Brocket Hall (Jersey) Ltd v Kruger & Ors

Contractual entitlement to VAT depends on the proper construction of the agreement in its commercial context. Silence as to VAT does not invariably exclude recovery where the parties’ established dealings and the contractual history show that fees were intended to be paid exclusive of VAT.

An express obligation to deliver up licensed property includes responsibility for obtaining necessary consents unless the contract provides otherwise. A term will not be implied where it would reverse the express allocation of risk or fail the requirements of business efficacy or obviousness.

Damages for wrongful retention may be assessed by reference to the licence fees representing the economic value of the property. Consequential expert costs caused by the breach may be recoverable, but costs incurred in an unauthorised self-help collection attempt are not.

The claimant leased Brocket Hall and held historic chattels and fixtures under several licences granted by the defendants. The chattel licences were terminated by notice expiring on 20 November 2013. The defendants counterclaimed for unpaid licence fees, VAT, delivery up, damages for non-delivery, restoration costs, expert fees and interest.

The claimant disputed the defendants’ entitlement to VAT and argued that planning restrictions prevented or reduced liability for delayed delivery. It also contended that the delivery obligations should be qualified by an implied term requiring the defendants to obtain necessary local-authority consents. The court determined the proper construction of the licences, the scope of the delivery obligation, the recoverability of consequential losses and the appropriate rate of interest.

1. VAT. The trustees were entitled to recover VAT on the licence fees. Although the 2003 licences were silent, the relevant factual matrix included the parties’ previous dealings, the substantially replicated contractual terms and the absence of any agreement that VAT would cease to be payable. The 1999 reference to VAT clarified, rather than changed, the existing liability. The pleaded claim was contractual, so unpleaded estoppel or rectification arguments could not establish entitlement.
2. Delivery up. The express terms placed the obligation to deliver up on the claimant. That obligation included taking necessary steps and obtaining any required planning or local-authority consents. No term could properly be implied to transfer that burden to the defendants. The suggested term was not required for business efficacy, did not go without saying and would negate the express contractual allocation of responsibility.
3. Damages. Applying the principles concerning user and negotiating damages explained in Morris-Garner v One Step (Support) Ltd [2018] 2 WLR 1353, damages were assessed by the licence fees representing the economic value of the retained items. Liability ran from termination until delivery up, including for fixtures which had become part of the demised land. Planning difficulties did not reduce liability.
4. The claimant was liable for £45,000, inclusive of any VAT, for damage to the Waterford candelabra, and for expert costs caused by its breach. The defendants’ abortive collection costs were refused because they arose from an unauthorised attempt to enter the land and collect the items. Interest was awarded at 3%, with no exclusion of the period during which the proceedings had effectively been parked.