Matthew Kerruish-Jones defeats claim for commercial rent arrears of £227,000

On 17^th October Matthew Kerruish-Jones successfully defended a claim brought by W Wing Yip & Brothers Property and Investment Limited, the landlord of the Wing Yip Business Centre in Croydon, who sought over £227,000 from the defendant who was one of their tenants and a guarantor on a number of their properties.

The lion’s share of the claim related to two business units that were rented as a restaurant for whom the defendant was the guarantor with the remaining sums relating to unpaid rent of a third business unit and a residential property.

The background to the claim was there was a settlement agreement between the parties in 2014 whereby everyone agreed the defendant would repay more than £176,000 over the next 14 years, or so. By 2015, the terms of the agreement changed so that the defendant was expected to pay a reduced sum of £125,000 over two years, in default of which, the claimant argued the defendant was expected to repay the full amount plus interest, i.e. the subject of the claim.

In late 2017, the defendant and managing director of the claimant company exchanged emails following a meeting whereby the defendant was invited to set out a payment plan in order to discharge the outstanding debt of £125,000, less payments already made to that point. The managing director of the claimant purported to accept the defendant’s proposal in an email that was entitled “subject to contract” with the provision that a “simple settlement agreement” would be provided by the claimant’s solicitor. No such settlement agreement materialised and, in any event, the defendant duly attempted to comply with the terms of this proposal which, by the time of trial, he was up to date with. 10 months after the payment proposal was purportedly accepted and after which payments to discharge the arrears had been made a claim was issued without warning, i.e. with no pre-action correspondence in the interim.

The claimant argued that there was no legally binding agreement reached in late 2017 as it was clearly marked “subject to contract” and that, even if there was, the defendant was in breach of this agreement. It was the claimant’s position that any sums paid by the defendant in the interim of the purported acceptance of the payment plan proposal and issue of the claim were on account of what the defendant owed in any event.

Matthew Kerruish-Jones successfully argued before His Honour Judge Roberts at Central London County Court that the parties had, effectively, waived the term “subject to contract” for a number of reasons: from the beginning of discussions relating to the monies owed the claimants had been very accommodating to the defendant; when the first agreement was not complied with a second binding agreement was entered into reducing the sums to be paid generally; in 2016 only one letter was sent to the defendant by the claimant with no follow up; in late 2017 it was left to the defendant and not the claimant to suggest a payment plan (which the defendant said he did not have to stick by strictly); finally, no other alternatives to payment were considered.

The judge concluded in addition that there was no follow up correspondence from the claimants after the last proposal was purportedly accepted in the “subject to contract” correspondence and that, accordingly, the claimant treated the need for a simple settlement agreement to be drafted as waived. He was referred to the Supreme Court decision of RTS Flexible Systems Limited v Molkerei Alios Muller GmbH & Co KG (UK Production) [2010] UKSC 14 at paragraphs 86 to 88 as persuasive.

As to the alternative argument that the defendant was in breach of the payment plan, the judge concluded the defendant’s contention he had flexibility in terms of payment had no contractual force but, again, he accepted the claimant had waived any such breach and noted the defendant was up to date with his payments. In dismissing the claim and drawing the order, the judge made a declaration that the last payment proposal marked as “subject to contract” was legally binding and that the defendant owed no more than the reduced sum of £125,000 less payments already made.

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Author: Matthew Kerruish-Jones Farrars (chambers@farrarsbuilding.co.uk)

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