 541, Sir Richard Q Henn Collins M.R. put the point in this way:
" He [the plaintiff] is entitled to say that the representation was made, not merely by language used, but by conduct, and conduct may include negligence. A man may act so negligently that he must be deemed to have made a representation, which in fact he did not make, but because he has acted negligently he is deemed to have made it.
If A, having some right or title adverse to B, sees B in ignorance of that right or title acting in a manner inconsistent with it, which would be to B's disadvantage if the right or title were asserted against him thereafter, A is under a duty to B to disclose the existence of his right or title:. If he stands by and allows B to continue in his course of action, A v/ill not, if the other conditions of estoppel are satisfied, be allowed to assert his right or title against B: see Halsbury's Laws of England, 3rd ed., vol. 14 (1956), paras. 1178-1180. On similar grounds, in our judgment, if A sees B acting in the mistaken .belief that A is under some binding obligation to him and in a manner consistent only with the existence of such an obligation, which would be to B's disadvantage if A were thereafter to deny the obligation, A is under a duty to B to disclose the non-existence of the supposed obligation. It is'interesting to notice that in West v. Dillicar [1920] N.Z.L.R. 139; [1921] N.Z.L.R. 617, where the facts were in many B respects similar to the facts in this case, the Supreme Court and the Court of Appeal in New Zealand took this view; although we do not rely on that case for our conclusion, since it was not cited in argument. This was, in our opinion, the position in the present case from the time when the fact that Hamels belonged to Mr. Lintem and not to Mrs. Lintern became common knowledge. Q As soon as Mr. Spiro and his advisers became aware that Mr. Lintern was the sole owner of Hamels the primary question, and indeed, in our opinion, the only question, in doubt about the binding effect of the contract signed by E. J. Brooks & Son was whether Mrs. Lintern had her husband's authority to instruct that firm as she did. The answer to this question was not within the knowledge, or means of knowledge, of Mr. Spiro or his advisers, and Mr. Lintern, if he had thought about it, must have known D this. In our judgment, Mr. Lintern was under a duty to Mr. Spiro to disclose the fact that his wife had acted without his authority. His failure to do so amounted to a representation by conduct that she had that authority".
"90. As for ING's obligations as a business partner in the light of circumstances as they arose, what happened has been set out in Carnwath LJ's judgment above. ING made its own internal calculations as to its fee, and concluded that €7.335 million would be payable under the contract, calculated by applying EBITDA 2006 to Deyà's investment offer, thus producing an entry multiple of 13.3. An alternative calculation applying the current forecast for EBITDA 2007 and producing an entry multiple of 10.3 was also set out. The rest was the mechanical operation of the contract's formula, which produced the money figures payable on either basis. Thereupon ING considered at the highest level, that of Mr Muro-Lara, who was ING 's managing director, whether ING should revisit the discrepancy between the estimate of transaction costs which had passed between the parties and the calculation of ING 's contractual fee. It was decided that the figure should not be revisited, given, as Mr Muro-Lara put it in his witness statement, the "potential disruption" that might be caused. When he was asked about this in his cross-examination, he accepted that he had in mind the possibility of a dispute with or an attempt at renegotiation on the part of Ros Roca , i.e. the "situations" mentioned by Ros Roca 's Mr Gomà in his witness statement (see [43] above).
91. In my judgment, however, there was in these circumstances a duty on ING to raise with Ros Roca the question of ING's fee and the related question of the estimate of transaction costs. Such costs were directly related both to the number of shares to be issued to Deyà by reason of its investment, i.e. were directly related to the operation of the transaction on which ING was advising (even if an under-estimate of transaction costs was less dangerous than an over-estimate), but were also relevant to the business sense of the transaction as a whole. Would it make sense for Ros Roca to enter into a transaction when ING 's fee alone would amount to some 13 per cent of the investment capital to be raised? No doubt Ros Roca was primarily and ultimately responsible for looking out for its own interests, but ING was also responsible under its contract with Ros Roca to advise its client on the transaction, its conduct and negotiation, in general (see section 1 passim). Mr Phillips accepted in argument that in such circumstances ING's position, subject only to the niceties of the law of estoppel, was unconscionable (Day 2 of the appeal, 180).
92. What then does the law say about such a situation? Outside the insurance context, there is no obligation in general to bring difficulties and defects to the attention of a contract partner or prospective contract partner. Caveat emptor reflects a basic facet of English commercial law (the growth of consumer law has been moving in a different direction). Nor is there any general notion, as there is in the civil law, of a duty of good faith in commercial affairs, however much individual concepts of English common law, such as that of the reasonable man, and of waiver and estoppel itself, may be said to reflect such a notion. In such circumstances, silence is golden, for where there is no obligation to speak, silence gives no hostages to fortune. If, however, the contractor speaks, then he may have to live up to what he says; so also where what is unsaid is sufficiently closely connected with what he has said to render what has been left unsaid misleading. In general, however, there is no duty of disclosure. As Chitty on Contracts, 30th ed, 2008, Vol I, at para 6-014 puts it:
"For the same reason it is not possible to set up an estoppel on the basis of an omission to disclose unless a duty to disclose can be established in the particular circumstances of the case. Tacit acquiescence in another's self-deception does not itself amount to misrepresentation, provided that it has not previously been caused by a positive misrepresentation."
Nevertheless, particular circumstances can make a difference, and it is possible to formulate a general principle as to why that should be so. Thus in Moorgate Mercantile Co Ltd v . Twitchings [1977] AC 890 at 903 Lord Wilberforce, in a dissenting speech but which in this respect has borne fruit, spoke of the possibility that, in a particular situation which affected two parties, a reasonable man would expect the other party, "acting honestly and responsibly" either to make something known or face the consequences of not doing so. In Republic of India v India Steamship Co (No 2) (The "Indian Endurance") [1998] AC 878 at 914 Lord Steyn approved Lord Wilberforce's observation as "helpful as indicating the general principle underlying estoppel by acquiescence". As Bingham J had put it some years earlier in Tradax Export SA v . Dorada Compania Naviera SA (The"Lutetian") [1982] 2 Lloyd's Rep 140 at 157, after citing Spencer Bower and Turner, Estoppel by Representation, 3rd ed at 49:
"More recently, Lord Wilberforce in Moorgate…provided persuasive authority for the proposition that the duty necessary to found an estoppel by silence or acquiescence arises where a reasonable man would expect the person against whom the estoppel is raised, acting honestly and responsibly, to bring the true facts to the attention of the other party known by him to be under a mistake as to their respective rights and obligations. (Lord Wilberforce dissented on the outcome, and expressed the principle in proprietary terms appropriate to that case, but neither of these things in my judgment diminishes the significance of what he said.)"
94. Bingham J there applied the principle to a dispute about withdrawal under a time charter, in other words it affected parties to an existing contract. The charterers had tendered payment of hire in an amount which they believed to be correct, as the owners knew. The penalty of failure to pay punctual hire was that owners had the power to withdraw the vessel. By keeping silent about their own calculations of hire, the owners thwarted the charterers' attempt to live up to their contract. The owners were held to be estopped from exercising their right to withdraw (see issue (7) at 156). Bingham J concluded:
"The relationship of owner and charterer is not one of the utmost good faith. One must be careful not to impute unrealistically onerous obligations to those who may choose to conduct their relations in a tough and uncompromising way. There is nonetheless a duty not to conduct oneself in such a way as to mislead. I have no doubt that the owners knew that the charterers believed they had paid the right amount. It was their duty, acting honestly and responsibly, to disclose their own view to the charterers. They did not do so and indeed thwarted the charterers' attempts to discover their views. Their omission to disclose their own calculation led the charterers to think, until a very late stage, that no objection was taken to their calculation. It would in my view be unjust in the circumstances if the owners could rely on the incorrectness of a deduction which they had every opportunity to point out at an earlier stage and which their failure to point out caused the charterers to overlook. I answer this question in favour of the charterers."
95. In my judgment, the facts of our case are relevantly analogous, but ours is an a fortiori case. The relationship between an advising bank and its client is closer, and more professional, than that between an owner and a charterer of a vessel. Although such an owner and his charterer co-operate on what is hoped to be the success of their maritime adventure, that is commerce in the raw. In our case, the bank is advising its client on its potential transaction, and is earning its fee for doing so and for a successful outcome. Moreover, the contract required the parties to co-ordinate their estimates of the transaction costs, and that is what ING outwardly purported to do, while internally intending to charge a fee which was totally inconsistent with its outward show of agreement with its client. It was not honest and responsible for ING , but unconscionable as Mr Phillips had in effect to accept, to fail to disclose to Ros Roca , in the run-up to the closing of its transaction, that Ros Roca and ING differed on the calculation of ING 's fee. Just as the owner in The Lutetian was estopped from denying the accuracy of the charterer's calculation of hire for the purpose of its monthly payment and thus for the purpose of preventing the owner's right to withdraw, because it had represented by its silence that the charterer's calculation was correct, so in my judgment ING is estopped from saying that its calculation based on EBITDA 2006 is the correct calculation. In both cases, one party has represented by his silence (in truth on the facts of this case by more than silence) that the other party's understanding of the situation is correct. ING sought its own advantage in keeping quiet, when it knew that speaking out would lead to a dispute and to a renegotiation. Ultimately, the dispute could not be avoided, and has occurred, but ING considered that its position would be strengthened if the dispute only took place after the event.
96. One question that arises is, of course, whether, assuming that Ros Roca has relied on it's representation, it would be acceptable to allow ING to withdraw from the position which its silence and seeming acquiescence has created."
CONCLUSION
