K/S Victoria Street -v- House of Fraser (Stores Management) Ltd & Ors  EWCA Civ 904 (27 July 2011)Note: What follows on this and other pages constitutes information on the firm as it existed immediately prior to 21st August 2012.
We recently acted for K/S Victoria Street, a Danish investment partnership, in an action for specific performance of an agreement dated 26 January 2006 between it and three companies in the House of Fraser Group for the sale and immediate lease back of the freehold of Beatties department store in Wolverhampton.
The initial tenant under the Lease was House of Fraser (Stores Management) Ltd, a paper company whose obligations were guaranteed by the parent, House of Fraser plc (which was subsequently privatized in late 2006 and renamed House of Fraser Limited). The Agreement required Stores Management by late April 2006 to assign the Lease to another group company of equal or greater covenant strength to James Beattie Limited with a guarantee from House of Fraser plc, failing which the Lease was to be assigned to House of Fraser (Stores) Ltd, a substantive company with a much stronger covenant than Stores Management.
The assignment was not carried out, and Stores Management remained the primary tenant for several years.
In March 2010 K/S Victoria Street retained this firm to enforce the assignment clause. Proceedings were issued in May 2010. House of Fraser raised several defences to the claim, including the defence of “futility,” which it based on the allegation that if Stores were forced to take an assignment of the Lease, it could immediately re-assign it back to Stores Management, thereby essentially negating the effect of the specific performance. House of Fraser also claimed that the assignment clause was not enforceable as against House of Fraser Limited by virtue of section 25 of the Landlord and Tenant (Covenants) Act 1995 and the interpretation of that clause in the recent opinion of Mr Justice Newey in Good Harvest Partnership LLP –v- Centaur Services Limited  EWHC 330 (Ch) 23 February 2010).
At a summary judgment hearing in October 2010, Mr John Randall QC struck out several of House of Fraser’s defences and allowed others (including the “futility” defence) to go to trial, ordering that the lease interpretation point underpinning the “futility” defence be determined as a preliminary issue. Mr Randall QC also declared that the assignment clause was not enforceable as against the parent guarantor (House of Fraser Limited) as a result of Newey J’s opinion in Good Harvest.
We prevailed at the preliminary issue trial before Mr Justice Mann and obtained a permanent injunction effectively prohibiting House of Fraser from carrying out the assignment and immediate re-assignment of the Lease as threatened. Consequently Mann J declared that the “futility” defence failed.
There followed two appeals. K/S Victoria Street appealed against the declaration by Mr Randall QC in relation to the “Good Harvest” defence, and House of Fraser appealed against the Order and Injunction of Mann J.
Both appeals were dismissed following a highly publicized appeal hearing before the Master of the Rolls, such publicity arising out of the importance of the
Good Harvest decision to the commercial leasing industry.
In the aftermath of the decision of the Court of Appeal and in a last-ditch attempt to rehabilitate its “futility” defence, House of Fraser applied to re-amend its defence to include a claim for rectification of the Lease, arguing that the interpretation adopted by Mann J and the Court of Appeal was contrary to the parties’ intentions when they entered into the Agreement.
On 1 December 2011, Mr Justice Henderson dismissed House of Fraser’s application to re-amend. House of Fraser then abandoned its remaining defences and at the handing-down of Henderson J’s Judgment agreed to assign the lease to Stores and pay K/S Victoria Street’s costs of the claim.
Link to the Judgment of Mann J dated 17.12.10:
Link to the Judgment of the Court of Appeal dated 27.07.11:
Link to the Judgment of Henderson J dated 01.12.11:
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