Plummer v Tibsco Ltd & Anor

A contractual option to renew a tenancy may create an equitable tenancy, but surrender of that tenancy can compromise the tenant’s claim to future performance and related damages. Accrued claims, such as claims for dilapidations or arrears, may survive surrender; a claim based on the landlord’s failure to provide the legal title to a future tenancy does not necessarily do so. Damages must correspond to the actual breach and must account for benefits obtained. Where the breach is merely failure to execute and provide the appropriate legal instrument, damages may be nominal. Acceptance of repudiation also requires communication of the election to the other party.

Mr Plummer held a five-year public-house tenancy containing an option for a further five-year term. After he exercised the option, the landlord declined to grant the renewal and offered a 20-year lease instead. Following negotiations, Mr Plummer signed a surrender agreement and entered into the longer lease.

At first instance, Mr Justice Neuberger held that the refusal to renew constituted a breach of contract, that the claim had not been compromised, and that substantial damages were recoverable. He rejected claims based on misrepresentation and negligent misstatement. The landlords appealed against the findings on compromise, the availability of substantial damages, and the assessment of quantum.

The Court of Appeal unanimously allowed the appeal, set aside the order below, dismissed Mr Plummer’s action and made no order for costs.

1. Compromise and surrender. The relevant breach was the refusal to grant the further five-year tenancy. Mr Plummer was already entitled in equity to occupy the premises on the agreed terms. By surrendering the relevant rights and accepting the 20-year lease, he compromised his claim to continue occupying on the five-year terms and his associated claim for compensation. He could not later claim damages on the basis that the renewal remained enforceable.
2. Accrued claims. The judge below was right that accrued contractual claims can survive surrender. That principle applies to claims such as dilapidations or rent arrears. It does not preserve a claim for future performance where the future right itself has been surrendered.
3. Loss caused by the breach. The breach, viewed independently of the compromised renewal claim, was at most a failure to provide the legal title or appropriate document. Damages could therefore be nominal, or limited to the costs of enforcing the claim.
4. Repudiation. The argument that Mr Plummer had accepted repudiation failed. Acceptance requires notification of the election to the other party, and no such notification had been given. In any event, a subsequent surrender would have been unnecessary if the contract had already been terminated by acceptance.
5. Quantum. The substantial-damages assessment was also unsustainable. The value attributed to the 20-year lease already reflected the net value of its benefits and liabilities. The calculation could not treat the assignment value as a benefit while separately charging the tenant with liabilities assumed by an assignee. The approach to benefits and losses was consistent with the principle discussed in Dimond v Lovell [2000] 2 WLR 1121.

Lord Justice Robert Walker and Lord Justice Keene agreed with Lord Justice Aldous, while expressing regret at the result in view of the landlords’ conduct.

• Court of Appeal (Civil Division): Appeal from the Chancery Division allowed; the order below was set aside and the action dismissed.
• High Court, Chancery Division: Mr Justice Neuberger held that there had been an uncompromised breach of contract and awarded substantial damages, while rejecting the misrepresentation and negligent-misstatement claims.