Crossco No 4 Unltd & Ors v Jolan Ltd & Ors

An agreement in principle does not become contractually binding where essential matters remain unresolved and the parties objectively intend to record the arrangement later. A non-binding side letter cannot prevent reliance on an existing contractual break clause. Rectification requires proof of the relevant mistake and, where appropriate, a prior consensus which the executed document fails to express. Proprietary estoppel and constructive trust are principled doctrines, not general remedies for unconscionable conduct or commercial disappointment. In a redevelopment case under Landlord and Tenant Act 1954, an intention under section 30(1)(f) requires a genuine, settled intention to carry out the works and a reasonable prospect of doing so. The landlord’s planning permission, pre-letting commitments, professional preparations and funding prospects established that intention.

The proceedings concerned a building in Manchester owned by Jolan Piccadilly Ltd and leased to Piccadilly for 15 years. The lease contained an unqualified three-month landlord’s break clause and fell within Part II of the Landlord and Tenant Act 1954.

Following a complex family-business demerger, the freehold passed to the defendants’ side while the lease remained with the claimants’ side. The claimants alleged that discussions and side letters preserved their occupation of the ground floor without exposure to the break clause. They sought contractual relief, rectification, estoppel and a constructive trust. The landlord also sought termination of the tenancy under sections 29 and 30(1)(f) of the 1954 Act.

The central issues were whether the parties had made a binding agreement, whether equitable relief was available, and whether the landlord genuinely intended to carry out the proposed redevelopment.

1. Main claim dismissed. The discussion on 18 February 2009 produced commercial heads of terms, not a binding contract. Essential matters remained unresolved, including the extent of the demise, the duration and terms of any lease, and the rent. The parties’ subsequent communications objectively showed an intention that the side arrangements should not be legally binding.
2. The side letter of 9 April 2009 was not contractual. It was materially identical to the earlier non-binding side letter and did not contain an express restriction on the break clause. Even if binding, it would have required only agreement to reduce the demise while leaving the lease otherwise subject to clause 9.
3. Rectification failed. The claimants had mistakenly overlooked the break clause, but the defendants neither knew of nor were wilfully blind to that mistake. There was no common mistake and no prior consensus differing from the executed documents. The approach in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 did not assist on the facts.
4. There was no proprietary or promissory estoppel. The defendants made no representation or assurance that occupation would continue for the remainder of the lease term without the break clause. The claimants relied on their own mistaken reading of the lease. Applying Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752, unconscionability could not replace the necessary ingredients of an equitable doctrine. No constructive trust arose under the principles discussed in Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372.
5. The landlord had a genuine and settled intention under section 30(1)(f) of the 1954 Act. Planning permission, four agreements for lease, professional preparations, the development’s momentum and available funding gave it a reasonable prospect of carrying out the scheme. A termination order was therefore required under section 29(2).