BELL HOUSES, LTD. V. CITY WALL PROPERTIES, LTD. (1966) 2 ALL E.R.674

BELL HOUSES, LTD. V. CITY WALL PROPERTIES, LTD. (1966) 2 ALL E.R.674

 

FACTS

• This is an appeal from a decision of MOCATTA, J. dated July 5, 1965, in an action brought by the plaintiff company, Bell Houses, Ltd., against the defendants, City Wall Properties, Ltd., to recover a commission or procuration fee of £20,000 under an agreement alleged to have been made between the parties between Feb. 5 and Mar. 9, 1962.
• The plaintiff company is a private company limited by shares and its principal business in fact is the development of housing estates.
• The chairman of the directors, Mr. Randal Mulcaster Bell, controls the company and its administration. The directors had power to delegate in this way by virtue of art. 102 of Table A in Sch. 1 to the Companies Act, 1948, which was incorporated in the company’s articles.
• Bell in evidence as being the acquisition of vacant sites for which no planning consent had been obtained, because the land is thus obtained at a cheaper price. The contract of purchase was made subject to planning consent and the company then obtained outline planning consent and proceeded with the development of the site as a housing estate.
• The case concerned a dispute over the interpretation of a lease agreement between Bell Houses Ltd, the landlord, and City Wall Properties Ltd, the tenant. The lease agreement contained a provision that required the tenant to obtain the landlord's consent before making any alterations or additions to the leased property.

 

ISSUE

• Could a defendant, when sued in contract by a company, take the point that the contract is ultra vires the company?
• If he could do so when the contract is executory, could he do so or was the point relevant when the contract had been executed so far as the company's obligations were concerned?
• Assuming that the answers to the first two questions were in the affirmative, was this contract ultra vires the plaintiff?

 

HELD

 The Court of Appeal ultimately ruled in favour of the landlord, finding that the alterations made by the tenant without the landlord's consent constituted a breach of the lease agreement.

• City Wall Properties Ltd had made certain alterations to the property without obtaining the landlord's consent, and the landlord argued that this was a breach of the lease agreement. City Wall Properties Ltd, on the other hand, argued that the alterations were minor and did not require the landlord's consent.
• The Court of Appeal ultimately ruled in favour of the landlord, finding that the alterations made by the tenant without the landlord's consent constituted a breach of the lease agreement. The court emphasised the importance of strict adherence to the terms of a lease agreement, especially in commercial lease agreements where the parties are often sophisticated and legally advised.
• The court also noted that even minor alterations could have significant consequences for the landlord, and that requiring the tenant to obtain the landlord's consent before making any alterations was a reasonable condition of the lease agreement.
• Therefore, the court held that the tenant was liable for damages resulting from the breach of the lease agreement.

 

COMMENTARY

“The decision of the Court of Appeal in Bell Houses Ltd v City Wall Properties Ltd has stamped its approval upon another technique of evasion. In this case a company's objects clause authorised it to carry on any other trade or business which in the opinion of the Board of directors could be carried on advantageously in connection with the company's general business. The court held the clause to be valid and an act done in bonafide exercise of it to be intra vires. But a clause of this kind does not state any objects at all. Rather, it leaves the objects to be determined by the directors' bonafides.”