UTLC LC-2022-000705 - [2023] UKUT 141 (LC)

The hearing before the Judge occupied three days, during which the Judge heard oral evidence from the key individuals involved in the case. The Judge set out a full account of the background to this dispute in the Decision. My own account of the relevant background is confined to what is necessary to set the scene for the issues which I have to decide in the Appeal. My account is taken largely from the Decision, and also from other documents which I have seen in the Appeal. I am indebted to the Judge for his account of the background to the dispute. As the Appeal is being heard by way of review I am not, in this decision, making any findings of fact of my own.

Reference to Paragraphs in this decision are, unless otherwise indicated, references to the paragraphs of the Decision. Italics have been added to quotations in this decision.

The freehold title to the Property is registered under title number NGL674581 (“the Registered Title”). The Appellant acquired the Property on 11^th July 2013, and was registered as the freehold proprietor of the Property on 19^th August 2013. The Appellant, which is now known as Carlton Vale Limited, was then known as CLTX Limited. The Appellant acquired the Property with the intention of demolishing and redeveloping the Property. The sole director of the Appellant at that time was a Mr Ori Calif (“Mr Calif”). Mr Calif’s evidence, as recorded in the Decision at Paragraph 2.3, was that at the material time he was a tax lawyer practising predominantly in Israel and was also, between 2013 and 2016, an overseas investor in the London property market.

Prior to the Appellant’s acquisition of the Property, Mr Calif was introduced to Mr Matan Amitai (“Mr Amitai”), who held himself out as an experienced property developer. Mr Amitai had already exchanged contracts for the purchase of the Property, and had paid a substantial deposit, but had found himself unable to raise the funds required to complete the purchase. Mr Calif, through the medium of the Appellant, agreed to step in and provide the necessary funding.

The Property was then subject to a lease held by GPS. This lease (“the Lease”), which was dated 18^th October 2010, had been granted to GPS for a term of 20 years by Punch Partnerships (PTL) Limited. In order to proceed with its redevelopment plan, the Appellant needed vacant possession of the Property, which in turn required the termination of the Lease. Mr Calif was introduced by Mr Amitai to Fladgate, solicitors (“Fladgate”). The Appellant instructed Fladgate to, as the Judge put the matter (Paragraph 2.5), “put pressure on GPS and the Respondent with a view to achieving either a forfeiture or a surrender” of the Lease.

Following negotiations between the parties, a surrender of the Lease was agreed. The terms on which that surrender was agreed were the subject of considerable dispute at the hearing in the FTT. What does not appear to have been in dispute is that GPS did surrender the Lease to the Appellant. There is a form of transfer (TR1), dated 8^th April 2015, by which the surrender was expressed to be effected. This form of transfer (“the TR1”) identified the consideration paid for the surrender of the Lease as the sum of £344,024.41.

The Respondent’s case was, and remains that the terms of the surrender of the Lease included the payment agreement, to which I have previously referred. As this payment agreement is central to this dispute, and to the Appeal, it is necessary to introduce it at some length.

The payment agreement bears the date of 8^th April 2015 and, as I have already said, was expressed to be entered into between the Appellant, GPS and the Respondent. Although described as a payment agreement, the document was stated to have been executed as a deed. In terms of execution of the payment agreement, the counterpart of the payment agreement which is contained in the appeal bundle for the hearing of the Appeal purports to have been executed by the Appellant, acting by a director. The purported signature of Mr Calif appears on the counterpart, as the director acting on behalf of the Appellant. The witness to the purported signature of Mr Calif is identified as Mr Amitai, whose name and address are printed in manuscript on the counterpart, accompanied by the signature of Mr Amitai as witness.

I will refer to this payment agreement, which purports to have been executed as a deed in counterpart on 8^th April 2015, as “the Payment Agreement”. This is a term of convenience. It is intended to be a neutral expression and, in advance of my conclusions in the Appeal, implies no view, one way or the other, as to whether the Payment Agreement was or is binding upon the Appellant. Equally, where I refer to what were the terms of the Payment Agreement, I am referring to those terms as they appeared in the Payment Agreement on the date of its purported execution (8^th April 2015). Again, and in advance of my conclusions on the Appeal, this implies no view, one way or the other, as to whether the Payment Agreement was or is binding upon the Appellant.

Turning to the terms of the Payment Agreement, I will need to come back to these in more detail later in this decision. For present purposes, it is necessary to identify a few of the clauses of the Payment Agreement at this stage. For convenience, references to Clauses in the remainder of this decision mean, unless otherwise indicated, the clauses of the Payment Agreement. Equally, where I use terms in this decision which were defined terms in the Payment Agreement, I use those defined terms as they were defined in the Payment Agreement, unless otherwise indicated.

It is convenient to start with Clause 3.2, which was in the following terms:

“3.2

Within 7 days following the obtaining of a Satisfactory Planning Permission or if earlier a disposal of the Premises by the Landlord other than by way of a Permitted Disposal, the Landlord shall pay to the Tenant or to Mr Gapper at Mr Gapper's direction the Payment such sum to be paid by the Landlord's Solicitor to the Tenant's and Mr Gapper's Solicitor's Account by direct credit. The Landlord shall keep the Tenant and Mr Gapper fully informed of the progress of obtaining a Satisfactory Planning Permission and shall promptly provide the Tenant with copies of all material documentation and correspondence relating to it.”

The Payment was defined to mean the sum of £90,000. As can be seen therefore, Clause 3.2 was essentially an overage clause, imposing a contractual obligation upon the Appellant to pay to GPS or the Respondent the sum of £90,000 in the event of the obtaining of a Satisfactory Planning Permission or, if earlier, a disposal of the Property by the Appellant other than by way of a Permitted Disposal. I use the expression “a Disposal” to refer to a disposal falling within the terms of Clause 3.2. The expression “a disposal”, as it appears in Clause 3.2, was not defined in the Payment Agreement, and the question of what dealings with the Property were included in this expression is in dispute in the Appeal.

Clause 3.3 provided as follows, in terms of the duration of the obligation to make the Payment

“3.3

Subject always to the Landlord's compliance with the terms of this agreement in the event that the Landlord has not obtained a Satisfactory Planning Permission within five years of the date of this agreement the Payment shall be no longer payable to the Tenant (or Mr Gapper) and the Landlord's Solicitor shall be entitled to return the Payment to the Landlord.”

Clause 6.2 provided for the entry of a restriction against the Registered Title, in the following terms:

“6.2

The Landlord shall apply for the entry of the following restriction against the Landlord's Registered Title at HM Land Registry on the date of this agreement and shall procure that the restriction has priority to any mortgage or charge entered into by the Landlord:

"No disposition of the registered estate by the proprietor of the registered estate (other than a Permitted Disposal as defined in an agreement dated) 8 [written in manuscript] April 2015 made between CL TX Limited (1) GPS Entertainment Limited (2) and Adam Jason Gapper (3)) is to be registered without a written consent signed by GPS Entertainment Limited and Adam Jason Gapper or their conveyancers"

Clause 6.4 provided for the removal of this restriction, in the following terms:

“6.4

On payment of the Payment under clause 3.2 or expiry of the period of five years from the date of this deed (whichever is the earlier) the Tenant and Mr Gapper jointly and severally undertake to procure that the restriction mentioned in clause 6.2 is removed from the Registered Title and to assist the Landlord in achieving such removal.”

Returning to the narrative, the negotiations concerning the surrender of the Lease are dealt with in detail in the Decision. For present purposes it is sufficient to record that it does not seem to have been disputed that the surrender of the Lease (“the Surrender”) was completed on 8^th April 2015, and that a premium was paid to GPS in consideration of the Surrender.

The Appellant then proceeded with the demolition of the Carlton Tavern, without having first obtained planning permission for the demolition and redevelopment. This resulted in enforcement proceedings by the local planning authority which, after what appears to have been a lengthy planning battle, resulted in a situation where the Appellant was obliged to rebuild the Carlton Tavern.

In order to finance the rebuilding work the Appellant agreed to borrow the required funds from Perly Capital Limited (“Perly Capital”), a company controlled by Mr Calif’s brother, Ran Calif. The funding was effected by a bond agreement dated 17^th January 2017 (“the Bond”) and a charge (“the Charge”) dated 24^th February 2017. By the Charge the Appellant charged the Property to Perly Capital as security for all the present and future liabilities of the Appellant to Perly Capital. The Appellant’s solicitors then registered the Charge at Companies House, and applied to register the Charge against the Registered Title.

At this point a problem was encountered. On 7^th August 2015 the Restriction had been entered on the Registered Title. It was in the following terms:

“(07.08.2015) RESTRICTION: No disposition of the registered estate by the proprietor of the registered estate is to be registered without a certificate signed by GPS Entertainment Limited and Adam Jason Gapper both of Flat 3, 40 Kellet Road, London SW2 lED and of 17 9 Bridgnorth Road, Stourton, Stourbridge, West Midlands DY7 6RY that the provisions of clause 6 of an Agreement dated 8 April 2015 made between (1) CLTX Limited (2) GPS Entertainment Limited and (3) Adam Jason Gapper have been complied with or that they do not apply to the disposition.”

The Appellant did not pursue the application to register the Charge, and the Charge was removed from the register at Companies House, by the filing of a notice that it had been satisfied. The evidence of Mr Calif in the FTT was that there was no redemption of the Charge because no charge had been created, save possibly in equity, and no monies had been lent pursuant to the Bond. Mr Calif also gave evidence that he only became aware of the Restriction when it was encountered on the application to register the Charge.

The application to register the Charge was notified to the Respondent, who claimed that the Charge was a Disposal, within the meaning of Clause 3.2, with the consequence that the obligation to make the overage payment (the Payment as defined in the Payment Agreement) had been triggered. This resulted in the Respondent serving a statutory demand on the Appellant, which in turn resulted in the Appellant applying for an injunction to restrain the presentation of a winding up petition by the Respondent. In his witness statement in support of the application for an injunction Mr Calif claimed for the first time that he had not signed the Payment Agreement, and that he had no knowledge of the Payment Agreement until he was alerted to its existence by the Appellant’s solicitors, when they sought to register the Charge against the Registered Title. In the event, it appears that the Respondent did not contest the application for an injunction. The Respondent’s evidence in the FTT was that he had been unwilling to take on the risk of having to pay the costs of the application, if it was successful.

In April 2020 the periods of five years referred to in Clauses 3.3 and 6.4 came to an end. On 2^nd June 2020 the Appellant’s solicitors wrote to the Respondent and invited him to agree to the removal of the Restriction, on the basis that the term of the Payment Agreement had expired, without a Disposal having occurred. The Respondent refused to agree. The result was the Application, which was then referred by the Land Registry to the FTT pursuant to Section 73(7) of the Land Registration Act 2002.