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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Carter v Lotus Leisure Group Ltd [2001] EWCA Civ 1205 (25 July, 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1205.html Cite as: [2001] EWCA Civ 1205, [2001] NPC 123, [2002] 2 P & CR 2

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR
JUDGE ROGER COOKE
CENTRAL LONDON COUNTY COURT

		Royal Courts of Justice Strand, London, WC2A 2LL Wednesday 25 July, 2001

LORD JUSTICE MUMMERY:

Introduction

1. This is an appeal from an order of HHJ Cooke sitting at the Central London County Court on 20 and 21 October 1998. He dismissed with costs (to be taxed on scale 2, if not agreed) an action by Mr Michael Carter against Lotus Leisure Group Limited (Lotus) to enforce the terms of a written agreement made on 25 October 1994 (the 1994 Agreement).
2. It has taken a long time for the hearing of the appeal to come on. The notice of appeal was lodged by Mr Carter, who acts in person, as long ago as 18 November 1998. The delays resulted mainly from a contested application by Lotus for security for costs, from Mr Carter's initial failure to comply with the order made on the application and from Mr Carter's delay in setting down the appeal and lodging the appeal bundles.
3. It should also be noted that, although Mr Carter is the claimant, he was not a party to the 1994 Agreement on which his claim is based. On 8 August 1996 he took an assignment of the benefit of the 1994 Agreement and the accrued causes of action on payment of £500 to a connected Guernsey company, Bon Nej Locations Limited (BNL), which was a contracting party. Notice of the assignment was given to Lotus. Proceedings by Mr Carter were begun by writ issued on 13 August 1996. The case was transferred to the County Court.
4. Mr Carter's title to sue was an issue before the judge. It was resolved in his favour. There is no appeal by Lotus against that ruling. The only issue on the appeal is whether the judge correctly construed the restrictions in the 1994 Agreement which Mr Carter seeks to enforce against Lotus.

The Setting of the 1994 Agreement

5. Mr Carter and Lotus both operate in the market for Alpine skiing holidays with accommodation provided in mountain chalets. Mr Carter trades through BNL. He and BNL earn commissions and other sums by acting as middlemen between chalet owners and tour operators, such as Lotus, who supply package ski chalet holidays to their customers.
6. In some instances, such as here, BNL enters into an agreement to rent the chalet from the owner for a winter season. Mr Carter then looks for a potential "tenant", such as Lotus, to enter into a rental agreement with BNL for the duration of the skiing season. The season runs from the beginning of December in one year to the beginning of May in the following year. During the season the chalets supplied by Mr Carter and BNL are actually occupied by customers of the tour operators. The chalets are usually unoccupied out of season. The tour operators continue throughout the year to look for available chalets and to enter into agreements securing them for actual occupation in the skiing season.
7. Thus, the 1994 Agreement was made out of season on 25 October 1994,but actual occupation of the chalet for the skiing holidays would not begin until December 1994. Occupation by a succession of skiers would end on 1 May in the following year.
8. As Mr Carter's role is that of a middleman, he is concerned to protect his connection and that of BNL with the chalet owners. It is plainly in his interest to prevent the package tour operators, who have rented chalets through him or BNL, from cutting him and BNL out of commissions, which they could do if they were left free to make approaches to the owners and rent from them direct chalets originally introduced and made available to them through Mr Carter. No doubt it was the need to guard against that risk that led Mr Carter to include in his form of agreement with the tour operators a clause restricting the tour operators in dealing directly with the chalet owners. This appeal turns on the construction of the restrictive clause. The dispute is about the scope of the restriction.

The 1994 Agreement

9. The 1994 agreement, which is expressly governed by English law, was made between BNL and Lotus "for the rental of " a chalet "Carcailleu" at Courcheval 1850 in the French Alps for the season from 3 December 1994 through to 1 May 1995 ("The Season"). A "rental sum" of 288,000frs was agreed for "The Season." "Rental payments" were to be made by three instalments of 96,000 frs, the first to be on 15 November 1994 (i.e. before the first occupation of the season).

The restriction at the heart of this dispute provides that-

" From signing herein until the expiry of 18 months from the end of this contract (if/as extended season by season) the renters and their directors agree not to rent directly or indirectly this nor any other property currently rented by Mike Carter ("MC").....and /or BNL in Courcheval without BNL's permission in writing (not to be unreasonably withheld) or alternatively upon the payment to them of 5000frs per bed per season of occupation resulting directly or indirectly from any such agreement (the payments due not being limited to 18 months' usage.) The following are the chalets in 1850 affected by this agreement: Cedres, Foret, Claire de Lune, Vinot and Carcaillou. All chalets rented in Courcheval 1650,1550 and 1300 currently rented by MC or BNL are also covered by this agreement."

10. The numbers in the last two sentences of the clause refer to the altitudes of the four separate resorts collectively called Courcheval.
11. Mr Carter's claim is based on an alleged breach of the clause by Lotus making an agreement on 23 April 1996 (the 1996 Agreement) directly with Mr Lecornu, the owner of the chalet "Foret" expressly mentioned in the 1994 Agreement, for the winter season 1 December 1996-30 April 1997. Those dates, during which the chalet would actually be occupied by customers of Lotus, fall entirely outside the period of the restriction specified in the clause. So Lotus contend that they have not acted in breach of the restriction.
12. Lotus accept that they are the "renters" referred to in the clause. They also accept that during the period of the restriction they agreed with the owner of the chalet "to rent" it and that they neither sought nor obtained the written permission of BNL to do that. But they insist that they are not in breach of the 1994 Agreement. The clause provides that they are not to "to rent" the chalet until the expiry of 18 months from the end of the 1994 Agreement i.e.until November 1996. Their case is that they were only renting the chalet from the beginning of the season in December 1996. The agreement with the owner and the payment for occupation was for the season beginning then. The chalet would only be occupied after the start of the 1996/1997 season. As the actual occupation of the chalet was not to start until after the expiry of the 18 month period from the end of the 1994 Agreement, they had not rented it during that period and the restriction does not apply.
13. Mr Carter disputes this construction of the 1994 Agreement. According to him the critical point is that the 1996 Agreement to rent the chalet was entered into before the expiry of the 18 month period. Is that a breach of the 1994 Agreement? That turns on the construction of the restrictive clause. What does it prevent Lotus from doing?
14. Lotus agreed during the period of the agreement and for the period of 18 months after the expiry of the agreement "not to rent" property currently rented by Mr Carter or BNL without written permission. Mr Carter's case is that the clause applies to the making of any agreement within that period to rent one of the chalets in question, whether for actual occupation during that period or during any subsequent period.
15. He therefore submits that Lotus were renting the chalet "Carcaillou" from the date they signed the 1994 agreement on 25 October 1994, even though their customers would not begin to occupy it until the season started in December 1994. By the same token Lotus were renting Chalet Foret from the moment they signed up with the owner on 23 April 1996.

The Judgment

16. The judge accepted the submissions of Lotus on the construction issue, holding that the language of the 1994 Agreement was unambiguous. In the judge's vivid turn of phrase Lotus were only prevented by the clause "from putting bodies into the chalets during the closed season": they were not prevented from signing an agreement during that period for the future occupation of chalets to start after the expiry of the specified period.

The Judge held that , on the face of it and without any controlling context, the expression "to rent" in its primary sense means that

".... the person taking the property is entitled to the possession, which must include possession to a tenant or a licensee or anyone you care to put in there, or the personal use and occupation, that in this industry means, above all else, that it is entitled to put bodies in the chalet.........It is a reference to present occupation; present use, present possession. On that construction, if that stands alone, the clause would be directed at the putting of bodies into the chalet during the prohibited period as opposed to when any agreements are actually made."

17. The judge summarised the various arguments on construction advanced by Mr Carter and considered whether the context suggested that a different meaning from the primary meaning was intended. He referred, in particular, to Mr Carter's contextual point (described by the judge as "the most tricky point in the whole of the case") that the last six months of the specified period is the summer and autumn season when people do not ski and the chalets are unused and unoccupied. He concluded, however, that this was not in the end a controlling factor, that the primary meaning of "to rent" was unambiguous and that what Mr Carter was in fact seeking was the substitution of a fair and reasonable result in place of the clear language of the contract.

Conclusion

18. In every day usage, the core meaning of the verb "to rent" is actually occupying premises at the present time, or having an ongoing right to occupy premises at the present time, on terms as to periodical payments continuing for an agreed period.
19. On that approach, which was adopted by the judge, the making of the 1996 Agreement did not constitute breach of an agreement not "to rent" Chalet Foret during the period of the restriction. All that happened during that period was that Lotus acquired a contractual right to commence actual occupation of the chalet after the expiration of the specified period. In short, an agreement "to rent" a chalet for future occupation after the specified period is not the same as renting a chalet actually occupied during that period.
20. I accept that that is a possible construction of the restrictive clause. Indeed, when I first read the judgment under appeal I formed the provisional view that the judge's construction was probably correct. However, on a more detailed consideration of the language of the 1994 Agreement and its factual setting, I have arrived at the conclusion that the judge placed too much reliance on the literal core meaning of the verb "to rent" and too little reliance on the factual setting. I would allow this appeal.
21. In ordinary language the verb "to rent" may bear a wider meaning than the core meaning. The wider meaning includes the making of a binding agreement for the future occupation of premises in return for periodical payments. The context of the 1994 Agreement indicates that this wider meaning, rather than the narrower core meaning applied by the judge, is more likely to reflect the common intention of the parties.
22. In support of that conclusion there are a number of linguistic pointers, although they are not in themselves conclusive on this point. There are also contextual indicators which are compelling.
23. First , in the 1994 Agreement Lotus are referred to as "the renters." As at the date of the 1994 Agreement (25 October 1994), however, neither Lotus nor any of its customers were in present occupation of the chalet. Actual occupation would not in fact commence for another five weeks. As the parties to the 1994 Agreement treated Lotus as the "renters" of the chalet "Carcaillou" from the moment when they entered into the agreement ahead of actual occupation in the season, so it can be said that they probably intended Lotus to be treated as the "renters" of the Chalet Foret as soon as they entered into the 1996 Agreement, thereupon putting them in breach of the obligation not "to rent" any of the chalets within the period of the restriction.
24. Secondly, the use of the expression "currently rented " in relation to the property caught by the restriction tends to reinforce this construction. The restriction was intended to apply to other properties subject to the same arrangements as "Carcaillou." For the purposes of the 1994 Agreement the other chalets were treated as "currently rented" as soon as they were the subject of an agreement between Mr Carter or BNL and an owner, even if the agreement was made prior to actual occupation in the season
25. Thirdly, if this were not the effect of the restriction, Lotus would have been entitled to enter an agreement with the owner of the chalet "Carcaillou" on the very next day after the 1994 Agreement in respect of the season following the expiration of the specified period (i.e. two years on). As at 26 October 1994 Lotus would not, on their construction of the clause, be renting the chalet. Lotus would accordingly be able to deny liability for breach on the basis that "an agreement to rent" the chalet was not a breach of an agreement not "to rent" a chalet. The restriction in the 1994 Agreement would in effect only apply to the 1995/96 season. Having regard to the evident purpose for imposing the restriction, this construction is unlikely to reflect the common intention of the parties.
26. Fourthly, it is the case that, by virtue of the 1994 Agreement, Lotus, in return for periodical payments to commence before the start of the season, acquired an immediate benefit in the chalet. Although actual occupation of the chalet would not commence until the start of the season, Lotus were immediately in a position upon the conclusion of the agreement with the owner to market its future occupation in season by advertising and taking advance bookings. In a very real commercial sense the chalet was "rented" to Lotus from the moment they made that agreement with BNL on 25 October 1994. In the same sense the Chalet Foret was "rented" to Lotus by the owner as soon as the 1996 Agreement was made.
27. I would reject the submission of Mr Mason, appearing for Lotus, that "renting" of the chalet within the meaning of the clause is confined to actual present occupation, starting only when a holiday maker moves into it. That may be a correct way of describing the position as between Lotus and their customers, whose use of the chalet on skiing holidays would be confined to the periods in which they presently occupied it. But the same does not follow as between Lotus and BNL and/or Mr Carter: Lotus acquire a benefit in the chalet as tour operators as soon as it is available for marketing by them.
28. I am unimpressed by the "impossibility" objection raised by Mr Mason to treating Lotus as renters of a chalet for occupation in the next skiing season at a date when someone else may be in present occupation of that chalet. In my judgment, a more absurd commercial result would follow from the construction advanced by Lotus. On their construction, the restriction imposed for the purpose of protecting Mr Carter's portfolio of ski chalets from being "poached" by tour operators making direct approaches to chalet owners (of whom they have only become aware through introductions by Mr Carter) would not apply to the very time of the year when the tour operators are likely to be looking for and signing deals with chalet owners for actual occupation by their customers in the next skiing season.

Result

29. I would allow the appeal.

LADY JUSTICE ARDEN:

30. I agree. In this case, the question is whether the ban on renting certain properties contained in an agreement dated 25 October 1994 ("the 1994 Agreement") and made between Lotus Leisure Group Limited ("Lotus") and Bon Nej Locations Ltd ("BNL") covered agreements to rent made within the eighteen month period but taking effect thereafter, or only agreements for rent which took effect within the eighteen month period. Mr Carter, as assignee of BNL, argues for the former construction and Lotus for the latter. The relevant part of the agreement provides:

"An agreement between Bon Nej Locations Ltd (BNL) of Noble House, St Peter Port Guernsey and Lotus Leisure Ltd (LLG) for the rental of Chalet Carcaillou Courchevel 1850 from December 3rd 1994 through to May 1st 1995 "The Season". There shall be no further subletting without the consent of BNL.

The rental sum for "The Season" is to be 288,000 frs exclusive of all running costs (for instance but not exclusively EDF, heating, water, gas if applicable, Taxe de Séjour, locataire's insurance) except buildings insurance. Rental payment shall be made as follows:

November 15th 1994 96000 FF

January 6th 1995 96000 FF

March 4th 1995 96000 FF

From signing herein until the expiry of 18 months from the end of this contract (if/as extended season by season) the renters and their directors agree not to rent directly or indirectly this nor any other property currently rented by Mike Carter ("MC") of Lodge Farmhouse, Foxhall, Ipswich, IP10 0AE and/or Bon Nej Locations Ltd in Courchevel without BNL's permission in writing (not to be unreasonably withheld) or alternatively upon the payment to them of 5000 frs per bed per season of occupation resulting directly or indirectly from any such agreement (the payments due not being limited to 18 months' usage.) The following are the chalets in 1850 affected by this agreement; Cedres, Foret, Claire de Lune, Vinot and Carcaillou. All chalets rented in Courchevel 1650, 1550 and 1300 currently rented by MC or BNL are also covered by this agreement."

31. The ban in question is contained in the final paragraph set out in this quotation from the 1994 Agreement. I gratefully adopt Mummery LJ's explanation of the facts and his summary of the judge's judgment.
32. Mr Carter, who appears in person, made a formidable number of submissions about the construction of the 1994 agreement. Some of his submissions are linguistic. Some of them are based on the 1994 Agreement in its factual matrix. First, he submits that the opening words "An agreement . . . for the rental of" Chalet Carcaillou do not mean that the word "rent" subsequently appearing in the ban on renting refers to a right presently to occupy the chalet, even though the "rental" of Chalet Carcaillou is from a date subsequent to the signing of the agreement, namely 3 December 1994 to 1 May 1995. In the 1994 agreement, an agreement "for the rental of" a chalet is not an agreement to rent such a chalet in the future but an agreement for renting such a chalet. The opening words are therefore not inconsistent with the meaning which Mr Carter seeks to place on the word "rent" as used in the ban itself. Second, Mr Carter submits that if, as the judge considered, the word "rent" includes making use of, as opposed to simply occupying, the chalet, then, Lotus rented the chalet immediately notwithstanding that its right to occupy did not come into force until a later date. This is because it could and would have used the chalet for marketing holidays immediately the agreement was signed. Third, on Mr Carter's submission it is significant that the 1994 agreement refers to Lotus as "renters" even though they were not in occupation. Fourth, he submits that the words "directly or indirectly" naturally qualify an agreement to rent. Those words were not appropriate to cover this situation where the directors of Lotus form some new company to occupy premises. Fifth, Mr Carter points out that words "currently rented" refer to a situation where BNL had contracted to take a property, since it was never in occupation itself of any chalet and at the date of the agreement the skiing season had not started. Sixth, to make commercial sense, the ban on renting must cover a situation where the day after the agreement was signed Lotus enters into an agreement with the owner of the property to rent the property with effect from the end of the prohibited period. If his construction is not correct this situation was not covered.
33. Mr Carter has several other submissions. The words "5000 FF per bed per season of occupation" tie in with the ban being on an agreement to rent (his seventh submission). The words "any such agreement" appearing in the ban relate back to "rent" and would be meaningless unless the ban is on entering into an agreement to rent (his eighth submission). As a practical matter, an agreement between a ski tour operator and himself would have to be entered into outside the skiing season for occupation within the skiing season. Otherwise the ski tour operator could not market holidays on the basis that it had use of the chalet (his ninth submission). Further Mr Carter submits that both landlord and tenant could be said to "rent" and this supported his submission that to "rent a property" included into an agreement to rent property (his tenth submission). He also submits that significance is to be attached to the expression "season of occupation" as opposed to "season of rent" (his eleventh submission). He submits that occupation "resulting directly or indirectly from an agreement in breach of the ban was wide enough to cover successive agreements for renting (his twelfth submission). Mr Carter submits that the purpose of the ban was to prevent a ski company dealing with BNL from taking advantage of the experience, contacts and goodwill which he Mr Carter had and had used to get them into the chalet to go behind his back and try to cut BNL or him out from their commission in the middle. As a commercial matter if the tenant was restricted only for one season, it was in the interests of the tenant to go behind Mr Carter's back and approach the owner direct (his thirteenth submission).
34. Mr Carter relies on the fact that the agreement provided for a payment of rent to be made prior to occupation (payment of 96000 FF on 15th November 1994). This sum is described as a rental payment even though on that date Lotus' tenancy had not begun. Finally, Mr Carter submits that the eighteen month period was illogical since no ski company would wish to occupy the chalet in the summer and the eighteen month period on the judge's construction only covered one skiing season of six months.
35. In answer to these points, Mr Mason contends that the judge was right. He submits that the ordinary meaning of "rent" is to use or occupy premises. In addition the opening words of the agreement being an agreement "for the rental of" the chalet show that in the case of an agreement covering a future period the party's legal act was to enter into an agreement to rent not to rent a property. In answer to Mr Carter's second submission, Mr Mason submits that on the ordinary meaning of the word "use" advertising a chalet is not using it. In response to Mr Carter's third submission, he submits that the use of the word "renters" did not take the matter any further and that that expression obviously meant Lotus. In answer Mr Carter's fifth submission, he submits that Lotus has no knowledge of Mr Carter's agreements with the landlords. In answer to Mr Carter's sixth submission, Mr Mason accepts that the ban prevents Lotus from renting the specified properties within the eighteen month period but not the entry into an agreement to rent a property in say 2010. He submits that the eighteen month period was an adequate period for protecting Mr Carter's interests. In answer to Mr Carter's eighth submission, he submits that the words "any such agreement" are very unclear. He adopts the judge's response which was that there has to be an agreement but the words "any such agreement" were consistent with an agreement having to be made within the period and were therefore not helpful (judgment, page 18). In answer to Mr Carter's thirteenth submission, Mr Mason submits that the purpose of the ban is to fix a period during which Lotus could not put their clients into the chalets. He submits that Mr Carter's fourteenth submission (the fact that rent was paid before the right of occupation arose) was irrelevant. He submits that if the agreement has the effect contended for it is unclear and that any ambiguity should be construed contra proferentem, i.e. against Mr Carter whose predecessor in title produced the agreement. He relies on Pera Shipping Corporation v Petroship SA [1985] 2 Lloyd's Law Rep 103, and in particular on the following passage from Griffith's LJ judgment:-

". . . but of this much I am absolutely satisfied that this clause, at best, is ambiguous and that being so I return to the fundamental rule that a contractual clause intended to cut down the rights which a party to a contract would otherwise enjoy, must be expressed in clear and unambiguous language."

36. Lastly, in response to Mr Carter's final submission, he submits that the meaning of the word "rent" which the judge adopted was consistent with the dictionary definition of "to occupy or use (property) in return for periodic payments". It is also consistent with the commercial objective of the agreement.
37. In my judgment, Mr Mason's submissions cannot deflect the force of Mr Carter's submissions. In my judgment the ban on renting covers an agreement entered into within the eighteen month period of the ban even if the right to occupy given by that agreement is not exercisable within the eighteen month period. In my judgment the most significant points are the following:-

i) The ban clearly begins on the signing of the 1994 agreement. It is also a ban on renting Chalet Carcaillou - the chalet to which the 1994 agreement relates. Those words clearly have to be given some meaning and can only bear the meaning that agreements to rent the property at a future date are covered. There is nothing to restrict those future dates to dates falling within the eighteen month period.

ii) As regards the factual background to the agreement, BNL's business is that of arranging tenancy agreements for ski tour operators. Lotus is a well-known ski tour operator. It did not desire the property for its immediate use but rather for the use of its clients during the season. Inevitably the agreement had to be made outside the season and relate to a future period. Accordingly the type of rental agreement entered into by these parties would inevitably be for rental for a future date. Moreover, as Mr Carter points out, there is very little point in having this particular eighteen month period as it will on the judge's construction prohibit Lotus from occupying the property during the summer, which neither party expected it to want to do.

iii) There are indications in the ban that "rent" covers agreements to rent: see, for example, the expression "any such agreement".

iv) It is significant that the agreement provides for the payment of "rental payments" to commence before the agreement starts. This shows that the parties were using the words "rent" and "agreement to rent" interchangeably.

38. In my judgment, on close analysis, the meaning of the clause is not in doubt and there is no room for the application of the contra proferentem rule, on which Mr Mason relies.
39. For these reasons, and those given by Mummery LJ, I would allow this appeal.

MR JUSTICE SUMNER:

40. I have had the advantage of reading the judgment of Mummery LJ and the judgment of Arden LJ. I am persuaded that, on the close analysis to which they have subjected the agreement of 25 October 1994, this appeal should be allowed for the reasons which they have given.
ORDER: Appeal allowed with the costs. Appellant to pay the costs of 12^th May, subject to detailed assessment. Payment out to appellant of £3,800 plus interest. Inquiry re: damages before district judge. Liberty to apply to district judge for directions. Application for interim payment to go before district judge. Permission to appeal refused. (Order does not form part of approved Judgment)