Wigan Borough Council v Scullindale Global Ltd & Ors

A contractual break clause permitting termination “at any time” may be subject to an implied limitation where it is necessary and obvious that the right can be exercised only while the relevant default persists. The court will not imply a term requiring exercise within a reasonable time where that would be imprecise and contradict the express wording.

A party cannot rely on delay in performance which it caused, subject to contrary express terms and the need to prove causation. A valid break notice is not required to be justified by motive, and an invalid notice does not ordinarily amount to repudiation or breach of quiet enjoyment.

The Council granted Scullindale a 199-year lease of Haigh Hall for redevelopment as a four-star boutique hotel. The lease required commencement of works within six months and completion of the development in accordance with specified planning permissions by 23 May 2018. It gave the Council a right to terminate after an Event of Default by serving a break notice at any time.

The Council served a break notice in September 2019, effective on 22 November 2019, alleging that the second milestone had not been achieved. Scullindale disputed the construction and validity of the notice, relying on implication, prevention, waiver, estoppel and repudiation. The issues also included the termination compensation, valuation date, mesne profits and the counterclaim.

1. Construction and completion. The second milestone required delivery of the development shown on the approved plans, including the 30-bedroom hotel, roof ceremony room and associated works. The phrase “appropriate to a 4 star boutique hotel” described the required standard, not a reduced extent of works. Completion required practical completion, namely completion free from patent defects other than trifling defects, applying Mears Ltd v Costplan Services (South East) Ltd [2019] EWCA Civ 502. The development was incomplete both in May 2018 and in September 2019.
2. Break clause. “At any time” referred to service of the notice, not the termination date. No term requiring exercise within a reasonable time could be implied because it lacked precision and contradicted the express clause. However, the lease was subject to an implied term that a notice could be served only while the relevant Event of Default persisted. A lessee could also make time of the essence by notice, after which failure to exercise the break within a reasonable time would cause the option to lapse.
3. Prevention, waiver and estoppel. The lease contained an implied term preventing the Council from relying on delay it had caused, subject to clause 7.4 and requiring proof of causation. The Council had neither caused the delay nor prevented completion. Continued dealings and expressions of satisfaction did not amount to clear and unequivocal election or representation that the break right would be abandoned. There was no sufficient detrimental reliance.
4. Valuation and occupation. Compensation under clause 9.3 was valued at the termination date. Any loss caused by delayed possession had to be claimed as damages for breach of the yielding-up covenant. The Council suffered no recoverable loss from continued occupation, and Scullindale obtained no relevant benefit, so mesne profits were nil.
5. Counterclaim and orders. The break notice validly terminated the lease. Its service was not repudiatory and did not breach quiet enjoyment. The counterclaim was dismissed. The lease ended on 22 November 2019; Scullindale was in breach by failing to give vacant possession; possession was ordered on a date to be fixed; the Council’s claims for mesne profits, trespass damages and interest were dismissed; and the termination payment was to be determined under clause 9.3.

First-instance judgment of the High Court (Chancery Division). No appellate history was stated in the judgment.