Biggin Hill Airport Ltd v. LB Bromley

Transcript date:

Tuesday, November 21, 2000

Matter:

Court:

High Court

Judgement type:

Substantive

Judge(s):

Nicholas Strauss QC

No. HC00 02941

In the High Court of Justice

Chancery Division

B e t w e e n:

Biggin Hill Airport Limited

Claimant

- and -

The Mayor & Burgesses of the

London Borough of Bromley

Defendant

Judgment

Mr. G. Fetherstonhaugh, instructed by Messrs. Blake Lapthorn, Fareham, appeared on behalf of the Claimant. Mr. S. Moriarty Q.C. and Mr. M. Smith appeared on behalf of the defendant, instructed by its Borough Secretary. Mr. Matthew Hutchings, instructed by Mr. Richard Buxton, appeared on behalf of a group of residents of the London Borough of Bromley.

Introduction

1. The claimant ("BHAL") is the lessee of the Biggin Hill airport and holds it for a term of 125 years pursuant to a lease dated 6th May 1994 granted by the defendant ("the Council" or " Bromley").

2. By an agreement of the same date between International Airports UK Ltd. (" AUK"), the previous operators of the airport, Bromley and BHAL, the business of running the airport and various assets owned by AUK and Bromley were transferred to BHAL. I will refer to this as "the business transfer agreement". Bromley has a continuing interest in BHAL's business, since part of the rent under the lease is calculated by reference to the airport's turnover and profits.

3. BHAL seeks a declaration that it is entitled to permit scheduled and chartered services from the airport. The relevant provision of the lease is clause 1.8, which defines "Permitted User" as:-

" Airport providing facilities for business aviation flight training and private flying and other airport and aviation related uses (including one air fair or one air display in each year of the Term or such greater numbers as may have been previously approved in writing by the Landlord (such approval not to be unreasonably withheld))"

By Clause 5.9.1, BHAL covenanted not to use the airport otherwise than for the Permitted User.

4. Despite the breadth of the declaration sought it is not in dispute that some chartered aircraft operations are permitted, provided that the charter is for business purposes and that no individual fare-paying passengers are carried.

5. The first main issue between the parties is whether BHAL is entitled to permit scheduled services or chartered aircraft carrying individual fare-paying passengers. The immediate cause of the issue arising now is that BHAL wishes to permit a particular airline to operate a chartered service to a European destination; the publicity material relating to the service, which presently operates from another airport, makes it clear that it is used mainly by businessmen.

6. BHAL's main contention was originally that, where such a service is provided principally for businessmen, it is within the meaning of " business aviation"; ultimately, it also contended that the "other airport and aviation related uses" permitted by the second part of the user clause include any kind of scheduled services which are not within the meaning of "business aviation", at least if they are of a kind which existed at the airport at the time the lease was entered into.

7. Bromley's main contention was that "business aviation" is a term used in the aviation industry which includes only flights by aircraft owned or chartered by a company and used for business purposes and does not include ordinary schedules services for individual fare-paying passengers, or chartered aircraft carrying fare-paying passengers, even if provided principally for businessmen; nor are these or any other schedules services within the second part of the permitted user definition. To some extent Bromley too has modified its case in the course of the hearing. I set out both parties' submissions in more detail later in the judgment.

8. It is common ground that BHAL is entitled to permit one schedules service, not necessarily for businessmen, to France. BHAL's case is that this is permitted because it is an "airport and aviation related" use of the airport. Bromley's case is that, whilst another provision of the lease indeed shows that it is permitted, it is not permitted by clauses 1.8 and 5.9.1 as they stand, which mistakenly omit reference to it as the sole exceptional case in which a scheduled service is allowed, and clause 5.9.1 should be read as though the reference were there.

9. The second issue, which arises if Bromley is right on the first, is whether it is nevertheless estopped from objecting to schedules services. BHAL submits that it is, for two reasons. It is said that BHAL made it quite clear to Bromley over a long period that it intended to improve the airport's profitability by securing the business of airlines operating scheduled services as and when it could; Bromley encouraged this, or at least did not object. Further, BHAL incurred substantial expenditure in extending the air terminal for the express purpose of accommodating scheduled services and Bromley, which BHAL alleges knew this, did not object. Other substantial work was also done, which would not have been if BHAL had known that Bromley objected to scheduled services.

10. In relation to the first issue both parties have relied on extensive evidence relating to the previous history of the airport and other relevant factual background. Although, as was said by Staughton L.J. in Scottish Power plc. v. Britoil [1997] L.S. Gaz. R. 30, such evidence is not always useful, in this case it was indispensable. The material to which I was referred was, for the most part, either publicly available or seen by BHAL in its pre-contractual due diligence investigations. In addition, I have heard expert evidence on the meaning of "business aviation" and have been referred to a number of documents in which the term has been used spontaneously. In relation to the second issue, I have been referred to a number of documents sent by BHAL to Bromley and to the minutes of various meetings, in which there are references to scheduled services, as well as to detailed evidence concerning the facts known to Bromley about the construction of the extension to the terminal.

11. Bromley also has a counterclaim relating to an entirely different issue, namely whether clause 19.1 of the business transfer agreement requires BHAL to renew a Tenant Performance Guarantee. This is a pure issue of construction with no relevant evidence as to the background.

12. This case has been brought on very quickly because its outcome may affect commercial negotiations. Despite this, it has been notably well prepared and presented, and I should like to express my appreciation for this to both parties' solicitors, as well as to all counsel for their effective exposition of their respective clients' cases, which helped me greatly to understand what turned out to be quite a complex case.

The Residents' application

13. After the hearing had been completed, a group of residents of the Bromley area applied to be joined as parties to the action, in order (inter alia) (a) to establish that their rights under Article 8 of the European Commission on Human Rights would be contravened if scheduled services were permitted and (b) having established this to contend that, since I am giving judgment after 2 nd October 2000, section 6 of the Human Rights Act 1998 makes it (i) necessary for me to construe the lease having regard to their Convention rights and (ii) in any event illegal for me to grant a declaration that the lease permits scheduled services even if I think that it does. I rejected this application on 3rd November. My reasons for doing so are set out at paras. 162 et seq. below.

Background facts relevant to construction

BHAL

14. BHAL is a subsidiary of Regional Airports Limited ("Regional"). Another of its subsidiaries, Southend Airports Limited, operates London Southend Airport on a 150 year lease from Southend Borough Council. This was entered into at or about the same time as the lease of Biggin Hill. Its founder and Chief Executive is Mr. Andrew Walters, who was BHAL's main witness. He has been involved in aviation for 33 years, first as an Army pilot and later as the founder of a company called IML, which operated an international courier express parcel and freight business using schedules airlines and chartered aircraft, and also provided facilities at airports for the handling of airlines and aircraft. The only other witness for BHAL was Mrs. Diana MacLean, Mr. Walters' personal assistant. Both were entirely truthful witnesses.

Bromley

15. Bromley is the owner of the land on which Biggin Hill Airport is situated. Its functions as landowners are performed by the Policy & Resources Committee, which has overall control of the Council's resources, including finance, land and personnel. At the material times, matters affecting the running of the airport were delegated to one of its sub-committees, and Land & Property Sub-Committee (later called the Property & Finance Sub-Committee), which was accountable to the Policy & Resources Committee. Any major decision was taken by the Committee itself. The officer within the Council who is responsible, under the Chief Property Officer, for the conduct of the Council's land-owning/landlord role is the Head of Valuation and Estates, who since 1995 has been Mrs. Jane Pocknall.

16. Planning applications are the responsibility of the Development Control Committee, which has four Plans Sub-Committees. The Development Control Committee and its Sub-Committees operate independently in exercising the Council's planning functions. This is necessary for legal reasons; the determination of planning applications must be made on the basis of relevant considerations only, which may well exclude the concerns of other committees. The reason why this matters is that Bromley contends, and it is not really in dispute, that facts communicated only to the Planning Department for the purposes of a planning application cannot be regarded as communicated to Bromley in its capacity as landlords, nor are the actions of Bromley in its capacity as the planning authority relevant in connection with the estoppel issue.

17. One of the departments of the Council is the Technical Services Department (subsequently the Environmental Services Department). It is headed by the Chief Planner, who was at all material times Mr. Stuart MacMillan. He reports principally to the Development Control Committee and its Sub-Committees. Also located within this department is the Chief Engineer (subsequently Director of Environmental Services), Mr. Gordon Hayward.

18. It is Bromley's practice, in circumstances in which the performance of a particular function is relevant to the activities of more than one department, giving rise to a danger of failure of communication, to appoint a lead officer or chief officer to coordinate matters, both internally and externally in dealings with third parties. Until early 1996, the lead officer for the airport was the late Mr. Adrian Stungo, the Director of Land & General Services (subsequently Director of Corporate Affairs), who reported to the Policy & Resources Committee and its Land & Property Sub-Committee. When he retired, he was replaced by Mr. Gordon Hayward who, at least in this capacity, reported to the same Committee and Sub-Committee. Mr. Walters saw the lead office as "pivotal" to the arrangement, and as somebody who would act across the board in relation to matters affecting the airport. Mr. Walter Million, the Borough Secretary, accepted this in the course of his evidence, save for planning matters which, he said, had to be dealt with independently.

19. The witnesses who gave evidence on behalf of Bromley were Mrs. Pocknall, Mr. Hayward, Mr. Million and Mr. Pitt, who was at the time of the negotiations for the lease, and still is, the Assistant Borough Treasurer; he gave evidence on one aspect of the negotiations for the lease. Again, all were truthful witnesses, although I do not accept the accuracy of Mr. Hayward's recollection on one important aspect of the case.

Biggin Hill Airport

20. Aircraft first landed at the site which subsequently became Biggin Hill Airport in 1917. It was originally an army establishment but, with the formation of the RAF, it became a fighter station and is famous for the major role it played in the Battle of Britain. By 1954, it was no longer suitable for use by military aircraft. From 1958, it provided a home for light executive aircraft previously based at Croydon Airport, which had been closed down. It was operated by a company called Surrey Aviation Limited under a series of short-term agreements. In 1960, HM Customs opened a facility at the airport and provided an immigration service, since which time it has been an international gateway. It continued in Ministry of Defence ownership until 1974, when Bromley acquired it.

21. Biggin Hill is one of 9 airports in the London area, the others being Heathrow, Gatwick, Stansted, Luton, London City (which opened in 1987) Southend, Farnborough and Northolt. Although its location is closer to Central London than all these, apart from London City, road and rail connections to it are not particularly good. It has some 465 acres of operational land, which is relatively small, and its main runway at 1,800 metres is shorter than all the others except for London City and Southend. The runway and taxiways are of light construction with a low aircraft bearing strength, sufficient only for smaller aircraft. An example of the largest type of aircraft which can land at Biggin Hill is the BAe 146 Whispering Jet, which now carries about 100 passengers. There is no question, whatever may be the right construction of clause 1.8 of the lease, of Biggin Hill attracting mass holiday air traffic. This is both because of the size and light construction of the runway, and because of operating restrictions in the lease to which I refer below. It is much more suitable for "niche" schedules services for passengers prepared to pay relatively high fares.

22. At all material times, there has been an Airport Consultative Committee (" ACC"), at which the Council, the operator for the time being, airport users, residents and various other interested parties are represented.

Biggin Hill Airport 1971-1994

23. In April 1971, the Greater London Council published a written statement setting out the development plans for the Biggin Hill area, which included the following passage:-

" Permission for industrial development on the airfield will be restricted to industries associated with the use of the airfield for general aviation, which provide employment related to the needs of the community and which can be sited without unacceptable detriment to the Green Belt, generally in the southernmost part of the airfield where buildings already exist.

General aviation within the context of this Statement includes all civil flying except that performed by commercial airline operators engaged in the conveyance of passengers or of freight on domestic or foreign routes (whether operating scheduled or non-scheduled flights) in aircraft of 12,500 lbs all up weight or more. It includes private, business, executive and club aircraft, aircraft engaged on local pleasure flights, agricultural work, aircraft sales, aerial survey, flying training and air taxi operations."

24. As I have already said, the Ministry of Defence sold the airport to Bromley in 1974. In a statement made by the Chairman of the Policy and Resources Committee in 1979, it was said that the airport had been purchased "to preserve the environment and to ensure that it was not a burden on the rates". The airport continued to be operated for Bromley by Surrey Aviation Limited, on the basis of an operating licence which ran until December 1980.

25. In 1978, the Government published a White Paper, cmnd 7084, setting out its airport policy. Section 4.4 dealt with general aviation, of which " business aviation" was a part, and in para. 151 stated:-

" In the light of the limited additional use that can be made of Northolt and Leavesden, especially by executive jets, the Government believes that the future use of Biggin Hill is particularly important .. the Government proposes .. to open discussions with the Borough Council and others concerned with a view to establishing Biggin Hill as a major business aviation airport for the London area (my emphasis). Improvements in its facilities would be required and in this role it would become an integral part of the London airport system. In these circumstances the Borough Council may favour a transfer of ownership to the BAA. Flying clubs now at the aerodrome may need to be relocated since these may not be compatible with an extended role for Biggin Hill as a business aviation aerodrome."

It is clear from other passages that, in the context of this White Paper, " ;business aviation" was treated as an activity distinct from commercial aviation, and did not include ordinary scheduled services with fare-paying passengers.

26. Bromley did not transfer ownership of the airport to the British Airports Authority. In October 1980, the Policy and Resources Committee recommended that the airport should be developed on a modest scale:-

" the basic concept is one of a gradual improvement of the airport, with strictly enforced noise controls, and a modest increase in business use with a more than compensating decrease in club and circuit flying to give an overall reduction in the number of movements from 175,000 to 125,000 pa. Although the Authority should not become too closely involved with the day to day running of the airport, a close control over policy matters must be maintained to ensure that Biggin Hill develops as a safe and efficient airport, with the best possible environment for both users and neighbouring residents, and with minimal demands on Council finances."

27. Consequently, in 1981 Bromley entered into an operating agreement with Biggin Hill Airport Limited, ("old BHAL"), which is not the company which is the claimant in this action, but was a joint venture company owned by Bromley and Surrey Aviation. It subsequently changed its name. This agreement was for a term of 10 years, and contained a number of operating conditions, some of which (for example provisions relating to opening hours and maximum aircraft movements) were clearly designed to control noise. By clause 2 of the agreement, old BHAL was granted the exclusive right to use the airport as a licensed airport and by clause 4(2) it undertook to ensure that it was open for operating during operating hours. By clause 4(11), it was prohibited from permitting movement by any aircraft exceeding a maximum authorised weight of 5700 kg, subject to certain exceptions. There was no prohibition, however, against scheduled services, although no such services operated from the airport at that time.

28. A further White Paper, published in 1985, cmnd. 9542, again referred to Biggin Hill as having a role to play in meeting the expected increase in demand in the London area for suitable aerodrome facilities for business aviation aircraft, using that term in the same sense as had the 1978 White Paper.

29. On 23rd September 1985, Bromley adopted a Borough Plan, which included a number of specific policies relating to the airport, including the following:-

Policy BHA.1:

" The Council will seek to protect as far as practicable the amenities of local residents and will ensure that harm and disturbance to the local environment generally is minimised. Strict noise controls will continue to be applied to all aircraft using the airport."

Policy BHA.5:

" The Council will encourage and promote the provision of development and facilities related to the business and executive use of the Airport. Such development, which may encompass proposals for fixed base business and executive operations, air taxi services, aircraft charter, aircraft sales and ancillary car parking, club and training uses, and a public viewing area, will generally by directed within the area of south of Runway 11/29 to that part as defined on the Inset Proposals map.

Permission will not normally be granted for the erection or retention of temporary buildings."

Policy BHA.6:

" The Council will encourage and promote the provision of modest development related to passenger handling, hotel, restaurant and ancillary facilities. Such development will be directed towards that area adjoining the existing terminal and customs building as defined on the Inset Proposals Map.

...

Such facilities are an integral part of the development of a business aviation function for the Airport and are in accordance with the strategic policies. It is proper in both operational and land use terms for these facilities to be linked to the existing airfield terminal. The development proposed, which is listed in the Schedule of Proposals, forms an extension to the existing buildings and includes a viewing area for the benefit of the public."

30. The terms of the operating agreement required Bromley to notify old BHAL whether it wished in principle to negotiate a new agreement. In January 1987, a project team was established to consider the future of the airport and in particular to advise on this issue. Its report recognised that it might be difficult to find a new commercial partner; in 1981 the only organisation prepared to accept the limits on noise control and on the aircraft which might be permitted to use the airport had been Surrey Aviation. The report also recognised that one of the other options under consideration, sale to a commercial organisation, involved the disadvantages that "business aviation would grow at a disproportionate rate, and there would be an increasing likelihood of scheduled flights and regular passenger services" . It also referred to the fact that the airport had been running at a loss, and to the desirability of achieving profitability.

31. In its conclusion and recommendations, the project team referred to the declared purpose of Bromley when it purchased the airport in 1974, as having been "to protect the amenities of the Borough by controlling the use of the airport", and stated that its conclusions were intended to retain a balance in two separate ways:-

"(a) a balance between business and executive users and flying clubs/flying schools/ private owners.

(b) a balance between development of the Airport and the need to prevent Biggin Hill from becoming another Heathrow, Gatwick or Stansted".

32. Its actual recommendation was that Bromley should seek to form a new partnership with a commercial company to run the airport and, if this proved to be unsuccessful, that it should consider running the airport itself. The new operating agreement should be the same in principle as the existing one, but different in detail; it should last for at least 10 years. Thus in 1987 Bromley rejected the option of selling to a commercial organisation with its attendant disadvantages.

33. This report led to an early termination of the operating agreement with old BHAL and to a new agreement dated 8th July 1988 with a subsidiary of the British Airports Authority called Airports UK Limited ("AUK"). The recitals to this agreement show that Bromley's twin objectives remained in being:

"(2) The Council and AUK wish to continue to protect the environment of the area around the Airport to the greatest extent practicable compatible with the presence of a long-established airport.

(3) It is the objective of the Council to eliminate or reduce the rate fund subsidy to the Airport and it is the objective of both parties to achieve an increasing financial surplus arising out of or in connection with the operation of the Airport".

34. The Agreement commenced on 9 th July 1988 and was to continue in force until 31st March 2013, subject to the right of either party to terminate on 12 months notice served on or after 1st March 1991. AUK was appointed exclusively to manage, control and develop the airport on Bromley's behalf for a fixed fee of £60,000 p.a., profits and losses to be shared equally. Clause 12.1 required AUK to operate the airport in accordance with airport policy agreed by the relevant Committee of the Council. Clause 12.5 set out a number of specific operating conditions relating to operating hours, noise levels etc. Clause 12.5.14 specifically prohibited AUK from permitting the operation of scheduled passenger services from the airport without the Council's consent.

35. In 1990, AUK applied to introduce scheduled passenger services. The precise date of the application is not known, but in a letter from the Director of Land & General Services to AUK on 27th September 1990, AUK was informed that the Policy & Resources Committee and the Land & Property Sub-Committee had decided to take no action on its request, supported subject to conditions by the ACC, to introduce scheduled passenger services. This was despite a report from Mr. Stungo, reviewing amendments proposed by AUK to airport policy, in which he recommended that the ban on scheduled services

"... should be lifted to allow aircraft carrying a maximum of 35 passengers. (NB: This ban was only imposed in 1988. Up to then scheduled services were allowed though none actually took place. Only aircraft on the approved list would be permitted and there would be no increase in annual movements.)"

36. However, on 23rd January 1991 the Land & Property Sub-Committee set up a working party to review the airport's operation "bearing in mind the need to protect the local environment" and to make recommendations to the Land & Property Sub-Committee. The working party's report was presented in June 1991. It is clear from para. 1.1 and from the Council's minutes of 17 th July 1991 that the main reasons for it having been set up were falling income and the need for major investment to enable the airport to remain viable.

37. The working party's review of operating restrictions covered a number of matters, including the provision of scheduled services, in relation to which it said:

" 10.18 A ban on scheduled services was first introduced in 1988 even though no such services had ever operated at the airport. A scheduled service is an aircraft that departs in accordance with a printed timetable and carries fare-paying passengers.

10.19 In 1990 the Council resolved to retain this ban even though the Consultative Committee recommended its removal so as to allow plans carrying up to 35 passengers. AUKL would like permission for 'planes on the approved list carrying up to 35 passengers and the position reviewed when/if better Customer/passenger facilities are provided. They consider it is likely that only twin engine turbo-prop 'planes would be used initially. The airport users supported the introduction of scheduled services. The Residents' Federation wanted the present ban to be kept. However, they also said that: "there may not be such clear-cut objection to scheduled services if the aircraft to be used were limited to prop and turbo-prop types of a very limited seating capacity."

10.20 We felt that when this issue was debated in 1990 it was not appreciated that scheduled services would have to:

- comply with opening hours;

- use aircraft on the approved list (this does not allow noisy aircraft);

- carry only a small number of passengers (due to limits imposed by Customs & Excise); and

- remain within the overall limit on numbers."

10.21 Given these constraints we felt that scheduled services could be acceptable provided, in addition to the constraints set out above, only twin engined turbo-prop plans are used. "

38. The working party considered the recommendations in the review at its

meeting on 24th June 1991 and, so far as scheduled services were concerned, stated:

" The ban on scheduled services had been introduced in 1988. Having considered the views of the residents, users and the operator, the Working Party agreed that the ban could be lifted subject to scheduled services complying with the opening hours, using aircraft on the approved list only, aircraft having a seating capacity for no more than 18 passengers and being twin engine turbo-prop aircraft only."

39. On 26th June 1991, the review was drawn to the attention of the Policy and

Resources Committee in the following terms:

" The Director of Land and General Services draws attention to the reasons for the review and in particular the current financial position at the airport. The Working Party had tried to find a balance between environmental, operational and financial issues, but accepted the significant changes needed to be made in the operation of the airport."

As Mr. Million accepted in the course of his evidence, the main significant change which was required for financial reasons was the lifting of the ban on scheduled services.

40. On 17th July 1991, the recommendations of the working party came before the Policy & Resources Committee, and were approved subject to the reservations which are noted in the minutes. These reservations do not relate to scheduled services. The minutes note that recommendations had been submitted against a background of the need to keep a balance between commercial interests and those of the residents. According to Mr. Million's evidence, the effect of the requirement in clause 12.1 of the agreement that AUK operate the airport in accordance with the airport policy laid down by the Committee was that the consent to scheduled services could be revoked at any time. I doubt whether this is correct, unless consent was given expressly on that basis; but there is no evidence as to precisely how and on what terms the consent was communicated to AUK.

41. In November 1991, AUK hoped that there would be services to Brussels, Rotterdam and Beauvais with 30+ seater aircraft, and to Bembridge and Calais or Le Touquet with 10+ seater aircraft. There was a discussion between AUK and Bromley in December about the future of the airport, at which these plans must have been discussed.

42. The 1985 White Paper had considered the position of local authority airports and para. 9.15 recorded the government's view that airports would be run more effectively if they were constituted as Companies Act companies, with the shares held initially at least by their local authority owners, rather than being managed through local authority committees. The Airports Act 1986 was passed (inter alia) to give effect to this and empowered the Secretary of State to require designated local authority airports to be formed into companies. On 11th May 1992, the Department of Transport required Bromley to form a company and to prepare a transfer scheme in accordance with the provision of the Act. This led Bromley to consider a number of options, including the establishment of a company either wholly or partly owned by Bromley and the sale of the airport either outright or on long lease. In relation to the option of selling the airport on a long lease, a memo dated 27th May 1992 to the Land and Property Sub-Committee stated:-

" This option would relieve the Council of on-going financial support for the airport if a lease of at least 50 years were offered but could be expected to generate a lower return than an outright sale. The value of the lease would be reduced if the Council wished to impose what were considered to be severe operational constraints. Environmental control could be written in the lease. The leasehold route would enable the Council to retain some control over the way in which the airport operated without having to be directly involved in the management."

43. In order to gauge the interest of third parties in the airport, Bromley published advertisements in the Financial Times and in Flight International inviting organisations interested in the airport to contact it. It also published a "Briefing Pack" in July 1992, inviting interested organisations to submit offers either for the acquisition of the airport, or for a long lease or for taking an equity share in a new company, and indicated that other options would be considered. This described the airport as " the principal airport for business and general aviation south of the Thames" and "an important centre for flight training and recreational flying". None of the proposals made to Bromley was considered to be satisfactory. Regional expressed an interest, but took matters no further at this stage.

44. On 31st March 1993, the first scheduled service from Biggin Hill, a service to Le Touquet operated by Love Air, was given its press launch and normal operations were started on 2nd April. This service operated until relatively recently, although on a small scale with no more than one flight each way per day, except at weekends, and carrying between 5 and 10 passengers on each flight. It is clear from the advertising material that the service was intended to attract holiday traffic. Although Mr. Walters said that it was also advertised on the escalator at Bank tube station, presumably to attract businessmen interested in short breaks for golf or other short breaks, it was clearly not "business aviation" on any interpretation of the meaning of this term. At the same time, in April 1993, another scheduled service to Carlisle was started, although this proved to be short-lived; a service to Manchester was also envisaged, but this never started. In his report for July-September, the Airport Director stated that Love Air hoped to start a service to Paris, but this never happened either. In his review for the year 1993 he records:-

" The most notable change during 1993 has been the introduction of scheduled services. Love Air have operated a service to Le Touquet whilst a second operator, New Air, briefly provided services to Carlisle. Such activities are unlikely to ever grow to significant numbers as the Airport is limited to very small passenger aircraft by our facilities and manning levels. Reference to "scheduled services" sometimes gives a wrong impression of what is intended at this airport. The cost of "changing gauge" to allow larger passenger aircraft would be very high and would take Biggin Hill into difficult competition with Gatwick and London City. The operators such as Love Air on the other hand make a huge difference to the economic viability of the airport. The continuation of some passenger services is also critical to the retention of a customs presence at the Airport which will undoubtedly come under increasing review...".

45. The report for January-March 1994 refers to discussion by the ACC about assisting Love Air to establish "additional scheduled services to France" by permitting earlier air movements, as well as to its intended service to Paris.

46. Just before the commencement of the first scheduled service to Le Touquet, on 9 th March 1993, the Chairman of Regional, Mr. Derek Davison, had written to Mr. Stungo, referring to meetings and discussions held over the previous 2 months, and making a proposal for the acquisition of a long lease, subject to contract and due diligence, and enclosing proposed Heads of Agreement.

47. The proposal was presented as involving the participation of Hunting Business Aviation, which was related to Hunting Aircraft Services, one of the tenants at Biggin Hill. Its business strategy was described as meeting the needs of "business aviation users". In para. 2.3 it is stated:-

" The possibility of starting scheduled services from the airport will always be kept under review ... but consideration will be given to the new additional resources required, the environmental impact on the neighbourhood, together with news of the Airport Consultative Committee."

48. Negotiations do not appear to have progressed very speedily. A memorandum dated October/November 1993 to the Policy and Resources Committee shows that several options were still under consideration, although the lease to BHAL was the recommended option. This memorandum summarises the current situation of the airport under the heading "Business Outlook" in the following terms:-

" 13. The future of the airport largely depends on what happens within the various markets it serves. These can be considered under four headings - corporate, scheduled, private and training flying.

14. As was demonstrated above, corporate flying i.e. jets and twins account for only some 10% of movements but over a third of the income from landing fees. Although the number of jets had doubled since 1988 there must be some doubt as to whether this can be maintained. Firstly, the numbers fall off as a result of the recession. Secondly, there is now a surplus capacity at Gatwick which will be available until the end of the decade. Thirdly, globally this is a very small market and it would be unreasonable to expect Biggin Hill to increase its market share to a significant extent unless there is a dramatic recovery in the economy. In contrast with jets the number of twin engine movements has fallen. The reasons for this are not entirely clear but it may be in part be explained by corporate users preferring to use jet engined planes.

15. This year saw the introduction of the first ever scheduled service from Biggin Hill. One of the two - to Carlisle - collapsed within weeks. The other - to Le Touquet - is operated in conjunction with a service linked to the Channel Tunnel construction and may not be able to survive once the Tunnel has been completed. There does not seem to be much scope for increasing scheduled services due to the proximity to Gatwick and the fact that substantial expenditure would be required on passenger handling facilities.

16. Private flying and training have always been important at Biggin Hill. They account for perhaps 90% of movements but only some 60% of landing fee income. Both categories have declined in recent years due to recession. There is also keen competition from nearby airfields for this market and so there is a limit to which landing fees can be increased."

49. Then under the heading "Problems", the memorandum continues:-

"17. The problems in owning and operating the airport are almost entirely financial. The environmental objective, see para. 4, has been largely achieved apart from noise problems in the Leave Green area which are under review. Financial problems can be summarised as follows:-

(a) the profit on the airport account is not sufficient to offset the Council' s costs and its position will worsen when the Programme is implemented.

(b) there is no prospect of the situation changing in the foreseeable feature (sic) ...; and

(c) if the airport is to remain in its current use substantial capital investment is required. Once this has taken place there will be further demands to meet ever increasing safety and operational standards.

18. In an attempt to overcome these problems a range of options have been considered"

50. The reference to the environmental objective in para. 17 is shown earlier in the memorandum to be a reference to the objective for the management of the airport agreed in 1980, which was:-

"... to continue to protect the environment of the area to the greatest extent practicable compatible with the presence of a long-established airport; and to eliminate or reduce the rate fund subsidy".

51. The options considered in the memorandum were closing the airport, scaling down operations, carrying on with AUK, introducing new management, transferring the airport to BHAL (not old BHAL, but the new airport company formed in consequence of the direction under the Airports Act 1986, to which the airport assets had however not yet been transferred for reasons explained in an earlier memorandum) and sale of the airport. In the discussion of the third option, continuing current operations, it is noted that on 13th September 1993, BAA had served notice terminating the contract on 30th September 1994, unless the main runway had been resurfaced, the fuel storage tanks replaced and other safety related works implemented, the latter two of which were in dispute. Under the discussion of the last option, there are references to Regional's proposal and to draft heads of terms which had recently been sent to them and accepted as a basis for discussions.

52. Matters now proceeded more swiftly and on 15th November 1993 Mr. Stungo wrote to Regional setting out further information requested at an earlier meeting as to the operating restrictions which would be imposed on a lessee. The operating restrictions set out are detailed; they do not include any prohibition of scheduled service. On 7th December 1993, Mr. Stungo wrote to Regional setting out draft terms which were being recommended to the Council for acceptance in principle, with a view to a final decision by 19th January 1994. These contained no further reference to operating restrictions.

53. However, the Council then invited Coopers & Lybrand to carry out a due diligence analysis, and this led to a request to Regional for its business plan. This was provided in April 1994, but was for the eyes only of the Borough Treasurer, Mr. Pitt and another Council officer in the Finance Department. One section of the Business Plan dealt with "long term strategy", and this states that one of the strategic objectives is that the airport should become "the source of a growing number of scheduled passenger services". This, together with the earlier correspondence, is naturally relied upon by BHAL as evidence that the Council knew that they would seek to develop the scheduled services. Mr. Walters said in the course of his evidence that it did not occur to him, until the dispute arose shortly before this action was commenced, that there was any doubt as to BHAL's entitlement to permit the operation of scheduled services. He hoped that the increase in air movements at other airports in the London area, such as Gatwick or London City, would result in some scheduled services having to look for a new home; this would in fact have happened earlier, had it not been for a sudden doubling of the level of permitted air movements at London City. I accept his evidence on these points - indeed it was not challenged - but I will have to consider later in the judgment to what extent the correspondence in 1993, the Business Plan and Mr. Walters' state of mind are relevant to the construction of the lease. So far as Bromley is concerned, I accept Mr. Pitt's evidence that neither he nor his colleague was involved with the drafting of the lease. They did not know what kind of flying it would permit. Since (as Mr. Walters accepted was the case) they were principally concerned with Regional's short-term cashflow, the reference to scheduled services being started sometime in the future was not critical and they did not focus on it or check whether it was permitted; nor could Mr. Walters reasonably have expected them to do so.

54. On 26th April 1994, there was a presentation by Regional to the Policy & Resources Committee. There is no evidence as to precisely what was said. The Agenda, under the Key Terms of the Sale section, states "environmental and operating conditions remain the same". It does not refer to scheduled services. On the same day, a Policy & Resources Committee memorandum seeking approval of the transaction reiterated a point made in an earlier report that:

"... the very change in the relationship from an operating agreement with AUK to a lease to BHAL will result in a loosening of control. This is inherent in the change to a landlord and tenant basis is opposed to a situation in which a contractor carries out the business of the Council on its behalf."

55. On 6th May 1994, the Council issued a press release headed "Sale of Biggin Hill Airport" which contained the following passage:-

" The Council purchased the airport in 1974 in order to protect the local environment. Since then the airport has been operated under strict safeguards which will be maintained by [Regional]. These include a limit on the number of movements, restrictions on opening hours including a ban on night-time flights, and measures for preventing noise from aircraft in the air and on the ground. [Regional] has pledged to provide full support for the airport's Consultative Committee which brings together local residents, airport users and the local authorities around the airport".

The business at the airport at the time of the lease

56. Before turning to the terms of the lease and the business transfer agreement, it would be useful to deal with a number of matters relating to the airport's business as it stood at the time. These are principally relevant in relation to arguments (a) by BHAL that Bromley's construction cannot be right because it would restrict the ambit of the existing business at the airport, the goodwill of which was transferred to BHAL by the business transfer agreement and the financial viability of which was important to all concerned and (b) by both parties as to the practicability of the other's construction of clause 1.8. The relevant matters are as follows:-

(1) Scheduled services were permitted within the limits set out in paras. 10.18 to 10.21 of the working party's review; even though only one service operated for any length of time, others were tried or at least contemplated. I have already dealt with this at paras. 35-41 and 44-5 above.

(2) There were a number of tenants operating air charger, air taxi and helicopter services. They were obliged by the terms of their leases to comply with any restrictions in the Operating Agreement (i.e. the 1988 Agreement with AUK referred to at paras. 32-33 above). This did not contain any requirement that such services should be for business purposes. There was no detailed evidence as to precisely what services were provided, but it seems clear that, for the most part, they were for corporate customers and businessmen. However, I find that this was not exclusively so since (a) there was undisputed evidence that there was a market for surplus seats not needed by companies which had chartered an aircraft; these were often sold off to whoever wanted them and this must on occasions have included passengers travelling for leisure purposes and (b) air taxi and helicopter services which were free to take all comers must on occasions also have had passengers travelling for leisure purposes. A hypothetical example discussed in the course of the hearing was a group of individuals flying up to see the Grand National.

(3) After May 1994 scheduled services were diverted from other airports in the London area, for example in bad weather and regularly landed at Biggin Hill. According to the evidence of Mr. Price, BHAL's expert witness, this is a very valuable source of business for an airport. Diversions were certainly a useful source of income and Mr. Walters, as already stated, had no doubt that BHAL was permitted to accept them and did so. Bromley's case is that it did not know of this, but it was frequently referred to in minutes of ACC meetings attended by Mr. Hayward. However, what is not certain is whether this happened before May 1994 and was part of the existing business. Neither Mr. Walters nor any of Bromley's witnesses was able to say for certain. Mr. Walters thought it likely that it did and knew of no reason why it should not have done. I find that it is very likely indeed that diverted scheduled services did land at Biggin Hill before 1994, for two reasons. First, clause 12.5.14 of the 1988 Agreement prohibited only the operation of scheduled services from the airport. This would not have affected the acceptance of diverted flights and there would have been no reason for AUK to turn such valuable business away. Secondly, I think that if this was a type of business which Mr. Walters had had to develop from scratch, he would have remembered doing so.

(4) Apart from private flying and flying clubs, there were a number of other kinds of business which might be described as ancillary to the main flying activities, including maintenance and hangar services, fuel services, aircraft components and so on.

(5) The total number of aircraft movements at the airport was between 80,000 and 85,000. By far the greater part of these were by light aircraft, either privately owned or operated by flying clubs, producing very little income, as little as £6 per movement. There were about 5000 or 6000 movements by larger privately owned aircraft or chartered aircraft with 15-20 seats, which produced more income. The list of aircraft which satisfied the noise criteria at the airport included the BAE 146 and other aircraft in the 50-100 seat range, but none actually operated from the airport. A scheduled flight by an aircraft in this range could yield income in excess of £1,000.

(6) Mr Walters' evidence that at the time of the lease various parts of the airport buildings were in poor repair, and in particular that the "small passenger terminal facility ... presented a poor image" was not challenged, and is consistent with some of the documents, for example para. 15 of the October/November 1993 report referred to at paras. 48-51 above.

As is already evident from what I have said earlier, the financial viability of the airport had been a constant problem. The Council did not want Biggin Hill to close and, like Croydon, be given over to commercial or housing development. On the other hand its size and location, and environmental consideration, impaired its profitability. This was a matter of some concern to the Council. For example, a Policy & Resources Committee minute of 15 th April 1992 states that the airport, which had been acquired to protect the local environment, "is imposing an ever increasing financial burden", the increase being due to necessary capital expenditure and falling income. To similar effect is para. (17) of the October/November 1993 report quoted at para. 49 above. The Airport Director's report a few months earlier, in June 1993, shows the same picture. Against this background, it is not surprising to find Coopers & Lybrand, in their letter of March 1994 to the then Borough Treasurer reviewing the options for the disposal of the airport, describing the situation in these terms:-

"6 The Airport is currently owned freehold by the Council and managed by Airports UK Ltd. (AUKL), a subsidiary of BAA plc. AUKL have given notice of their desire to terminate the current management agreement by November 1994.

7 The Council therefore has a limited timescale to decide on new management arrangements for the airport. During the last few years the Council has been marketing the airport, with a view to achieving some form of disposal or joint venture. The marketing process is described below, and has demonstrated that there is a low level of market interest in the airport. The potential transaction with Regional Airports Limited (RAL) is likely to be the only one on offer in the near future.

8 The timeframe is also affected by the following factors:

the preference of the Department of Transport (DTp) for regional airports to be transferred out from local authority control;

the desire of the Council to escape the current revenue costs and capital liabilities with airport (my emphasis);

the need to maintain the confidence of current airport tenants and users;

the requirement to let the contract for resurfacing of the runway which needs to be done in the near future."

57. Coopers & Lybrand's review ends with the following conclusion on the proposed lease:-

"40 There are some areas of the transaction and legal documentation that need further examination which are identified above, in particular ensuring that the Council's interests are protected in the event that RAL faces trading difficulties or is forced to cease trading. Assuming that these can be satisfactorily concluded, the transaction provides an opportunity to run a revenue cost into a small revenue income, and also to avoid future capital expenditure liabilities".

The relevant terms of the lease and the business transfer agreement

58. By clause 1.3 of the lease, its term is 125 years from 7th May 1994.

59. By clause 1.6, the rent is £50,000, to be increased in accordance with RPI together with an additional yearly rent to be determined in accordance with complex provisions in the First and Second Schedule related to turnover and net profits.

60. By clause 5.5.2, BHAL covenanted not to make any material alterations or additions of a structural nature to the buildings on the airport, and not to erect any new buildings, without obtaining planning consent and landlord's consent, and paying Bromley's reasonable fees in relation thereto.

61. Clause 5.9.1 and the definition of permitted use in clause 1.8 have already been set out in para. 3 above.

62. By clause 5.21, BHAL covenanted to comply with the Operating Criteria; these are of some importance and are referred to at paras. 64-65 below.

63. By clause 5.24, BHAL covenanted to keep the airport open and to maintain the airport licences or procure that they are maintained by their airport manager; these are defined by Clause 1.10 as "all necessary Licences and permissions from the Civil Aviation Authority and all other relevant competent authorities to manage and operate the airport and to levy charges...". For reasons which appear later in this judgment, it is necessary to consider this provision in conjunction with clause 3.1 of the business transfer agreement (see paras. 67 and 94 below).

64. I have referred above to the Operating Criteria, which are set out in the Third Schedule. By Clause 2.11, these are expressed to be subject to such variations or amendments as may from time to time be agreed (such agreement not to be unreasonably withheld); there is provision for arbitration if there is a dispute as to whether agreement has been unreasonably withheld. They include some general obligations, such as maintaining the airport in accordance with the principles of good estate management ensuring the safe efficient and economic operation of the airport, co-operation with the ACC and maximising gross turnover consistent with the provisions of the lease. They also include specific limitations on operating hours, the number of flight movements (not more than 125,000 movements per year), noise criteria, weight of aircraft, maintenance of lists of aircraft satisfying the criteria and various "good neighbour" obligations designed to keep noise levels down. Many of the operating criteria are the same as, or plainly adapted from, the corresponding provisions in clauses 12.1 and 12.5 of the Agreement with AUK of 8th July 1988.

65. One provision of the Third Schedule is of particular importance. Para. (c) sets out details of the permitted operating hours, the general rule being between 7.30 a.m. and 21.00 p.m. on weekdays and 9.00 a.m. and 20.00 p.m. on Saturdays, Sundays and public holidays. Proviso (ii) reads as follows:

" Up to a maximum of three flight movements shall be permitted on Saturdays and Sundays between 08.15 a.m. and 09.00 a.m. to permit an operator based at the Airport to operate a scheduled service to France."

This is important because the definition of permitted user in clause 1.8 does not expressly include the operation of a scheduled service to France; hence the need referred to in para. 8 above for Bromley to contend that the parties mistakenly omitted reference to this scheduled service in clause 1.8.

66. The recitals to the business transfer agreement disclose that it was agreed between the Council and AUK to determine the Agreement of 8th July 1988 earlier than the date on which AUK's notice expired, 19th November 1994, that AUK had agreed to transfer its rights and liabilities to BHAL and that BHAL had agreed to grant Serco-IAL Ltd. an operating agreement under which that company was to provide management services and to operate the airport. There were provisions for the transfer of personnel and of various assets owned by the Council and AUK.

67. Clause 3.1 provided that BHAL would obtain and maintain, or procure the obtaining or maintenance by a third party appointed to manage and operate the airport of, all necessary licences and permissions from the Civil Aviation Authority and all other relevant competent authorities to manage and operate the airport and to levy charges. Thus far the provision mirrors clause 5.24 of the lease, but it goes on to specify in particular that the licence to operate the airport may be "a public use or ordinary Civil Aviation Authority licence". The importance of this appears at para. 94 below.

68. Clause 4.5 provides:-

" The Council hereby sells as beneficial owner to BHAL... the business (as a going concern) and goodwill of such part of the Council's business as relates to the ownership operation and management of the Airport including the exclusive right on the part of BHAL to represent itself as carrying on such business in succession to the Council and to use the name "Biggin Hill Airport"."

69. Clause 19 sets out the provision by BHAL of a Tenant Performance Guarantee. The issue relating to this is discussed at paras. 182 et seq. below.

Principles applicable to construction

70. In view of the evidence referred to above, which shows that during the negotiations for the lease BHAL made its intention to encourage scheduled services at the airport very clear and this met with no objections from Bromley, it is necessary for me to remind myself of the general rule that evidence of negotiations is not admitted on a question of construction: see Prenn v. Simmonds [1971] 1 W.L.R. 1381, in particular the central passage in the speech of Lord Wilberforce at 1348H-1385B:-

" The reason for not admitting evidence of these exchanges is not a technical one or even mainly of convenience ... It is simply that such evidence is unhelpful. By the nature of things, where negotiations are difficult, the parties' positions, with each passing letter are changing and until the final agreement, though converging, still different. It is only the final document which records a consensus. If the previous documents use different expressions, how does construction of those expressions, itself a doubtful process, help on the construction of the contractual words? If the same expressions are used nothing is gained by looking back; indeed something may be lost since the relevant surrounding circumstances may be different. And at this stage there is no consensus

of the parties to appeal to."

71. In the present case, the applicability of this rule is in my view doubtful, but until I reach the point in this judgment at which I discuss this further I will do my best not to be influenced by my knowledge of the negotiations, even though, as is said by Lewison, Interpretation of Contracts, 2nd ed. p.37, this may be difficult to achieve.

72. The modern law relating to the construction of contracts is summarised in the familiar passage in the speech of Lord Hoffman in Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 W.L.R. 896, 912-914, in which he said:-

"... I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v. Simmonds [1971] 1 W.L.R. 1381, 1384-1386 and Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen 1 W.L.R. 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of "legal" interpretation has been discarded. The principles may be summaries as follows.

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respect unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investment Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] A.C. 749.

(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude form the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1985] A.C. 191, 201:

" if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."...

... Finally, on this part of the case, I must make some comments upon the judgment of the Court of Appeal. Leggatt L.J. said that his construction was "the natural and ordinary meaning of the words used." I do not think that the concept of natural and ordinary meaning is very helpful when, on any view, the words have not been used in a natural and ordinary way. In a case like this, the court is inevitably engaged in choosing between competing unnatural meanings. Secondly, Leggatt L.J. said that the judge's constructing was not an "available meaning" of the words. If this means that judges cannot, short of rectification, decide that the parties must have made mistakes of meaning or syntax, I respectfully think he was wrong. The proposition is not, I would suggest, borne out by his citation from Through the Looking-Glass . Alice and Humpty-Dumpty were agreed that the word "glory" did not mean "a nice knock-down argument." Anyone with a dictionary could see that. Humpty-Dumpty's point was that "a nice knock-down argument" was what he meant by using the word "glory." He very fairly acknowledged that Alice, as a reasonable young woman, could not have realised this until he told her, but once he had told her, or if, without being expressly told, she could have inferred it from the background, she would have had no difficulty in understanding what he meant."

73. The Mannai Investments case, to which Lord Hoffman referred in the above passage, concerned the construction, not of a contract, but of a notice to terminate a lease which, while clearly worded as a notice to terminate, had wrongly purported to terminate the lease on 12th January when the correct date was 13 th January. By a majority of 3-2, the House of Lords held that it was a valid notice effective on 13th January, since any reasonable tenant would have understood that the landlord intended to terminate on the correct date, 13th January, but had made an obvious mistake. In the course of his speech Lord Hoffman, who was one of the majority, said at 774-5:-

" I propose to begin by examining the way we interpret utterances in everyday life. It is a matter of constant experience that people can convey their meaning unambiguously although they have sued the wrong words. We start with an assumption that people will use words and grammar in a conventional way but quite often it becomes obvious that, for one reason or another, they are not doing so and we adjust our interpretation of what they are saying accordingly. We do so in order to make sense of their utterance: so that the different parts of the sentence fit together in a coherent way and also to enable the sentence to fit the background of facts which plays an indispensable part in the way we interpret what anyone is saying. No one, for example, has any difficulty in understanding Mrs. Malaprop. When she says "She is as obstinate as an allegory on the bank of the Nile," we reject the conventional or literal meaning of allegory as making nonsense of the sentence and substitute "alligator" by using our background knowledge of the things likely to be found on the banks of the Nile and choosing one which sounds rather like "allegory."

Mrs Malaprop's problem was an imperfect understanding of the conventional meanings of English words. But the reason for the mistake does not really matter. We use the process of adjustment when people have made mistakes about names or descriptions or days or times because they have forgotten or become mixed up. If one meets an acquaintance and he says "and how is Mary?" ; it may be obvious that he is referring to one's wife, even if she is in fact called Jane. One may even, to avoid embarrassment, answer "Very well, thank you" without drawing attention to his mistake. The message has been unambiguously received and understood. .....

.... It is of course true that the law is not concerned with the speaker's subjective intentions. But with the notion that the law's concern is therefore with the "meaning of his words" conceals an important ambiguity. The ambiguity lies in a failure to distinguish between the meanings of words and the question of what would be understood as the meaning of a person who uses words. The meaning of words, as they would appear in a dictionary, and the effect of their syntactical arrangement, as it would appear in a grammar, is part of the material which we use to understand a speaker's utterance. But it is only a part; another part is our knowledge of the background against which the utterance was made. It is that background which enables us, not only to choose the intended meaning when a word has more than one dictionary meaning but also, in the ways I have explained, to understand a speaker's meaning, often without ambiguity, when he has used the wrong words. ...."

74. Thus it is clear that where it is obvious to the court, without any evidence as to the negotiations between the parties, that an error has been made, it can be corrected by a process of construction. This is not new. As long ago as 1854, in Wilson v. Wilson, S.H.L. Cases 40, Lord St. Leonards L.C. said at 66:-

" Now it is a great mistake if it be supposed that even a Court of Law cannot correct a mistake, or error on the face of an instrument; there is no magic in words. If you find a clear mistake and it admits of no other construction, a Court of Law, as well as a Court of Equity, without impugning any doctrine about correcting those things which can only be shown by parole evidence to be mistakes - without, I say, going into those cases at all, both Courts of Law and of Equity may correct an obvious mistake on the face of an instrument without the slightest difficulty."

75. Similarly, in Re Sassoon Ch. 852, which concerned the interpretation of a will, Romer L.J. said at 890-1:-

" Now our attention was drawn during the argument to several cases, and many others are to be found in the books, where the court has departed, and in some cases departed widely, from the literal meaning of words contained in wills and settlements. Such cases are sometimes referred to as cases in which the court has 'supplied' or 'struck out' words. This is, perhaps, a convenient way of referring to them, but it is in strictness an entirely inaccurate way. Except in actions for rectification the court has no power whatsoever of adding to or subtracting from the words of a written instrument. A testator or a settlor may, however, in the instrument itself indicate sufficiently plainly that he is using certain words or phrases in other than their literal and ordinary meaning. In such cases he is said to have provided his own dictionary, and the court will construe such words and phrases in the light of that dictionary."

76. However, whilst the court will as part of the construction process correct an obvious error or "supply" words obviously omitted, all the above statements emphasise this is only legitimate in cases to which the error or omission is truly obvious. Any other approach would be inconsistent with the rectification cases, such as Joscelyne v. Nissen [1970] 2 Q.B. 86 and Lloyd v. Stanbury [1971] 1 W.L.R. 535, which emphasise that, in order to correct a mistake in a written contract, the court must be satisfied by convincing evidence that the contract was contrary to the common intention of both parties, not an intention which was only in the minds of both parties, but one which was reflected in some outward expression of accord and which continued until the contract was concluded.

77. A practical example of a mistake being corrected by construction of the contract is afforded by the decision of the Court of Appeal in Amalgamated Investment & Propery Co Ltd. v. Texas Commerce International Bank [1982] Q.B. 84. This is more often referred to as an authority on estoppel by convention, but the main ground of the decision was that as a matter of construction the guarantee did not secure the liabilities of the debtor named in the guarantee, but those of another debtor. An examination of the background made it obvious that the wrong party had been named.

78. The distinction is thus that a mistake can only be corrected as part of the process of construction where the court is left in no doubt, without any evidence as to the negotiations between the parties, that a mistake has been made. Otherwise, a mistake can only be corrected if the court is convinced of the mistake by evidence as to the intention of the parties as expressed in the course of their negotiations. As was said by Mr. Donald Rattee Q.C. (as he then was) in North Circular Properties Limited v. Internal Systems Information Ltd, 26th October 1984 unreported, referred to in Lewison, op. cit. pp. 227-8:-

" Of course the court will not lightly, as part of the construction process, tamper with the actual words used, particularly in a commercial document such as a lease. On the other hand the law is not such an ass as to compel the court to hold the parties to the actual words used when it is, as in my judgment it is in this case, clear from the document itself, without looking at extrinsic evidence, that such words were used only by virtue of a draftsman's blunder. Such a process of correction of obvious drafting errors in the process of construction is of course distinct from the equitable doctrine of rectification. The former can only be adopted where the fact that a mistake has been made and the nature of the mistake can be ascertained with certainty from a consideration of the relevant instrument in the context of objective circumstances surrounding its execution. Rectification, on the other hand, will be appropriate in many other cases where the existence and nature of a mistake are apparent only from extrinsic evidence of the actual intention of the parties."

79. One point, which so far as I know is not covered by any authority, and which would be relevant if I accepted Bromley's argument on construction, is whether and in what circumstances a court, which would otherwise reach the conclusion that there was an obvious common mistake in the written agreement and correct it as a matter of construction, can consider evidence as to the negotiations between the parties which shows that in fact there was no common mistake, since one or both intended to contract on the basis of what the agreement actually said. I discuss this further at paras. 121 et seq. below.

The construction of the lease

The rival arguments

80. I will begin by setting out in more detail the rival arguments of the parties.

81. Bromley's contention is set out in its Opening Submissions in the following terms:

" It is Bromley's case that the term "business aviation" in clause 1.8 of the Lease refers to the operation and use of aircraft by companies in connection with the transport of passengers or cargo for the company concerned and, accordingly, does not include the transport of individual fare paying passengers whether by scheduled services or otherwise. This definition - on Bromley's case - is a term of art used in the aviation industry, and is to be contrasted with "commercial aviation", which is concerned with the transport of individual fare-paying passengers, generally (but not necessarily) on scheduled services."

82. In the course of the hearing, Bromley's case was further explained, and to some extent modified as follows:

(a) an aircraft need not necessarily be operated or chartered by a company; it could be a partnership or even an individual provided that it was for business purposes;

(b) it was essential that all passengers should be travelling for business purposes and that none should be paying an individual fare;

(c) an air taxi or helicopter service carrying businessmen travelling for business purposes would also be engaging in "business aviation", even if they paid individual fares;

(d) a company could operate a scheduled flight service for its employees.

83. BHAL's case did not remain constant through out the hearing either. In Further Information served shortly before it began, BHAL said:-

" It is the Claimant's case that the operation of scheduled and chartered services from the Premises is restricted to the purposes referred to in this paragraph (i.e. "for the use of businessmen and/or for business purposes and/or to and from recognised business destinations").

The Claimant's contention is that it is open to it to operate a schedule or chartered flight from the premises if the primary purpose of the service is the transportation of passengers to a recognised business destination for business purposes.

"Recognised business destinations" are capital and regional Cities of a size sufficient to support a significant business community, or other centres with recognised conference facilities. The Claimant instances Paris, Brussels, Dusseldorf, Rotterdam, Cologne, Bonn and Eindhoven (without intending in any way to confine itself to those cities)."

84. However, in its written opening submissions BHAL also said:-

" Finally, if the Defendant's interpretation of 'business aviation' ; prevails, the Claimant contends that the further expression in the definition of 'Permitted User', "other airport and aviation related uses" is apt to encompass the use of the Airport for the air transport of individual fare paying passengers."

This submission, if correct, would seem to cover all scheduled services which were not "business aviation", since there is no logical basis for saying that a scheduled flight for businessmen is "airport and aviation related" but others are not.

85. In the course of his opening, Mr. Fetherstonhaugh confirmed that he was not resiling from the concession made in the Further Information. However, later in his opening, and in his final submissions, he submitted, perhaps in consequence of an intervention of mine, that "airport and aviation related" uses included "at least" scheduled flights of a kind which were permitted at the time the lease was entered into.

86. In his final written submissions, Mr. Moriarty Q.C. contended that Mr. Fetherstonhaugh should not be permitted to resile from the concession made in the Further Information, and that I ought not to grant a declaration which goes beyond BHAL's case as there modified. However, I made it reasonably clear in the course of the opening (18th September transcript pages 22, 105) that I considered it possible that the concession might not have been rightly made, and in any event it would be unsatisfactory for me to refuse to grant a declaration because I did not entirely agree with either party's construction. I gave Bromley an opportunity to make further submissions and even to adduce additional evidence, if BHAL's change of conclusion had caused prejudice. But Mr. Moriarty confirmed that the only prejudice which might have been caused was that Bromley refused a without prejudice offer after taking into account, amongst other matters, BHAL's original position. This is relevant, if at all, to costs. I therefore consider myself free to grant a declaration which accords with my view, even if it is not consistent with BHAL's original case or even its present case.

87. Before turning to the precise wording of clause 1.8, I propose to consider the other terms of the lease and the business transfer agreement and the commercial background. In my view they lend strong support to the view that the parties did not intend to prohibit scheduled services.

88. The first point is of course the reference in Schedule 3 to a scheduled service to France. This is mentioned, not as an exception to a general prohibition on scheduled flights, but because it is permitted to operate is slightly outside the usual hours. On the face of it, this indicates that scheduled flights must be within the categories of activity permitted by clause 1.8. Otherwise, one would expect to find the operation of a scheduled service to France as an additional category of permitted activity in clause 1.8, or as an exception in clause 5.9.1 to the prohibition against carrying on activities outside those permitted by clause 1.8. Mr. Moriarty submitted that it was obviously an exception, permitted because the Le Touquet service already existed, that the parties had mistakenly omitted to add "except for the scheduled service to France referred to in the Third Schedule" to clause 5.9.1, and that the lease should be read as if these words had been added, or as it is sometimes put that the court should supply the additional words.

89. In my view, the effect of the authorities to which I have referred is to preclude the court from supplying the additional words required unless their omission was obviously a mistake. This would be the case if the wording of clause 1.8 could not possibly cove a scheduled service to France, but the words "and other airport and aviation related uses" clearly could, at least if broadly interpreted. Support for the view that the omission was an obvious mistake must therefore be found elsewhere, although a court should perhaps be more ready to accept that even in a professionally drafted formal document words may have been inadvertently omitted, than that a linguistic mistake has been made.

90. The second point, also arising from Schedule 3, is that it permits outside the usual hours a scheduled service to anywhere in France. Thus, it is not just an exception for an existing service; for example if the Love Air service ceased, BHAL could permit another company to operate a scheduled service to Paris or Nice outside the usual hours. This shows that the parties contemplated that at least one new scheduled service might come into existence, and that it would not necessarily be business oriented.

91. The third point is that, whereas clause 12.5.14 of the agreement with AUK of 8 th July 1988 expressly prohibited scheduled services in the operating criteria, the operating conditions in Schedule 3 do not; since the draftsman clearly drew much of Schedule 3 from clause 12.5 of the old agreement, this looks like a deliberate omission. Mr. Moriarty submits that this is because the prohibition is now imposed by clause 1.8, defining permitted user, for which there is no parallel in the AUK agreement. But if the draftsman had intended to maintain this prohibition, the obvious course would have been simply to leave it in its original form, subject to the exception for the service to France. It is clear that much of Schedule 3 was directly copied or adapted from the provisions of the 1988 agreement, and anyhow it would make no sense to replace clear specific provision with the clause 1.8 wording. The obvious inference is that it was not mistakenly omitted, but deliberately omitted because it was no longer to apply.

92. The fourth point is that after 1991 the regime so far as scheduled services under the 1988 agreement had been relaxed. They were permitted subject to the limitations set out in the approved policy. Even if there was only one service currently in existence, this was not for want of trying and it was seen by the Council as part of the financial problem that the prospects were not better (see para. 15 of the memo of October/November 1993 quoted at para. 48 above). Therefore, it is extremely unlikely that the Council would have wished to ban scheduled services subject only to one exception and far more likely, if a ban was to be imposed at all, that it would have been subject to the exceptions established in 1991. There would have been no sense in imposing severer restrictions.

93. Fifth, the Operating Criteria in Schedule 3 were all subject to the arbitration provision in clause 2.11; an unreasonable refusal to relax the conditions could be challenged. The effect of Mr. Moriarty's argument, if correct, is that the restriction on scheduled services was not only more severe, it was also, because it was imposed by means of the permitted user clause instead of the Operating Criteria, set in stone unless the Council in its absolute discretion agreed otherwise. This strikes me as most unlikely to have been intended, especially as the Council had not had any objection in principle to scheduled services since 1991.

94. Sixth, clause 3.1 of the business transfer agreement permits BHAL to maintain a public licence for the airport. Such a licence requires the airport to be available to all persons on equal terms and conditions; i.e. if an airport with a public licence accepts one scheduled service, it must accept all, subject to compliance with its operating hours and with any size or noise restrictions and of course subject to take-off and landing slots being available: see Civil Aviation Authority Regulations 1991 para. 3(1); R v. Coventry C.C. ex p. Phoenix Aviation [1995] 1 All E.R. 37, esp. at 50-1 per Simon Brown L.J. As Mr. Price put it in his oral evidence "If it is a public licence you have to take any traffic that comes... the very nature of a public licence means that putting restrictions in is very difficult". Therefore, on Bromley's construction of clause 1.8 of the lease, if BHAL exercised its right to maintain a public use licence, it would give rise to an insoluble conflict between its obligations under the lease and its obligations under the general law; to achieve consistency, the lease and/or the business transfer agreement should have prohibited BHAL from maintaining a public licence. The fact that BHAL has so far chosen to retain flexibility by not maintaining a public licence does not detract from the force of the point.

95. Seventh, the clause 4.5 of the business transfer agreement, the business and goodwill of the airport was transferred to BHAL. One would not expect to find that the provisions of the lease significantly reduced the scope of the business or reduced the value of its goodwill. Yet, if Bromley is right, the scope of permissible scheduled services was significantly reduced and diversions from other airports had to cease. Further, since the business of air charters and air taxis could now only be operated to the extent that they were "business aviation", the tenants who offered such services had to be told not to accept bookings for any other purpose and to ensure that no seats were sold to individual passengers paying their own fare. This was on the footing, Mr. Moriarty submitted, that the lease was the "operating agreement" with which the tenants were obliged to comply. An interpretation of the lease which would require the lessee to start off its relationship with its sub-tenants in this way is in my view unlikely to be right.

96. Mr Moriarty sought to meet this point by submitting that the agreement with AUK was for a much shorter period and anyhow after a few years could be terminated on a year's notice. Further, by virtue of clause 12.1 the Council had the "whip hand" and could change airport policy and reimpose the ban on scheduled services at any time (as indicated at para. 40 above, I am doubtful about this, and in any event Mr. Million accepted in the course of his evidence that it was unlikely in practice that it would have sought to do so). Therefore, Mr. Moriarty argued, it was only natural to expect the Council, in granting a lease for 125 years without the equivalent of clause 12.1, to impose tighter restrictions on use. Mr. Fetherstonhaugh also relied on the length of the lease, submitting that one would not expect the prospective tenant to accept control in effect for ever over the ways in which the airport could be developed so as to become and remain a thriving business. There is force in both these submissions, but the terms of the 1987 report and the memoranda of May 1992 and 26th April 1994, quoted at paras. 30 42 and 55 above, all suggest that BHAL's submission is the more realistic; Bromley would expect in a lease of this length to be able to exercise looser not tighter control over the operation of the business. AUK received a fee for its services and bore only half of any losses; BHAL was to pay a substantial rent, to share its profits and to bear any losses in full. It also had to undertake all necessary capital expenditure, apart form a part of the capital expenditure already needed for the runway which Bromley undertook.

97. Eighth, the force of the last point is increased when one considers the financial background. The airport had not been profitable at any time in its history. Bromley had always been clearly concerned about this and had originally lifted the ban on scheduled services precisely for this reason (see para. 39 above). BHAL was assuming an obligation to pay a substantial rent, and undertaking substantial capital expenditure, in connection with a business which had never in the past operated profitably. It would make very little sense to impose additional restrictions which would make it even more difficult to operate profitably, against a background in which (as the October/November 1993 memo shows) the market was not expanding. This is so not only from the point of view of BHAL, but from the point of the Council too. If BHAL failed, it would be unlikely that any other commercial operator could be found (see paras. 30 and 56(7) above); the Council would risk having the problem of what to do with a financially unviable airport, which it did not wish to turn into a housing development or an industrial zone, back on its plate.

98. Ninth, the practicality of Bromley's construction is questionable, insofar as it restricts charter flights and air taxis to passengers flying for business purposes. On its case, charter aircraft could not take individual fare-paying passengers, and neither charter aircraft nor air taxis could take passengers who were not flying for business purposes. Somebody had to ensure, for each flight, compliance with these restrictions. Where the flight was operated by a tenant of the airport, the responsibility would fall on it; it would have to question its customers to ensure compliance. Other flights might well arrive on very short notice. In relation to these, Mr. Moriarty submitted that the Air Pilot, which publishes the operating conditions of airports, such as length of runways, type of aircraft permitted to land, opening hours, could equally well stipulate conditions as to the type of passenger permitted to be on a flight landing or taking off from the airport. I was referred to examples of conditions which appeared in Air Pilot: there were none of this kind. It seemed to me, even before hearing any expert evidence to be very unlikely that the airport's tenants, let alone the operators of occasional flights wishing to use the airport, would be prepared in practice to vet passengers in this way. The evidence of BHAL's expert witness, Mr. Price confirmed this; he had never seen a restriction of this kind as an Air Pilot, and thought it unlikely that the operator of an airport or an aircraft would be prepared to check that no passengers had paid an individual fare; the necessary policing would be very bureaucratic. The effect of any serious attempt to enforce such an obligation would in my view be to drive away business. Mr. Moriarty submitted that the same objection applied to BHAL 's construction, at least in its original form, but I do not think that this is right as, on this construction, a flight would be "business aviation" if intended principally for businessmen; it may be that he was right in the application of this construction to air taxi operations.

99. Tenth, on the evidence there appears to have been no perceived need in 1994 for a ban on scheduled services, or on passengers flying for non-business purposes. The lease contained restrictions which were the same as, or similar to, those contained in the agreement of 8th July 1988 covering operating hours, permissible aircraft, noise levels and numbers of movements. These, and the length of the runway, would preclude any form of mass holiday traffic. The October/November 1993 memorandum suggests that the "environmental objective" had been "largely achieved", presumably by these restrictions. If so, why should it matter, from an environmental point of view, whether the passengers were travelling for business purposes or whether the movements were of scheduled or private flights? The memorandum referred to scheduled services more in terms of regret for their absence than as a threat to the environment which needed to be guarded against. The fact that the press release issued in May 1994 (see para. 56 above) made no reference to any control over schedule flights, while mentioning all the other main types of control, also suggests that no such control was intended.

100. In the course of his evidence, Mr. Million sought to answer this point. He said that for each schedule flight a much larger number of people would have to travel by road to the airport than for most chartered or any private flights. The Council's environmental concerns included road congestion; if schedule flights resulted in a need to expand terminal facilities, the issue could be addressed when the planning application was made. But scheduled flights might be started without an expansion of terminal facilities and then road congestion might occur without the planning authorities having an opportunity to prevent it; this danger could only be addressed by a prohibition in the lease. He said that councillors were concerned about this at the time the lease was entered into.

101. Although some scheduled flights (e.g. the Le Touquet service) might take fewer passengers than many chartered flights, this is a fair point, but in my view of little weight for two reasons. First, given the state of the passenger terminal facilities in 1994, it cannot have been seen as likely that a significant volume of scheduled services could be taken on without a development of the buildings for which planning permission would be needed (see again the October/November 1993 memorandum para. 15, quoted at para. 48 above). Secondly, it is inconceivable that, if councillors' concerns on this point had been known to those who were negotiating the terms of the lease, the specific ban on scheduled services would have been dropped from the Operating Criteria.

Clause 1.8 - "Other airport and aviation related uses"

102. For all the above reasons, I think that the factual background, in particular the balance of financial and environmental consideration as they stood in April 1994, make it very unlikely that Bromley would have wished to impose, or that BHAL would have accepted, a ban on scheduled services or on individual fare-paying passengers. Accordingly I am disinclined to interpret the lease as imposing such a ban unless its wording clearly requires me to do so.

103. For convenience, I set out again the relevant words of clause 1.8:

" Airport providing facilities for business aviation flight training and private flying and other airport and aviation related uses (including one air fair or one air display in each year of the Term or such greater number as may have been previously approved in writing by the Landlord (such approval not to be unreasonably withheld))".

104. I propose to consider first the meaning of "other airport and aviation related uses". As a matter of plain English, any flying activity, including a scheduled flight, involves a use of the land which is related to aviation and related to the airport. Of course, the meaning of words often depends on the context, but here, for all the reasons set out earlier, in my view the context strongly suggests that the natural meaning was intended.

105. Four possible meanings were canvassed during the hearing; the first was " other airport and aviation related uses of a similar kind" , i.e. that the words should be construed eiusdem generis. Of course, the so-called eiusdem generis rule is by no means always applied. As was said by Lord Esher M.R. in Anderson v. Anderson [1895] 1 Q.B. 749 at 753:-

"... ., nothing can be plainer than that ...prima facie general words are to be taken in their general sense, unless you can find that in the particular case the true construction of the instrument requires you conclude that they are intended to be used in a sense limited to things ejusdem generis with those which have been specifically mentioned before."

Reference may also be made to the judgment of Devlin J. in Chandris v. Isbrandtsen-Moller [1951] 1 K.B. 240 at 244, 246, which is to like effect. In this case, since an air fair or display is hardly similar to the specific uses mentioned earlier, this cannot be the correct meaning and neither party contended that it was.

106. Secondly, Mr. Moriarty submitted that it referred to activities at the airport which were ancillary to the main flying activities, such as the provision of hangar and fuel or fire services, but not to activities involving actual flying. I do not accept this submission. The word "other" necessarily implies that the previously mentioned activities, all of which did involve actual flying, are to be regarded as "airport and aviation related uses"; the bracketed addition including the air fair or display also shows that these words covered activities involving actual flying. Therefore, on the natural meaning of the language used, the other airport and aviation selected uses include activities which involve flying (as well as those which do not).

107. Thirdly, I suggested that it could mean "other airport and aviation related uses already permitted at the airport ". This was met by Mr. Fetherstonhaugh with all the enthusiasm to be expected from a man who is offered half a load, and by Mr. Moriarty with none at all. If correct, it would have covered scheduled services permitted by the terms of the 1991 resolution. But I think that both counsel were right in their reactions. There is simply no warrant for the implication of this limitation into the words used, and, whilst it would not attract all of the objections to Bromley's construction set out above, it would for example still result in the prohibition on scheduled services being imposed by clause 1.8 and thus being outside the arbitration provisions of clause 2.11. If the parties had intended a ban on all but the existing scheduled services, the simple and straightforward way of doing it would have been to leave in the express prohibition, subject to a proviso permitting those within the 1991 resolution, or the scheduled service to France.

108. This leaves only one remaining possibility, that any other aviation or airport related uses are permitted, including scheduled flights of any kind. This not only accords with the meaning of the words, it also makes perfectly good commercial sense. Given the detailed restrictions in the Operating Criteria, there was no perceived environmental need in 1994 for any limitations on the type of passenger to be carried, and every financial incentive to allow BHAL to develop whatever type of flights it could.

109. The main objection to this construction, rightly stressed by Mr. Moriarty, is that this makes much of clause 1.8 redundant; on this construction, the permitted use was simply use as an airport, subject only to the limit on air fairs. However, as has often been said, the presumption against surplusage or otiose or language is weak: for example per Devlin J. in Chandris v. Isbrandtsen-Moller, supra, at 245 and per Hoffman J. in Tea Trade Properties Ltd. 1 E.G.L.R. 155:-

" I have never found the presumption against superfluous language particularly useful in the construction of leases. The draftsmen traditionally employ linguistic overkill and try to obliterate the conceptual target by using a number of phrases expressing more or less the same idea."

In this case, I think that what the draftsman was doing was to set out the main existing or anticipated kinds of use at the airport and then to stress that any other uses related to aviation or an airport were permitted, apart form the limitation on air displays; any activity which was not related to aviation or airport use - for example the kind of trade fair often to be seen on racecourses - was not. This would be entirely consistent with the obligation to keep the airport open in clause 24. Therefore, I hold that any charter flight, air taxi flight, helicopter flight or scheduled service which is not covered by the "business aviation" part of the definition is permitted by this part.

"Business aviation"

110. If this is correct, it is not strictly necessary to consider whether scheduled services which are principally for the business market are within the term "business aviation", since if they are not they are covered by " other aviation and airport related uses". But I think that I ought nevertheless to deal with the issue. A great deal of time has been spent on it, and as a result the position is in my view relatively clear.

111. It is undoubtedly the case that the term "business aviation" has on a number of occasions, some of which are referred to above, been used in governmental or semi-official studies to describe a section of the aviation market which includes charters by companies and other legal entities for business purposes, but excludes scheduled air services carrying individual fare paying passengers. But apart from these two fixed points the definitions vary. In the Halcrow Fox report of July 1988, prepared for the government, it is said at para. 1.2.1. that the activities of business aviation are difficult to define or quantify. However, the report does draw a clear distinction between business aviation and "commercial flying", and it also draws a distinction between "business aviation" and "business air travel" in the following terms:-

" Business Aviation is a different market from business air travel as a whole. It is a small fraction of a sector of the market which is less sensitive to cost and more sensitive to time factors than the generality of air travellers."

112. During the period between the earliest of these studies in 1978 and 1994, there was a considerable increase in the number of small specialised scheduled services, sometimes operating from smaller airports, some of which were directed at the "business air travel" (in the Halcrow Fox sense) market. In particular, the London City Airport opened in 1987, and about 62% of its passengers travel for business purposes - a far larger proportion that would be found at a major airport catering for the mass holiday travel market.

113. BHAL's expert witness, Mr. Price, a director of a company providing specialist advice to the aviation industry, who had been professionally involved in civil aviation since 1971, accepted that the term "business aviation" was sometimes used in the sense contended for by Bromley. But he regarded it is an imprecise and ill-defined term and said that it was commonly used in the aviation industry to describe the use of air transport services for business purposes. In other words, his evidence was to the effect that the term was commonly used in the same sense as the Halcrow Fox term "business air travel" as well as in the narrower sense.

114. Bromley's expert, Mr. Johnson, formerly a planning officer and now a director of the Aviation Environment Federation, did not accept this. In his view, what Mr. Price described as the broad meaning of "business aviation" could only properly be described as "the business travel market" or, as Halcrow Fox describes it, "business air travel".

115. There are a number of documents which shed light on how the term "business aviation" was used spontaneously and without regard to the present dispute at or about the relevant time. For example:-

(a) The report of the working party (see para. 36 above) dated June 1991, section 9, describes the role of the airport and considers three options for future changes, the second of which is headed "balanced growth". This contains the following passage:-

" What AUKL would expect the Council to adopt is a middle course scenario which provides the balance between the various interests that they believe will be essential for a successful strategy. This envisages some easing of opening hours, some greater flexibility in the operation of commuter flights using existing approved aircraft ... this option would entail a gradual increase in business aviation..."

It is clear that in his passage the authors are treating "commuter flights", which in this context clearly meant schedules flights for individual fare-paying passengers who were mainly travelling in conjunction with their jobs, as within the concept of business aviation.

(b) BHAL's consultants' letter dated 24th October 1996 enclosing the planning application to extend the terminal facilities to accommodate scheduled passenger operations points in both directions. In sub-paragraph (a), the consultants say that "having completed its initial phase of works to provide quality facilities for business aviation" a similar exercise is being undertaken to provide proper facilities for scheduled air passenger services i.e. a distinction appears to be drawn between the two. On the other hand, at (d) of the same letter, the same extension is referred to as "an enlargement of the business aviation concourse in full compliance with the needs of business aviation", which implies that scheduled air passenger services are part of business aviation.

(c) Mr Walters' speech at the Corporate Open Day in June 1995 contained the following passage:-

" Our most important commercial activity is the Business Aviation which is done largely in twin engined aircraft, either jets or turbo prop, and we have some 12% of London market for this type of traffic.

Our Business Aviation comes from both customers based here at the airport with millions of pounds invested in their hangars and modern business jets, and by commercially important passengers visiting the United Kingdom ...

Passenger flights are another very important business segment. Here at Biggin we have a lot of charters - we see a lot of corporate groups, a lot of golf clubs, motor racing fans, business incentive and conference groups, and much more besides, and of course we have the famous Le Touquet scheduled service operated from here by Love Air."

This clearly shows Mr. Walters himself drawing the distinction between business aviation and passenger flights, including the existing scheduled service, although he appears to include chargers by corporate groups in the latter category. In cross-examination he remarked wryly "we fall into our own traps sometimes".

(d) In a note written on Bromley's letter of 17th June 1997 relating to the application for the second extension, to accommodate scheduled passenger services, Mr. Walters refers to the existing buildings as "the Business Aviation Terminal"; however, little weight can be placed upon this, as he is simply referring to the name given to the terminal as it stood. There is no implication that, when extended, it could no longer properly be described as a "Business Aviation Terminal", and indeed even in its existing state it presumably received the Love Air scheduled service passengers.

(e) An Environment Services Department Committee Report of 3rd December 1996, commenting on the application for permission to extend the terminal to permit scheduled air services comments that:-

"... the proposals are consistent with the strategic objectives of the UDP Review Paper 2, agreed by Development Control Committee (4th June 1996) which seeks to secure the gradual improvement of the Airport ... including a controlled growth in business aviation."

Here, the Council appears to be treating scheduled services as within the concept of business aviation.

116. These documents support Mr. Price's evidence that "business aviation" is an elastic and imprecise term, the meaning of which depends on its context. This in turn provides another reason for concluding that " ;other aviation and airport related cases" is not to be construed restrictively. If it had been intended to confine BHAL to flying activities which were "business aviation", it would have been necessary to define the term so that both parties knew exactly what was and what was not permitted; if other flying activities are permitted anyhow, there was no need as nothing would turn on the precise meaning of the term.

117. Mr Moriarty submitted that Mr. Price viewed "business aviation" as a term which defined an activity from the passenger's point of view; whether a passenger was engaging in it depended on his purpose in travelling on the aircraft. This, he said, was unhelpful in the context of this dispute, since we are dealing with the definition of a business run by an airport for operators of air services. This cannot be defined in terms of the purpose of the passengers' travel, since they will have different purposes. This is a valid point to make in relation to the earlier parts of Mr. Price's evidence, but eventually he explained that operators would look at it the same way, especially in assessing routes. For example, services operating out of London City would be regarded as business aviation, because, even though some passengers would be travelling for leisure purposes, predominantly they would be travelling for business purposes. Such routes would be within the broad meaning of business aviation. I accept Mr. Price's evidence; I do not think that it is invalidated by the fact that he has been unable to support it by any reference to a published report or study.

118. The question is therefore what meaning is to be established to the term in the lease. Mr. Fetherstonhaugh submitted that prima facie the ordinary English meaning should be taken unless there was a valid reason to displace it. He referred me to the decision of Fry J in Holt v. Co v. Collyer (1881) 16 Ch.D. 719, in which a landlord had sought to adduce evidence that the word "beerhouse" had a special meaning in the brewing trade, and that it should be given that meaning in a covenant in a lease of a shop. Fry J refused to admit the evidence. He said:

" Now is there anything here from which I can infer that the word " beerhouse" was not used in its primary and popular sense? The covenant which the Plaintiff desires to have enforced against the Defendant is contained in an indenture of lease, which is not a trade instrument in any sense of the term. It is an ordinary lease by a landlord, who is not shown to be a brewer or connected with the business of selling beer at that time, and in respect of whom there is no evidence to show that he was anyway engaged in the business."

Mr Fetherstonhaugh submitted that the narrow meaning could not be applied in this case because Bromley was not in the aviation industry and because there is no evidence that Mr. Walters knew of the narrower meaning. I do not agree with this submission. Bromley had owned and controlled the operation of an airport for 20 years. Mr. Walters did not deny knowledge of the narrower meaning (although he had not read the reports or studies) and as appears above occasionally used it.

119. Mr Moriarty submitted that, once an industry meaning is proved, the onus is on BHAL to show why it should be displaced. Mr. Fetherstonhaugh submitted that the onus was on Bromley to show why the ordinary meaning should be displaced. I do not think that it is a question of either meaning being prima facie correct: which is correct depends on the context. I hold that thebroader meaning is correct for much the same reasons as are applicable to the other part of the provision. Looking at the lease as a whole, it requires BHAL to keep the airport open through the term (clause 5.24) and to maximise turnover (Third Schedule para. (h)); in this context, the effect of clause 1.8 and 5.9.1 is to permit use of the land only for purposes connected with aviation, and "business aviation" is mentioned as one of the main uses current at the time of the lease. There would be no purpose in restricting its meaning to any variant of its narrower meanings and if the parties had intended to do so it would have had to be given a precise definition, either by reference to one of the existing reports or studies, or an ad hoc definition: a number of other terms in this lease (for example "development" which is given its Town and Country legislation meaning) are carefully defined and it is unlikely that this one would have been left undefined if it had been intended to limit BHAL's use of the airport.

120. Accordingly I hold:-

(a) that any chartered or scheduled service, the predominant purpose of which is to carry passengers travelling for the purpose of their employment or business, is within the meaning of the term "business aviation" in clause 1.8 of the lease; and

(b) that any other flight by a chartered or scheduled service air taxi or helicopter to or from the airport is an aviation or airport related use of the airport within clause 1.8 of the lease.

If I had taken a different view of the meaning of "business aviation" , I would have held that any flight by a chartered or scheduled service air taxi or helicopter which was not within the meaning of the term "business aviation" was an aviation or airport related use of the airport.

Evidence as to the negotiations

121. I have referred above to the interesting question whether, in a case in which a court would conclude on the basis of the factual background and context that an obvious mistake has been made, it is open to one party to rely on the negotiations and to show that in fact the parties or at least one of them meant exactly what the agreement said. Since I have decided that the parties did not mistakenly omit to refer in clause 5.9.1 (or in clause 1.8) to a scheduled service, I do not need to decide this question, but in case the matter goes further, I will set out my view on the law and its possible implication on the facts of this case.

122. The first point to make, which is I think clear on the authorities, is that the unexpressed intentions of the parties are not relevant. Thus, even if the parties are under the same mistake as to what the contract means, if the mistake remains "locked in the breasts of each party" the contract will not be rectified : see Joscelyne v. Nissen, supra, at 97 per Russell L.J. More recently, the post-Mannai authorities on mistakes in contractual notices, in which the legal principles applied are equated to those applicable to the construction of contracts, establish that what the giver and recipient of the advice thought it meant is irrelevant. All that matters is whether the reasonable recipient of the notice - that "formidable addition to the imagery of the law ... that paragon of the law, with the eyesight, omniscience and diligence that they (the plaintiffs) demand of him ....." (per Nourse L.J. in Garston v. Scottish Widows Fund [1998] 1 W.L.R. 1583 at 1586, 1588) - should have understood it to have contained a mistake. The fact that a recipient, through inexperience or lack of understanding, did not see it as a reasonable recipient might have done does not appear to be relevant. Nor, it appears, is his evidence as to why he did not even admissible (although it might perhaps sometimes be preferable for the court to hear the evidence, so as to gain some insight into what the recipient though and thereby be better able to judge its reasonableness). See Garston (supra); York v. Casey [1998] 2 E.G.L.R. 25; Lemmerbell Ltd. v. Britannia UAS Direct Ltd; 8th October 1998 (C.A.); Clickex v. McCann, 14th May 1999 (C.A.); Havant International Holdings Ltd. v. Lionsgate (H) Investments Ltd. 30 th November 1999 (Hart J.).

123. On the other hand, it does not seem reasonable that a court should be prepared to conclude that the parties made an obvious mistake, while refusing to look at the evidence of relevant exchanges during the negotiations, which may show that they did not make a mistake but actually meant what they said. It seems clear at least that evidence as to the negotiations which shows that their common intention was as expressed in the contract, i.e. that both intended the contract to mean what it said, must be admissible. This is what is sufficient to rectify an agreement so that its meaning is changed; a fortiori it must be sufficient to leave its meaning intact or, as one might put it, to avoid rectification.

124. The difficult question is what the position is if the evidence as to the negotiations shows that one party only intended the contract to mean what it said. One possible answer is that, the court having concluded on the normally admissible evidence as to the factual background and the context that the contract contains a linguistic mistake or omits relevant words, this can only be displaced if the evidence discloses a common mistake by both parties; in other words, that the usual rule governing rectification applies. The other possible view is that it cannot apply when what is under consideration in the first place is precisely whether the parties have made a common mistake; the court's conclusion that they have obviously made a common mistake is displaced by evidence that one of the parties has not.

125. In this case, if I had concluded that, as submitted by Mr. Moriarty, on the proper construction of the contract based on the normally admissible evidence, the parties intended to provide that only a scheduled service to France was permitted, but omitted reference to it in clause 1.8 or clause 5.9.1, I would then have been confronted by clear evidence that BHAL not only intended all scheduled services to be permitted, but expressed that intention, both in its letter of 9th March 1993 and in its Business Plan in early 1994. There is no evidence to show that BHAL ever changed its intention at any time before 26th April 1994 (and in fact it did not). On the other hand, there is no clear evidence at all as to what Bromley intended. The fact that it did not include any reference to a prohibition on scheduled services in its letters of 15 th November and 7th December 1993, quite some time before the lease was entered into, is not conclusive and, whilst the Business Plan evidences BHAL's intention, the failure to challenge it does not evidence Bromley's because it was not seen by any of the relevant employees concerned with the negotiations who would have known whether scheduled services were to be permitted or not (see para. 53 above).

126. In the Investors Compensation case, in the passage cited above, Lord Hoffman said that the scope of the exception rendering inadmissible evidence as to the negotiation and as to the parties' subjective intentions was in some respects unclear. I think that this is one of them. I am aware of no authority in which the admissibility of such evidence has been considered in the context of a contention by one party that there is a mistake in the contract which is so obvious that it should in effect be corrected by the court. In Investors Compensation itself, neither party submitted that the construction of the standard form agreement was affected by any of the earlier correspondence between the solicitors representing some of the investors and the compensating body, and the point therefore did not arise.

127. If I had had to decide what the position was in this situation, I would have held that the court cannot rectify an alleged mistake in the contract, or supply words alleged to have been omitted in error, unless satisfied on all the available evidence that there was a mistake which was common to both parties. Where a party alleges that a mistake in a contract is so obvious as to be remediable by a process of construction, it is in effect contending that the court can infer a common mistake from the evidence of the agreement alone, or from the agreement together with its factual background and context. In my opinion, in such a case, evidence as to the negotiations between the parties is admissible. The other party must be entitled to introduce and rely on such evidence to show that there was no common mistake, since - whatever may have been the first party's intention - he in fact had and expressed an intention which was consistent with the wording of the agreement as concluded. Otherwise, as the present case demonstrates, the wrong result may be arrived at.

128. I do not think that this should be seen as a two-stage process, first of construction and then of rectification (or perhaps unrectification). The distinction between construction and rectification becomes irrelevant in this kind of case. The question for the court is the same whether the issue is described as one of construction or of rectification; taking into account all the evidence, that is the agreement itself and, to the extent that evidence is introduced, the factual background, the context and the parties' intention as expressed during negotiations, was there a common mistake by both parties? If not, the contract should be taken to mean what it says. However, on the authorities as they stand, I doubt whether one party's evidence that he intended the agreement to mean what it said, in the absence of any manifestation of that intention during the negotiations, would be admissible; this would infringe the principle that the intention of the parties is to be objectively ascertained. Even in a rectification case in which evidence as to the negotiations is admitted, evidence as to a party's unexpressed subjective intention is not admissible (see para. 122 above). In the present case, Bromley 's submission that the court should supply mistakenly omitted words in clause 5.9.1 would have failed without any need to have resort to Mr. Walters' subjective intention, since BHAL expressed its intention that the lease should permit scheduled services clearly during the negotiations. I would have regarded any other conclusion as perverse in circumstances in which on any view the mistake was, at most, the mistake of one party.

Estoppel

129. In view of my decision on construction, it is not necessary for me to decide this issue, but I should find the facts in case the matter goes further. It is necessary to set out as briefly as possible the relevant events after 26 th April 1994. I bear in mind that Mr. Walters did not, at any time, have any doubt as to the permissibility of scheduled services. There is no material on which I could reach any conclusion as to whether any of the persons responsible for the Council's functions as landlord had any view, one way or the other, as to whether the lease permitted scheduled services. For the reasons set out below, I think it likely that Mr. Stungo believed that scheduled services were permitted, but that his successor, Mr. Hayward, probably did not direct his mind to the question until a very late stage, in or about September 1999, when the dispute between the parties arose.

130. At an ACC meeting held on 7 th April 1994, attended by Mr. Stungo and also by Mr. Walters, attending for the first time, Mr. Walters had outlined his short and long term plans, including amongst the latter "to widen the range of aviation activity supported by close links with the economic means of the community" and had said that to meet these ends there was to be a four month consultative period to develop a new Strategic Business Plan. At the ACC meeting held on 27th October 1994, also attended by Mr. Stungo, Mr. Walters presented his first five months trading review to the meeting, a copy of which was inserted in the minute book. The minutes of the meeting set out a summary, and this includes the following passage:

"Future Strategy

The strategic planning process is now at an end, and detailed business planning is now proceeding together with Airport customers, staff and other interested parties, and covers the following ten products for Biggin Hill.

....

- Regular passenger services on short routes, with aircraft capacity of 20 to 40 seats.

- Non-scheduled passenger flights with aircraft capacity of 20 to 40 seats."

131. At the ACC meeting held on 20 th April 1995, also attended by Mr. Stungo, Mr. Walters reported HM Immigration's notification of its intention to withdraw its services from August 1994 and the Airport's "unprecedented campaign" to retain this facility, which it had had for 30 years. The following passage is relevant:

" Withdrawal would reduce the Airport from being very accessible to London whereby passengers could come and go with ease, to an untested slow bureaucratic process that would upset the commercially supported segment of the market that we are targeting. This would reduce the ability of the Airport to develop its business and operate more schedule flights ... Andrew Walters, Lord Geddes have continued the relentless battle to retain the present Immigration service. It is the Airport's view that Biggin Hill arrivals are at such a level and of such a mixture, as to make permanent immigration facilities vital, and that the Airport would lose business if they were not in pace at all times ..."

132. I find it impossible to believe that Mr. Stungo could have missed these references to scheduled and passenger services, or that - had he believed that such services were not permitted by the lease - he would not have said so. It is possible that he did not direct his mind to whether the lease permitted scheduled service, but in my view it is much more likely, having regard to his earlier encouragement of such services, that he did not consider that the lease prohibited them.

133. The Airport Director's report to the ACC for the period January to March 1996, the effect of which was summarised in the minutes of the ACC meeting held on 18th April 1996, recorded that Biggin Hill had benefited from bad weather by being the only airport in the London area clear from fog due to its altitude. Most of the traffic from London City had been diverted to Biggin Hill, which had now been designated as a diversion airport for a number of London City operators. By this stage, Mr. Hayward had become the lead officer. There were similar references in the Airport Director's reports, also referred to in the minutes of ACC meetings, on five subsequent occasions, one in 1996, two in 1997 and two in 1999.

134. In January 1996, BHAL's consultants, Nathaniel Lichfield and Partners, provided Bromley with a detailed forecast of future growth in air traffic, including considerable growth in scheduled services. However, there is no evidence that this was seen by anybody outside the Planning Department.

135. In May and August 1996 respectively, BHAL sent Bromley an Economic Impact Study prepared by Nathaniel Lichfield, and a Development Strategy document. Each had been prepared for Bromley. Each referred, more than once and in clear terms, to an anticipated increase in the growth of scheduled or passenger services. The minutes of the ACC meeting on 18th July 1986 state that the first of these documents was "received by Members for information and future reference". The meeting was attended by Mr. Stuart McMillan on behalf of Bromley, rather than by Mr. Hayward. But Mr. Hayward accepted in cross-examination that he looked through both of these documents, and noted the references to scheduled services.

136. Mr Hayward sought to explain the fact that he did not take issue with these clear statements of BHAL's intention to develop scheduled services, or with a number of other similar references to which I refer below, because he thought that the scheduled services proposed were scheduled services carrying only the employees and executives of specific companies and were therefore within the meaning of "business aviation" as he understood it; he had not understood Mr. Walters to refer to ordinary schedules services carrying individual fare-paying passengers. I do not accept his evidence on this point. Mr. Hayward may have become confused in the course of the dispute, but I am quite sure that, at the time, he understood perfectly well that Mr. Walters was referring to ordinary scheduled services carrying individual fare-paying passengers. Nobody reading the documents could reach any other conclusion. There is no evidence that it was at all common for companies to provide scheduled services for their executives and employees, although there were one or two references in the documents to such services occasionally being established. The question is then why Mr. Hayward did not say to Mr. Walters that the lease did not permit scheduled services. As in the case of Mr. Stungo, I am quite sure that if he had, at the time, held the view that the lease did not permit them , he would have said so. Unlike Mr. Stungo, Mr. Hayward has no previous experience of the issue arising. The most probable explanation, in my judgment, is that he simply had not directed his mind to whether the lease permitted scheduled services, with the result that it did not strike him that Mr. Walters was proposing to seek business which was prohibited under the lease. I do not accept Mr. Hayward's evidence that he always held the view that scheduled services were prohibited. Again his recollection is at fault. I can see no possible reason why, if he had held this view, he would not have told Mr. Walters, so as to prevent him from seeking business which, if obtained, would then have to be turned away.

137. On 1st June 1996, Mr. Walters wrote to Dr. Blanch, the Chief Executive of Bromley, complaining about the publication of a review paper relating to the Airport without prior consultation. It is not relevant for me to consider whether this complaint was justified or not. The relevance is that Mr. Walters refers to "several proposed new scheduled and charter passenger services" as being amongst the activities endangered by the publication of the document, without giving rise to any objection on the part of the Council that such services were not permissible.

138. It is necessary next to refer to the evidence relating to two extensions to the passenger terminal facilities, known as T2 and T3. The T2 extension was unconnected with any planned increase in scheduled services. BHAL made a planning application on 21st November 1995. The covering letter from the architects and project managers stated that the purpose was to provide additional passenger handling and staff accommodation, together with associated car parking. Under Article 6 of the Town and Country Planning (General Development procedure) Order 1995, BHAL was obliged to give notice to Bromley in its capacity as landlord. Such a notice was given but was apparently received in the Planning Department, rather than in the Estates Department, or at least was filed by the Planning Department. However, in accordance with Bromley's usual procedure, a copy of the application and plans (but not the covering letter) was sent by the Planning to the Estates Department.

139. On 5th February 1996, the Planning Department wrote to the architects and complained that work had started without planning permission; according to Mr. Walters, this was not the case and the Planning Department was satisfied. On 1st March, Mr. Stungo wrote to Mr. Walters, reminding him that the Council's consent qua landlord was required and on 4th March BHAL applied for it; the letter said that additional space was needed for security procedures and that an additional temporary building was required adjoining the terminal. On 7th March Mr. Stungo wrote saying that the Council had "approved the principle of giving Landlord's consent" subject to the Chief Property Officer agreeing terms. On 13th March, Mrs. Pocknall confirmed this in principle, and set out a number of fairly routine terms and conditions, the details of which were subsequently negotiated between Bromley's solicitor and Rowe & Maw acting for BHAL. The licence was granted on 2nd December 1996. I have not been given the date on which planning permission was granted.

140. In the meantime, on 24th October 1996, Nathaniel Lichfield & Partners wrote to the Planning Department, enclosing an application for T3 Phase 1. The letter made it crystal clear that the purpose of the proposed extension was "to provide the proper facilities for scheduled air passenger services" in circumstances in which BHAL had received "urgent requests and proposals" from two airline operators wishing to use Fokker 50 aircraft, which they described as "a 50 seat "environmentally friendly" passenger aircraft" already in use at London City Airport. On the same day, Nathaniel Lichfield sent the requisite notice under Article 6 to the Principal Valuer, and it is accepted that this constituted proper notice to Bromley qua landlord. On 4th November 1996 the Principal Valuer responded on "Valuation and Estates" notepaper, headed with the name of Mrs. Pocknall, acknowledging receipt and staging "I am liaising with the Council's Planning Division regarding this matter". On 10th January 1997, planning permission was granted for T3 Phase 1.

141. However, following an inspection of the site by the Department of Transport, amendments were required to comply with security needs, and a further planning application known as T3 Phase 2 was made to the Planning Department on 14 th May 1997. On the same day Notice under Article 6 was given to the Principal Valuer, who acknowledged it on 19th May. On the same day the Principal Valuer confirmed that there would be liaison with the Planning Division. On 17th June, Mrs. Pocknall wrote to Nathaniel Lichfield, referring to the notice and to the previous licence granted in December 1996 for the passenger handling facilities, and stating that it would be necessary for another licence to be agreed for this proposed extension. On receipt of a copy of this, Mr. Walters asked Mrs. MacLean to telephone Mrs. Pocknall: part of his note to her reads:

" Please call Jane and say we are in a hurry to get this up - yes, providing the Licence arrangement does not prevent our work proceeding, lets get consent and discuss. Also, what is there to negotiate? Does LBB want to send me the legal format of what she wants and I can get (Rowe & Maw) to look at it?"

142. There was then a telephone conversation between Mr. MacLean and Mrs.

Pocknall. Mrs. MacLean's note of this reads:

" Yes, sending letter ASAP to us - there may be costs to pay - she will put them in her letter."

143. Mrs Pocknall's evidence is that she had no idea, at the time of this conversation, that the main purpose of the proposed extension was to provide additional passenger facilities for scheduled services. She believed that the purpose of the extension was merely to provide necessary security measures, and that there was therefore no possible objection in principle to it. The reason why she was unaware of the main purpose is that, despite the letters of 4 th November 1996 and 19th May 1997, stating that her department was "liaising" with the Planning Division, the Planning Division's idea of liaison did not extend to the provision of Nathaniel Lichfield's covering letters of 24th October 1996 and 14th May 1997 explaining the significance of the extension. As a matter of routine, apparently, the Planning Department would only send the planning application itself, perhaps together with the actual plans. Although I find it extremely surprising that the Planning Department did not send Mrs. Pocknall a copy of Nathaniel Lichfield's letter of 24 October, which was obviously of fundamental importance to what Bromley had to consider qua landlord, I accept her evidence that in fact it did not.

144. Neither Mrs. Pocknall nor Mrs. MacLean had any independent recollection of the details of the conversation between them. I am satisfied that Mrs. Pocknall, believing that the purpose of the extension was simply to provide for necessary security measures, conveyed to Mrs. MacLean that there was no problem or objection in principle and that, as recorded in Mrs. MacLean's handwritten note, she would be writing to set out the relevant terms and conditions. However, she did not say that the work could go ahead without consent. It is also clear from Mrs. Pocknall's evidence that, had she appreciated that the purpose of the extension was to provide for scheduled services, she would have sought legal advice as to whether this was permitted under the lease and would have told BHAL that she was doing so. In due course, BHAL would have been informed of Bromley's view that scheduled services were not permitted.

145. Mrs Pocknall did not in fact write to BHAL, but planning permission for T3 Phase 2 was granted on 15th July 1997, and the work proceeded despite the absence of any formal consent by Bromley qua landlord. Although as a result of the conversation with Mrs. Pocknall BHAL expected a letter from her, it did nothing to follow this up when none arrived. At some time later in 1997 - Mrs. Pocknall cannot say exactly when - she discovered that the extension had been built. Her evidence was that it was not unusual for work to proceed without formal consent, and that, believing that the work was anyhow necessary for security reasons, she was not unduly concerned. The T3 passenger terminal was officially opened on 27th November 1997. Bromley appears to have done nothing to object to it.

146. It is also relevant to refer to Mr. Hayward's knowledge about T3 in this period. He did not see a copy of the letter of 24th October 1996, but he was present at an ACC meeting on the same day, at which the plans showing the proposed extension were distributed, and at which there was a clear reference (as there had been in the Airport Director's report for the period July to September 1996) to a proposed Bright Air service to Rotterdam and to a "further expected increase in this type of operation using aircraft carrying between 35-46 passengers". For the reasons I have already given, I find that Mr. Hayward understood that these references were to proposed scheduled air services carrying individual fare-paying passengers.

147. At the ACC meeting on 17 th July 1997, the Committee was advised that following planning permission work had started, and that theairport's intention was:

" to pursue the market and to provide a scheduled service to Europe ... It was hoped that the residents of Biggin Hill would be able to take advantage of such a future service to the Continent from their neighbouring airport."

Mr Hayward was not present at that meeting, but accepted that he received and read the minutes; again I find that he understood that the work on the terminal extension was proceeding and that the object of the exercise was to provide a scheduled service, in the ordinary sense of the word.

148. Mr Hayward was present at the next ACC meeting on 23rd October 1997. The minutes record the Airport Directors' report that construction was proceeding at a great pace, and there are references to the "airport passenger terminal extension" and to the opening of the new "passenger lounges". He did not know that the landlord's consent had not been given, and there was no particular reason, as it seems to me, why he should have checked. In the following month a press release issued by BHAL and reported in the local newspaper referred clearly to "commuter services to European cities" and to "new scheduled services" contrasted to the existing "facilities for private passengers". This was not put to Mr. Hayward in cross-examination, but it seems unlikely that he would have been unaware of it. There are further references to commercial flights at the airport, and to proposed new scheduled services, in the minutes of the ACC meeting for January 1998, which Mr. Hayward did attend, as well as the references to diversions of scheduled flights during 1999, to which I have already referred.

149. Mr Hayward's own description of his job as lead officer was that it was:

"... . to take a wider view in terms of the balance between environmental, community and economic issues ... and when matters arise, which are impinging upon the wide view of the Council, to act upon those ... If there were significant issued [affecting the landlord arm of the Council] then, yes, I would do so [ i.e. report back to the landlord arm of the Council] if they were brought to my attention."

He also accepted that one of the principal means by which he was to gain the "wider view" was through his attendance at, or (when absent) his reading of, the minutes of ACC meetings.

150. Mr Million described the lead officer as :

" The Council's front man and co-ordinator in terms of the relationship between the Council and the Airport, .... would be mainly dealing with the development of the Airport, the operation of the agreement and things like that .... [including the operation of the lease]."

151. In these circumstances, the fact that Mr. Hayward - although as I have found fully aware of BHAL's intention to use the new passenger terminal in connection with scheduled services, as and when such business could be obtained - did not report this to Mrs. Pocknall's department, is consistent only with his not believing that scheduled services were prohibited by the lease. This could be because he actively believed that scheduled services were permitted, or because he simply had not considered the point; as I have already said, I believe that the latter explanation is correct.

152. Thus, the position can be summarised in this way. Leaving aside the actions of Bromley qua planning authority, there was a number of occasions on which BHAL threatened to contravene the lease (assuming for this purpose that its terms prohibited scheduled services), in circumstances in which one would expect Bromley to object, but it did not do so. So far as Mr. Stungo and Mr. Hayward are concerned, it appears to have been merely a matter of remaining silent. In the case of the conversation between Mrs. MacLean and Mrs. Pocknall, I think it went a little further, since the effect of the conversation was to lead Mrs. MacLean reasonably to believe, and to report to Mr. Walters, that there was no problem with what was proposed. Further, this was in the context of BHAL having earlier been told that there was liaison between the two departments, and of it therefore being reasonable for them to assume that the main purpose of the extension, as set out in the letter of 24th October, was known to Mrs. Pocknall.

153. The question is then what difference did this make? Certainly it did not induce Mr. Walters to believe that BHAL was entitled to permit scheduled services, he already had that belief. But if, as might have been expected if that was Bromley's position, Mr. Stungo or Mr. Hayward had made it clear that there was an objection to scheduled services, the issue between the parties would have crystallised much earlier than it did and could have been resolved (on the basis relevant to consideration of the estoppel point, it must be assumed, adversely to BHAL) before any significant expenditure was incurred on T3. Further, if Mrs. Pocknall had told Mrs. MacLean that there was an objection in principle to what was proposed, this would have crystallised the issue at a time when relatively little of the expenditure on T3 had been incurred - the expense of the planning applications had been incurred, but the work had not yet started.

154. I accept Mr. Walters' evidence that, if he had been told at any time before the work on T3 started that Bromley would object to scheduled services the work would not have proceeded unless and until the issue was resolved in BHAL's favour. It is clear from Nathaniel Lichfield's letter of 24 th October that the purpose of T3 was to provide passenger facilities which would be suitable for scheduled services. The cost of T3 was £438,544. BHAL's case is that Bromley stood by and allowed this expense to be incurred, knowing that it was to provide support for scheduled services and cannot now object to them.

155. Mr Moriarty however rightly points out that BHAL had no right to construct the terminal without permission. Even though, as I have found, the effect of the conversation between Mrs. MacLean and Mrs. Pocknall was to assure BHAL that there was no substantial problem this did not justify BHAL in proceeding with the work when Bromley's expected letter did not arrive. The terms of clause 5.5.2 are clear, and BHAL knew or should have known from the T2 procedure that formal consent needed to be negotiated and might involve matters which, while they might not amount to real problems were nevertheless of significance. In short, most of the expenditure was incurred in the course of breaking the terms of the lease, and BHAL is seeking to found its plea of estoppel on its own wrongful act. This in my view cannot be justified, notwithstanding Bromley's relaxed attitude to the breach when it was discovered.

156. The only part of the T3 expenditure which is unaffected by this point is that which was incurred in seeking planning permission, for both phases. This would have been avoided if Mr. Stungo or Mr. Hayward had objected to the proposed scheduled services before the relevant time. By the time of the conversation between Mrs. Pocknall and Mrs. MacLean, it would have been too late to avoid this expense. I have no evidence as to the precise amount involved, and can only hazard a guess that it might have been of the order of 10% of the total cost.

157. Mr Walters also said that a considerable amount of other expenditure was incurred which would not have been if he had known of the objection to scheduled services. He said that if he had known before the lease had been entered into, he would not have proceeded at all; I accept his evidence, but it is not relevant to the estoppel issue, which must depend on events occurring after 6th May 1994.

158. Mr Walters' evidence as to what part of the other expenditure would have been incurred if he had known of the objection to scheduled services was not very clear, although this was not entirely his fault. Apart from the intrinsically hypothetical nature of the question, confusion arose because he was at the time focussing on what would have happened if he had known of the objection before the lease was entered into, and at other times on what he would have done if he had known afterwards. There was also some confusion between two different questions, namely what he would have done if he had known, and whether the work done would actually have been of benefit to the airport even if scheduled services were not permitted.

159. Mr Walters produced a table showing total capital and revenue expenditure (excluding T3) of some £3.6 million, of which he said about 60% would not have been spent if he had learned immediately after the lease was entered into that scheduled services were prohibited. I have not been referred to any evidence as to when the various items of work were carried out, although it may be that there is some in the documents. I am therefore not able to say which parts of the work would have been avoided by an objection on the part of Mr. Stungo or Mr. Hayward on any particular date. There is no suggestion, as there is for T3, that Bromley knew that any of the other work was specifically connected with the expansion of scheduled services, and I did not understand Mr. Walters to say that it was; the effect of what he said was that expenditure had to be related to the future prospects of the airport, which without scheduled services would have been seen as considerably less rosy.

160. It became clear in the course of Mr. Walters' evidence that his table did not reflect exactly what would or would not have happened, but was a rough estimate. For example, the figure of £70,193 representing three quarters of the cost of improvements to the fuel farm reflected the likelihood that much of the work would not have been done, or would have been left until a time when it absolutely had to be done, or that all of it would have been postponed. The figure of £544,291 representing half of the cost of work to the runway reflected the probability that BHAL could have made do with improvements to a strip down the middle. I accept Mr. Walters' evidence as a reasonably accurate estimate of the work which would not have been done if, at the time it was done, he had known of the objection. I am not in a position to say how far the additional work has actively benefited the airport. I am satisfied that BHAL's reasonable business judgment would have been that the additional expense would not have been warranted by the likely traffic without scheduled services. In addition, considerable efforts were made in 1998-9 to attract scheduled services and £10,000 was spent on marketing consultancy services.

161. A number of legal issues relating to estoppel arose in the course of the argument, notably the question whether, in order to found an estoppel on silence, or a mere failure to object, it is necessary to show that the party remaining silent actually knew that there was a threat to infringe his rights but deliberately said nothing. If so, the effect of my finding that Mr. Stungo and Mr. Hayward respectively believed at the relevant times that the lease permitted, and did not realise that it prohibited, scheduled services would be to defeat the estoppel plea. I have been referred on this to the well known cases of Wilmott v. Barber (1880) 15 Ch.D. 96 and Taylor's Fashions Limited v. London Victoria Trustees Co. Ltd. [1982] Q.B. 133n., and to a number of other authorities but, despite the interesting arguments I have heard, it would have further delayed and further lengthened this judgment, neither of which is desirable, for me to decide the legal issues relating to estoppel.

The Residents' application

162. At some time in August, members of local residents' associations became aware of this action. However they did nothing until they learned in September that an order expediting the trial had been made and that the trial was imminent. By 11th September, they had instructed Mr. Richard Buxton, a solicitor specialising in environmental and public law. On 14th September, he wrote to the Borough Secretary with a copy to BHAL's solicitors indicating that he had instructions "in principle" to apply for residents' representatives to be joined as they had a " legal interest in the continuation of the lease", asking for copies of relevant documents, witness statements etc. and stating that the application would be made on the first day of the hearing, 18th September.

163. However, on the next day, Mr. Buxton wrote to the court, stating that although he had got as far as drafting papers for the application, because of lack of information and the shortness of time before the hearing, no application would be made. Instead, he set out the Residents' concerns about noise levels if scheduled services were allowed and some submissions as to the proper construction of the lease, and asked me to take both into consideration. Having made sure that the Residents were not represented, I told the parties that I had not read the letter in any detail and was not affected by its contents. I have read it carefully since.

164. The hearing concluded on 21 st September, except for final speeches. On 29th September Mr. Buxton wrote to me again, apologising for the fact that the Residents had not been represented and stressing their real concern. I replied on 5th October, repeating what I had already said to the parties. This seems to have prompted an application by 4 residents to be joined as parties to the action. A number of different reasons were given for applying at such a late stage, including the suggestion that it was only after the Human Rights Act came into force on 2nd October that the residents had any "direct legal interest" in the outcome of the action and the fact that I had, apparently unexpectedly, taken no account of Mr. Buxton's letter of 15th September.

165. The application was accompanied by draft Particulars of Claim, claiming a declaration that clause 5.9.1 of the lease prohibits BHAL from allowing aviation services to individual fare paying passengers to be provided at the airport. There was also a skeleton argument, in which it was said (inter alia) that the issue between the Residents and the parties was "identical to the issue between (BHAL) and the Council" and that they did not propose to call any evidence. There was no suggestion that the Residents proposed to put forward a different case from that which had already been put forward on behalf of the Council. Para. 16 implied that the only purpose of the application was to pursue an appeal i.e. the Residents might wish to act " in the event that the Council accept a decision of this Court ... favourable to (BHAL)". In his response to written questions I asked Mr. Hutchings about his skeleton argument, he confirmed that the Residents proposed only to make submissions, and not to put any evidence or other material before the court. His suggested timetable for further submission, subject to prompt disclosure of witness statements, documents etc., was less than a fortnight. He stressed the Residents' desire to cause only "minimum delay".

166. The hearing for the application was fixed for 3rd November. On 28 th October, the Residents served Opening Submissions in which its present contentions, summarised below, were advanced. These were accompanies by (a) revised Particulars of Claim in which an additional declaration was sought to the effect that the lease did not permit BHAL to allow the airport to be used in such a way as to cause excessive noise within its vicinity or interfere with their Convention right, (b) a witness statement from Mr. Buxton in which he said (inter alia) that the Residents' purpose was now to obtain effective protection against nuisance and (c) a very detailed expert report by Mr. Colin Stanbury on noise levels at the airport. Mr. Buxton did not, either in his letter to BHAL's solicitors or in his second witness statement, explain the reasons for the substantial changes in the Residents' case, coming as they did less than a week before the hearing, or for the decision contrary to previous assurances to introduce evidence on issues, the trial of which would be bound to cause very considerable delay. Instead, he pressed for the immediate production of BHAL 's skeleton argument and made it clear that an order for costs would be sought unless BHAL consented to the application; Bromley had throughout made it clear that it was neutral.

167. At the hearing on 3 rd November, it was agreed that one of the Residents, Mr. Peter Osborne, would cease to be an applicant (without prejudice to BHAL's right to claim costs against him) and that 3 others would be added as applicants.

168. In opening his case, Mr. Hutchings made four important concessions:-

(a) Before 2nd October 2000, the only course open to the Residents, if they considered that the operation of scheduled flights from Biggin Hill would infringe their rights under Article 8, would have been to make an application in Strasbourg, contending that the United Kingdom government had failed to take steps to preserve the Residents' rights under Article 8 to be protected from undue interference with the enjoyment of their homes; for example it might have been argued that the government should have designated the airport under the Civil Aviation Act, which would have enable it to impose more stringent controls than existed under the lease.

(b) The effect of sections 7(1)(b) and 22 (4) of the Human Rights Act is that the Residents cannot rely on Convention rights in any legal proceedings in relation to an act taking place before 2nd October 2000; since the lease was entered into in 1994, even if on its proper construction it permitted scheduled services, the Residents have no cause of action against Bromley.

(c) Therefore, were it not for the existence of these proceedings, in which the proper construction of the lease is in issue, the Residents' position would have been exactly the same after 2nd October 2000 as it was before; their only recourse would have been to Strasbourg.

(d) Before 2nd October 2000, the terms of the Convention would have been irrelevant in construing the lease.

169. Mr Hutchings submitted however that, because of the existence of these legal proceedings, uncompleted by 2nd October 2000, section 6 of the Act enabled and indeed entitled the Residents to protect their rights under Article 8 in this court. Therefore, what he now wished to do (contrary to what had previously been intimated) was to establish as a matter of fact that the noise levels which would be generated by scheduled services would interfere with the Residents' rights under Article 8; this would be likely to involve a detailed factual enquiry, no doubt with extensive expert evidence, as well as an equally complex enquiry as to whether such interference (if any) was justified by economic considerations or the " rights and freedoms of others" (see Article 8(2)).

170. Mr Hutchings' submissions as to the effect of section 6, assuming that an unjustified interference with the Residents' rights under Article 8 was established, were that the court's duty, as a public authority, was not to act in a way which is incompatible with those rights and that this meant, in summary, that in giving judgment after 2nd October 2000 (a) I should construe the lease as prohibiting scheduled services, even if I would have reached an opposite conclusion on 1st October; alternatively (b) I should imply a term to the effect that the Council should not interfere with Convention rights, even if I would have implied no such term on 1st October; alternatively (c) I should hold that the user clause under the lease was unlawful insofar as it purported to allow BHAL after 1st October to interfere with Convention rights; alternatively (d) even if I was still, after 2nd October 2000, of the view that the lease did permit scheduled services, it was "prima facie" a breach of the court's duty under section 6 to grant a declaration to that effect and I should therefore in the exercise of my discretion refrain from doing so.

171. I am afraid that I regard all this as quite unarguable. Taking the main submission first, it involves the proposition that, whatever the lease originally meant, its meaning may have changed on 2nd October 2000. Of course this may sometimes be the effect of sections 3 and 6(2) of the Act in relation to legislation, whenever enacted, when it is possible to read and give effect to it in a way which is compatible with Convention rights. There is no such provision in relation to contracts.

172. Mr Hutchings submitted that I should be prepared to interpret or develop the common law, if necessary radically, to achieve consistency with the Convention and there is indeed pre-Act authority to support this, where the common law is uncertain or ambiguous: see for example Rantzen v. Mirror Group Newspapers (1986) Ltd. Q.B. 670, 691B-C per Neill L.J. However, the submission in this case is that, whilst it is conceded that the terms of the Convention were of no relevance to the construction of the lease at the time it was entered into at any time before 2nd October 2000, now they are. To accede to this submission would go beyond the resolution of an uncertainty in the common law; it would require me to disregard a long line of House of Lords authority to the effect that a contract is to be construed in the context of the factual background at the time it was entered into, for example Prenn v. Simmonds and Investors Compensation cited earlier in this judgment.

173. It is perhaps appropriate that I should consider whether the concession referred to above was correctly made. I am satisfied that it was. One might well imagine circumstances in which it would be right to assume that a public authority, even before the Act came into force, intended a contract to which it was a party to be compatible with the Convention, or at least not to be obviously in conflict with it, and therefore to take the provision of the Convention into account when construing it as part of the context in which it was made. There is so far as I know no authority to this effect, but, on appropriate facts it would, I think, be at least arguable. However, in this case, there is before the court a large volume of Committee papers and internal reports relating to the operation of the airport from its inception, and the various ways in which it might be privatised, together with Mr. Million's detailed evidence about these matters based on personal knowledge from 1990. There is not a single reference anywhere to the Convention and I am quite satisfied that it was not in fact taken into account by the Council and negotiating the lease.

174. That of course does not mean that the Bromley was indifferent to the effect of the airport's operations on local residents. It is absolutely clear from numerous policy documents (some of which are quoted earlier in this judgment), as well as from the detailed Operating Criteria in the AUK agreement and in the lease, that Bromley has been following, throughout the period of its ownership of the airport, a policy of balancing environmental and financial considerations. Even though Bromley did not have the terms of the Convention in mind, its policy has in fact throughout been virtually indistinguishable from that required by Article 8, which provides for a similar balance to be struck. Even if there had been evidence that the Council had Article 8 specifically in mind, it would have made no difference to the correct perception of its objectives in 1994, and therefore would have added nothing to the factual background and context relevant to the construction of the lease.

175. Similarly, for all the reasons set out above, there is no basis whatsoever for implying a term that any operations which interfered with Article 8 rights were prohibited. No such term was necessary to give business efficacy to the lease, and there is no basis on which it can be interred that the parties had any such term in mind.

176. As to the submission that clause 5.9.1. was unlawful insofar as it failed to prohibit any such interference, section 22(4) makes it clear that the Act does not render unlawful any act by a public authority done before the Act came into force Bromley has done nothing after 2nd October 2000 to interfere with the Residents' rights. It is simply obliged to permit BHAL to operate in accordance with the lease.

177. Mr. Hutchings' final submission on the construction of the lease was that, even if it permitted scheduled services, it would be incompatible with the Convention for me to grant a declaration to that effect. There is nothing in the Convention which prevents me from giving a ruling as to the meaning of a contract. In doing so, I am not ruling in any way, nor am I even expressing an opinion, as to whether operations at the airport will or will not interfere with the Residents' rights under Article 8. That is not the subject matter of this action, nor is there any reason to permit it to become the subject matter of this action. If, as Mr. Hutchings says, the Residents have no other basis on which they can enforce their Article 8 rights in the English courts, the fact that there is a dispute about the meaning of clause 1.8 of the lease should not provide them with a fortuitous platform.

178. Mr. Hutchings also submitted that the Residents were "victims" within the meaning of section 7(l) of the Act, and therefore entitled to bring proceedings against the public authority concerned because they would be affected by the declaration. Section 7(1) reads as follows:­

"(1) A person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may­

(a) bring proceedings against the authority under this Act in the appropriate court or tribunal, or

(b) rely on the Convention right or rights concerned in any legal proceedings, but only if he is (or would be) a victim of the unlawful act."

179. Here, the Residents submit that the public authority which is proposing to act unlawfully is the court itself, by declaring that scheduled services are permitted; the appropriate legal proceeding in which to rely on their Convention rights is therefore this action. Assuming without deciding that the Residents would be sufficiently affected by such a declaration to be " victims", for the reasons already given I do not consider that, in granting the declaration, I am acting unlawfully. Therefore reliance on section 7 does not advance the Residents' case.

180. Finally, Mr. Hutchings also submitted that, in considering whether Bromley is estopped, by reason of events which took place before 2nd October 2000, from asserting that the lease prohibits scheduled services, I should now take into account the terms of the Convention. The relevant events had nothing whatsoever to do with the Convention. I reject this submission.

181. For the above reasons, I did not consider that there was any issue involving the Residents which it was desirable for the Court to resolve in this action, as required by CPR 19.2(2), and in any event in the circumstances outlined at paras. 162 to 166 above I would have exercised my discretion against joinder at such a late stage in a case which was of sufficient urgency to warrant expedition. I therefore dismissed the Residents' application at the hearing on 3rd November 2000.

The Tenant's Performance Guarantee

182. Clause 19.1 of the Business Transfer Agreement provides as follows:

" BHAL shall arrange on the completion hand over to the Council a duly executed Tenant Performance Guarantee (hereinafter called "the Guarantee") in a form and by a Guarantor approved by the Council at its absolute discretion. The terms and conditions of the Guarantee shall be as follows:-

(i) the Guarantee shall specify a Maximum Amount of Indemnity of not less than One hundred and eighty five thousand pounds.

(ii) A special endorsement shall be added to the Guarantee to ensure that any failure by BHAL to make payments to the Council under or otherwise to comply with the provisions of the ILS Agreement is included within the definition of Default under the terms of the Guarantee with the intent that the Guarantee shall guarantee performance under the ILS Agreement in like manner as it will guarantee performance under the Lease.

(iii) The obligation on the part of BHAL to provide a Guarantee to the Council shall be for a maximum period of fifteen years and the Guarantee shall be for an initial period of three years. The Guarantee shall on expiry be renewed and all renewals thereof shall be renewed for not less than one year periods up to a maximum of fifteen years from the completion date by and at the expense of BHAL.

(iv) the Council shall before the expiry of the initial and each subsequent period of the Guarantee review the Council's requirement for a Tenant Performance Guarantee and at its absolute discretion may determine whether having regard to BHAL's ability to meet its obligations to the Council for the foreseeable future the Guarantee need be renewed following the next expiry of the then current period of the Guarantee.

(v) On completion BHAL shall pay into an interest bearing Bank Account in the name of and to be administered by the Council the sum of Twenty thousand pounds (hereinafter called "the Sum"). The Sum shall be maintained in such Account until the happening of one of the following events:-

(a) the expiry of the period of fifteen years from the date of completion; or

(b) the Council deciding as a result of a review of the Council's requirement for a Guarantee that the Guarantee is no longer required; or

(c) BHAL failing to renew the Guarantee on the expiry of the period of fifteen years.

(vi) On the occurring of one or other of the events described in sub-paragraph (v)(a) or (b) hereof the Sum together with the accumulated interest thereon (subject to the deduction of any tax payable) shall be paid to BHAL.

(vii) On the occurring of the event described in sub-paragraph (v)(c) hereof the Sum together with accumulated interest thereon (subject to the deduction of any tax payable) shall be paid to the Council."

183. The initial three-year term of the guarantee which BHAL provided expired on 5 th May 1997. Contrary to the terms of clause 19.1(iv), Bromley did not review its requirement for the guarantee. BHAL did not renew the guarantee. Bromley did not appreciate this until October 1998, when Mr. Pitt wrote to ask for it. Initially BHAL confirmed that it would reinstate the guarantee. Later, it refused to do so.

184. Mr Moriarty submitted clause 19.1(iii) obliged BHAL to renew automatically on the expiry of the initial guarantee. Bromley's obligation to review was an independent obligation, the only remedy for breach of which was damages; this was not an entirely illusory remedy, since in circumstances in which it could be proved that Bromley would, had it carried out the review, not have required the guarantee, BHAL could recover damages covering the expense of renewal.

185. Mr Fetherstonhaugh admitted that on the proper construction of these provisions the obligation to renew was dependent upon Bromley having reviewed the requirement, and on it having on that review not decided to dispense with the guarantee. The provision was clearly inserted for the benefit of BHAL and the only sensible way in which effect could be given to it is by treating the review as a condition precedent to the obligation to renew the guarantee.

186. On this point, I prefer Mr. Fetherstonhaugh's submissions. It seems to me that, read literally, without any provision for notification of the result of the review, the provisions cannot be operated in a commercially sensible manner. There is clearly a mandatory obligation to review, but unless the result of the review is notified BHAL cannot know whether it is to renew or not. On Mr. Moriarty's construction, BHAL would have to renew automatically even if in fact, unknown to it, Bromley had determined that no renewal was necessary but had failed to notify it. The suggestion that damages could be a realistic remedy was implausible.

187. In my view, it was an implied term ­ and one which would pass both the business efficacy test and the officious bystander test ­ that Bromley should notify BHAL of the result of the review before the expiry of the current guarantee. Such a term is necessary to make the provision work sensibly, and, if suggested at the time the lease was entered into would readily have been agreed to by both parties because it was obviously required and imposed no great burden on anybody. I also hold that BHAL was not obliged to renew the guarantee until it was notified that Bromley had carried out the review and had not decided to dispense with the guarantee. Again, my reason is simply that it would make no sense for BHAL to incur the expense of renewing the guarantee until it was known whether it was required.

188. However, that is not the end of the matter. The question then arises whether Bromley, by reason of its failure to review and notify before the expiry of the current guarantee, has entirely lost its right to do so for ever. This raises the familiar issue as to whether time is of the essence. The leading case is of course the decision of the House of Lords in United Scientific Holdings Limited v. Burnley Borough Council and in Cheapside Land Development Co Ltd v. Messels Service Co , reported together at [1978] A.C. 904, which established that the effect of section 25(7) of the Judicature Act 1873 (re­enacted as section 41 of the Law of Property Act 1925) was to make the equitable rule that a contractual stipulation as to time is not to be treated as "of the essence" unless the contract expressly or by necessary implication so provides apply in all cases.

189. These decisions have been followed many times in cases involving (as did United Scientific ) rent review clauses: see for example the decisions of the Court of Appeal in Lewis v. Barnet [,1982] 2 E.G.L.R. 12 and Henry Smith's Charity Trustee v. Awada Trading and Promotion Services Limited [1984] 1 E.G.L.R. 116 at 120, in which the principles of construction applicable to such clauses were summarised by Slade L.J. at 120, as follows:-

"(1) Where a rent review clause confers on a landlord or tenant a right for his benefit or protection, as part of the procedure for ascertaining the new rent, and that right is expressed to be exercisable within a specified time, there is a rebuttable presumption of construction that time is not intended to be of the essence in relation to any exercise of that right.

(2) In a case where the presumption applies, the other party concerned may, if he wishes to bring matters to a head after the stipulated time for the exercise of the right has expired, give to the owner of the right a notice specifying a period within which he requires the right to be exercised if at all; the period thus specified will, if it is reasonable, then become of the essence of the contract (see the United Scientific case [1978] A.C. 904 at pp.933H-934A per Lord Diplock and Amherst v. James Walker Goldsmith & Silversmith Limited [1983] 3 W.L.R. 334 at p.344A per Oliver L.J. and p.348B per Lawton LJ).

(3) The presumption is rebuttable by sufficient "contra indications in the express words of the lease or in the inter relationship of the rent review clause itself and other clauses or in the surrounding circumstances" (see the United Scientific case at p.930 per Lord Diplock).

(4) Though the best way of rebutting the presumption is to state expressly that stipulations as to the time by which steps provided for by rent review clause are to be taken are to be treated as being of the essence (see: ibid at p.936G-H per Lord Diplock and at p.947E-F per Lord Salmon) this is not the only way. Any form of expression which clearly evinces the concept of finality attached to the end of the period or periods prescribed will suffice to rebut the presumption. The parties are quite free to contract on the basis that time is to be of the essence if they so wish (see, for example, Drebbond Ltd. v. Horsham District Council (1978) 264 EG 1013 and Lewis v. Barnett (1982) 264 EG 1079)."

190. These and other cases show that, even where the rent review provisions set out an apparently rigid timetable, typically involving notices being given before the expiry of a rent period, the courts are reluctant to hold that the landlord's or tenant's substantive rights are lost because of a mere procedural delay, unless this is expressly or by necessary implication provided in the lease. In my opinion, the same principles apply to this case. Bromley has a substantive right, not to an increase in the rent, but to continuing security. Assuming my construction to be correct, the agreement provides that the right to renew the security is to be invoked before the expiry of the existing security. But it does not provide, expressly or by necessary implication, that time is of the essence so far as the procedural provisions are concerned. The presumption that it is not of the essence remains intact. BHAL was entitled, if it wished to know where it stood, to require Bromley to state within a reasonable period whether it wished the guaranteed to be renewed or not. However, it did not do so. Bromley therefore remained free after expiry of the guarantee to notify BHAL that it did require it to be renewed. This it has done.

191. Accordingly, I hold that Bromley is entitled to require BHAL to reinstate the guarantee, and will grant a declaration accordingly.

192. I would add for completeness that I have not been asked to consider the effect of sub-clauses 19(v) and (vii). If Bromley sought to involve these provisions, it seems to me that two questions might arise. The first is whether the provision for payment of £20,000 on the failure to renew the guarantee is an unenforceable penalty. The second is whether, on the assumption that it is enforceable, Bromley is entitled to require payment and to insist of the reinstatement of the guarantee, or only to one of these at its option. It may be that Bromley has no intention of invoking these provisions and that these issues will therefore not arise.

I will hear counsel on the form of the declarations I should make, on costs and on any application for permission to appeal.

N Strauss QC

Deputy Judge Ch.D.