Looe Fuels Ltd v Looe Harbour Commissioners

An oral agreement for a lease may be enforceable where it concerns a lease taking effect in possession for no more than three years at the best rent which can reasonably be obtained without taking a fine. The statutory exception applies to an agreement for such a lease, not only to the completed lease itself.

Whether the parties reached a binding agreement is a question of fact assessed from the objective evidence, including board minutes and surrounding documents. In deciding whether the rent is the best reasonably obtainable, the court may consider the landlord’s actual financial position and capital outlay, rather than a purely notional valuation.

Looe Fuels Ltd claimed specific performance of an alleged oral agreement under which Looe Harbour Commissioners would construct and lease to it a new fuel-tank facility. The Commissioners later decided to operate the facility themselves or lease it to another trader. His Honour Judge Griggs held that a binding agreement had been made, that the agreement fell within the statutory exception for short leases at the best reasonably obtainable rent, and, alternatively, that leasing to a third party would derogate from the existing grant.

The Commissioners appealed, challenging the factual finding, the alleged rent terms, and the alternative derogation analysis. The central issues were whether an agreement had been concluded and whether it could be made orally.

1. Appeal dismissed. Lord Justice Longmore delivered the leading judgment. Sir Robin Auld and Lord Justice Rix agreed.
2. The judge was entitled to find that the Commissioners’ December 2004 resolution, read with the minutes and surrounding evidence, approved a facility intended to be operated by Looe Fuels Ltd and amounted to a binding agreement to grant it a lease. The finding was essentially factual, and the judge had given adequate reasons for rejecting contrary witness evidence. This court had not heard the witnesses and had no proper basis to interfere.
3. The proposed payment based on pence per litre was no more than a proposal or alternative to the annual rent. It was not adopted as a condition of the agreement, was not subsequently pursued, and did not contradict the agreement already reached.
4. Section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989 extended the relevant exception to an agreement for a lease of the kind described in section 54(2) of the Law of Property Act 1925. The only live requirement was that the rent should be the best reasonably obtainable. The judge was entitled to consider the Commissioners’ actual position, including their 25 per cent capital contribution and its recovery within three years. The later apportionment of the project cost to exclude the fishermen’s store could not affect the existence of the contract. The resulting rent of £6,000 per annum was still capable of satisfying the statutory requirement.
5. It was unnecessary to decide the alternative derogation-from-grant issue. Longmore LJ observed obiter that using the doctrine to prevent an up-to-date replacement facility, where the existing tank was obsolete, might be difficult to justify. The appeal was dismissed.

1. Court of Appeal (Civil Division) — On 22 April 2008, the Commissioners’ appeal was dismissed. The court upheld the finding that an oral agreement to grant the lease had been made and that it fell within the statutory exception for short leases at the best reasonably obtainable rent.
2. Exeter County Court — His Honour Judge Griggs held that the Commissioners were bound to grant the lease, that the oral agreement satisfied section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989, and alternatively that a third-party lease would derogate from the existing grant.