Bank of New York Mellon (International) Ltd v Cine-UK Ltd
| Jurisdiction | England & Wales |
| Judge | Master Dagnall |
| Judgment Date | 22 April 2021 |
| Neutral Citation | [2021] EWHC 1013 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: QB-2020-002783 And Case No. QB-2020-002792 |
| Date | 22 April 2021 |
[2021] EWHC 1013 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Master Dagnall
Case No: QB-2020-002783
And Case No. QB-2020-002786
And Case No. QB-2020-002792
(“the First Claim”)
(“the Second Claim”)
(“the Third Claim”)
Mr Guy Fetherstonhaugh QC and Ms Elizabeth Fitzgerald (instructed by Mishcon de Reya LLP) appeared for the Claimants in the First Claim, the Second Claim and the Third
Claim Ms Philomena Harrison (instructed by Maples Teesdale LLP) for the Defendant in the First
Claim Mr Tim Calland (instructed by Estate Legal Limited) for the Defendant in the Second Claim
Ms Katharine Holland QC, Ms Kimberley Ziya, and Mr Admas Habteslasie (instructed by Shoosmiths LLP) for the Defendant in the Third Claim
Hearing dates: 24 and 25 November and 17 and 18 December 2020
Introduction
The COVID-19 pandemic (“the Pandemic”) and its consequences have had a massive effect on public, private and business life in this country and elsewhere in the world. This Hearing has concerned questions as to upon whom (landlords, tenants and/or insurers) certain of the resultant financial detriments should fall, and, in particular, whether tenants of commercial premises have remained responsible to pay their rents notwithstanding that they have been subject to the enforced closure of, or inability to trade from, their premises.
There are before me applications for summary judgment made by the Claimant landlords (“the Landlords”) against the Defendant tenants (“the Tenants”) in these three Claims for rents (“the Rent(s)”) which have (in principle) fallen due under three leases (“the Lease(s)”) of commercial premises (“the Premises”) during the currency of the Pandemic and consequent statutory regulations (“the COVID Regulations”) restricting the use of and access by the public to the Premises and, at least according to the Tenants, compelling or necessitating their closure for (at least) substantial periods of time (and so that they were all closed as at the dates of the hearing, and see below).
The Landlords contend that the Rents (including value added tax (“VAT”) and interest (“Interest”)) simply continue to fall due and payable notwithstanding the existence of the Regulations and their effects. The Tenants assert that, for various differing reasons, the consequence of what has happened is that they do not have to pay all or part of the Rents.
The Landlords are Bank of New York Mellon (International) Limited (“BNY”) and AEW UK REIT Plc (“AEW”). They are associated entities being, for these purposes, entities which hold the assets of commercial property funds, essentially (although I am not concerned with the precise legal structure) on behalf of investors to whom they will owe responsibilities to seek to collect income such as the Rents. In each case they are landlords by assignment. They act by the same solicitors and counsel being Guy Fetherstonhaugh QC and with him (and who appeared on her own at previous hearings) Ms Elizabeth Fitzgerald.
The Tenants are three well-known substantial commercial entities, being:
a. Cine-UK Limited (“Cine-UK”) which is the tenant of a Lease (“the Cine-UK Lease”) dated 24 January 2002 made between (1) Sun Life Assurance Society Plc (2) Cine-UK Limited and (3) Hengrove Park Bristol (Phase 1) Management Company Limited of the land and multiplex cinema forming part of the leisure development at Hengrove Park, Hengrove, Bristol and which are (or were) a cinema (“the Bristol Cinema”). The Landlord (and also the Superior Landlord) is BNY and the Claim is QB-2020-002783. Cine-UK appears by Ms Philomena Harrison
b. Mecca Bingo Limited (“Mecca”) and which is the tenant of a Lease (“the Mecca Lease”) of Premises at Ground Floor and Part First Floor, Unit 6 and adjacent smoking area, East Thames Plaza, Dagenham dated 18 September 2017 and made between (1) Meadow Dagenham Retail Limited and (2) Mecca Bingo Limited. and which Premises are (or were) used for the playing of bingo (“the Dagenham Bingo Hall”). The Landlord is AEW and the Claim is QB-2020-002786. Mecca appears by Mr Tim Calland
c. SportsDirect.com Retail Limited (“Sports Direct”) and which is the tenant by assignment of a Lease (“the Sports Direct Lease”) of Premises known as part of the Ground Floor, the First Floor and part of the Second Floor of the Woolworth Building, Bank Hey Street, Blackpool, Lancashire dated 20 March 2008 and made between (1) Development Securities (Blackpool Developments) Limited and (2) Sports World International Limited, and which Premises are (or were) used as a retail shop (“the Blackpool Shop”). The Landlord is AEW and the Claim is QB-2020-002792. I believe that AEW is also the Superior Landlord but it is common-ground in any event that the relevant Insurance is that to which I refer below as taken out by AEW. SportsDirect appears by Ms Katharine Holland QC and with her on the first two days Ms Kimberley Ziya and on the final two days Mr Admas Habteslasie.
The Leases each contain provisions for the Rents (themselves subject to review or increase) to be paid by quarterly instalments of annual figures (with VAT) in advance on the usual quarter days; and with Interest to accrue following default. The Claims were originally for all or part of the March 2020 quarter's rent, and in some cases for the June 2020 quarter's rent, although I have given permissions which will enable Rents for other quarters to be claimed.
The Tenants assert that they have a real prospect of defending the Claims and/or there is a compelling reason(s) why the Claims should be disposed of at a trial for a number of reasons, but where different Tenants (at least in their pleaded Defences) rely on different reasons although counsel in their submissions sought (albeit only as “fall-back” secondary cases) to adopt each other's submissions. These reasons divided up into:
a. The Rent Cesser clauses in the Leases should be construed to provide that in the circumstances of the Regulations and of the Landlords having (allegedly) insured against the event of the Pandemic and/or the Regulations (“the Insurance”), the Rents ceased to be payable, at least whilst the Premises were or had to be closed
b. If the Rent Cesser clauses were not to be construed so expressly, then there should be implied into the Leases terms to such effect
c. If the Rent Cesser effect was not to be achieved by construction or implication then the Leases should, by (i) construction or (ii) implication, be read to provide that the Landlords were to be left to recovery by their Insurance and where:
i. the Insurance covered the Rents and so that the Landlords could have them paid by the Insurer and in consequence of which the Landlords can only look to the Insurer for payment and not the Tenants or
ii. if the Insurance did not so cover the Rents at all or in part then that was the fault of the Landlords and who could not recover from the Tenants what they should have been able to recover from the Insurance
d. If the Rent Cesser effect was not to be achieved by construction or implication then a similar effect flowed from (i) a suspensory frustration (that is to say a short-term frustration following which the Leases would continue as before) and/or (ii) an application of principles of supervening event in terms of illegality and/or (iii) the application of a doctrine of temporary failure of consideration
e. An application of relevant UK Government Guidance requiring landlords and tenants to consult as to rent suspension and similar measures, and the need for a full consideration of all the issues in the light of the (allegedly) unprecedented circumstances of the Pandemic and of the Regulations.
The situation in relation to Mecca Bingo is slightly different in relation to the March 2020 quarter's rent which Mecca Bingo paid but which payment it contends was made under a mistake entitling it to recover under the law of restitution and unjust enrichment. The Landlord, AEW, does not contest that that claim would have a reasonable prospect of success if, but only if, the argument that the March 2020 quarter's Rent had not fallen due itself had a reasonable prospect of success.
There is also a further specific and distinct point relating to an element of the Rent claimed against Sports Direct where AEW had originally brought proceedings in the County Court Business Centre under Claim No. G8QZ85H4 (“the County Court Claim”) for a sum of “Rent” for the March 2020 quarter and for which it obtained default judgment (“the County Court Judgment”) and which sum (“the County Court Judgment Sum”) was then paid. AEW contends that it had miscalculated the amount claimed and has included a claim for what it says is the balance (“the Balance”) in Claim QB-2020-002792 which it contends (now) is previously unclaimed VAT. Sports Direct contends that this claim for the Balance cannot be made at all, and in any event not by separate High Court proceedings where the County Court Judgment still stands, as a result of the doctrines of merger (and cause of action and issue estoppel) or abuse of process.
The Procedural History and this Hearing
This hearing came about initially as follows. BNY had also issued proceedings (“the Deltic Proceedings”) and sought summary judgment (“the Deltic Summary Judgment Application”) against Deltic Group Limited (“Deltic”) under Claim No. QB-2020-002071 in relation to two leases of Night-Clubs (in Kingston-upon-Thames and Uxbridge). Deltic issued an application for a stay of those proceedings (“the Deltic Stay Application”). On 16 September 2020 I...
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