Bank of New York Mellon (International) Ltd v Cine-UK Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Julian Flaux C,Lord Justice Snowden,Sir Nicholas Patten |
| Judgment Date | 27 July 2022 |
| Neutral Citation | [2022] EWCA Civ 1021 |
| Docket Number | Case Nos: CA-2021-000744 AND CA-2021-003262 |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 1021
Sir Julian Flaux CHANCELLOR OF THE HIGH COURT
Lord Justice Snowden
and
Sir Nicholas Patten
Case Nos: CA-2021-000744 AND CA-2021-003262
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MASTER DAGNALL
AND ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE LIST (ChD)
MR ROBIN VOS (SITTING AS A DEPUTY JUDGE OF THE HIGH COURT)
QB-2020-002783 AND PT-2020-000828
Royal Courts of Justice
Strand, London, WC2A 2LL
Jonathan Seitler QC and Philomena Harrison (instructed by Maples Teesdale LLP) for the Appellants in CA-2021-000744
Jonathan Seitler QC and Benjamin Faulkner (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Appellants in CA-2021-003262
Guy Fetherstonhaugh QC and Elizabeth Fitzgerald (instructed by Mishcon de Reya LLP) for the Respondents in CA-2021-000744
Nicholas Trompeter QC and Chris de Beneducci (instructed by Druces LLP) for the Respondents in CA-2021-003262
Hearing dates: 21 and 22 June 2022
Approved Judgment
Introduction
These appeals, which we heard together, raise the issue of whether the defendants, who were the tenants of the claimant landlords and who operated cinemas at the premises, are liable to pay rent for periods of time during the COVID 19 pandemic when, due to the Coronavirus Regulations, they could not lawfully operate their cinema businesses from the premises. In each case, the landlords issued proceedings for the rent and sought summary judgment. The judge at first instance in each case ordered summary judgment in favour of the landlords on the basis that the tenants had no defence to the claim for rent. The tenants now appeal against those orders.
In the first case, the landlord is Bank of New York Mellon (International) Limited and the tenant is Cine-UK Limited which operated a cinema complex at the premises which were in a shopping centre at Hengrove, Bristol. I will refer to that appeal as the Hengrove appeal and the parties as the Hengrove landlord and the Hengrove tenant respectively. In that case, Master Dagnall in the Queen's Bench Division, ordered summary judgment in favour of the Hengrove landlord in a judgment dated 22 April 2021. Permission to appeal to this Court was granted by Stewart J on 22 September 2021.
In the second case, the landlord is London Trocadero (2015) LLP, to which I will refer as the Trocadero landlord. The first defendant is the tenant of the premises at Trocadero, Piccadilly, London from which it operates a cinema complex. The second defendant is the original tenant under one of the leases and the third defendant is the guarantor of sums due under both leases. The defendants are companies in the same group (as indeed is the Hengrove tenant) and I will refer to them as the Trocadero tenants save where it is necessary to distinguish between them. In that case, to which I will refer as the Trocadero appeal, Robin Vos, sitting as a Deputy High Court Judge of the Chancery Division, ordered summary judgment in favour of the Trocadero landlord in a judgment dated 28 September 2021. On 3 November 2021, the judge granted permission to appeal to this Court.
In both appeals, the tenants resist the payment of rent for periods when operation of the cinemas was unlawful on two grounds: (1) that the Government restrictions imposed as a consequence of the pandemic caused a failure of basis, relieving them of the obligation to pay rent for those periods and (2) that it was an implied term of the lease that the tenant should be relieved of its obligation to pay rent where the tenant could not lawfully use the premises as a cinema. There are differences of detail but the substance of the argument is the same in each case. In the Hengrove appeal there is an additional argument on behalf of the tenant that it is relieved from the obligation to pay rent by the rent cesser clause.
Factual and legal background
The Hengrove lease
The Hengrove lease is for 35 years from 1 May 1999, so that it had run for nearly 21 years when the restrictions under the Coronavirus Regulations were imposed and still had 12 1/2 years to run when the restrictions came to an end.
Clause 1.8 of the lease defines the “Permitted Use” as:
“Use of the Property as and for a multiplex cinema for the exhibition therein of motion pictures television dramatic opera concert lectures or theatrical performances or entertainment…”.
Clause 4 is the Demise Clause and provides:
“The Landlord demises the Property to the Tenant TOGETHER WITH the rights specified in Part 1 of the First Schedule but EXCEPTING AND RESERVING the rights specified in Part II of the First Schedule SUBJECT TO all rights easements quasi easements privileges covenants restrictions and stipulations of whatsoever nature affecting the Property including the matters contained in or referred to in the deeds and documents listed in Part III of the First Schedule TO HOLD the Property unto the Tenant for the Term YIELDING AND PAYING unto the Landlord during the Term:
4.1 yearly and proportionately for any fraction of a year the Basic Rent and from and including each Review Date such yearly rent as shall become payable under and in accordance with the Second Schedule such Basic Rent to be paid by equal quarterly payments in advance on the four usual quarter days in every year…
4.2 UPON DEMAND by way of further rent:
4.2.1 the Insurance Rent [defined in Clause 2.9 as the sum which is equal to the aggregate of the gross insurance premiums chargeable to the Landlord, the costs of valuations and inspections for insurance purposes and any excess which is normal from time to time in the market.]
Clause 5 sets out the Tenant's Covenants. Clause 5.1 is headed “Rents” and provides:
“[THE TENANT COVENANTS WITH THE LANDLORD as follows:] To pay the Reserved Rents [i.e. the sums due under Clause 4] at the times and in the manner aforesaid without any deduction (except for any tax required by statute to be deducted) and not to exercise or seek to exercise any right or claim to withhold payment or any right or claim to legal or equitable set-off.”
Clause 5.17.1.4 is a covenant not to use the whole or part of the Property:
“otherwise than for the Permitted Use or the Permitted Sublet Use described in paragraph (a) of that definition during the first five years of the Term in accordance with the requirements and conditions of any planning permission authorising such use from time to time save that following the expiration of the first five years of the Term the Tenant subject to the other constraints as to the use of the Property in this clause 5.17 and as contained in the Superior Lease shall be entitled to change the use of the Property to any leisure use not being the then current primary permitted use or the Permitted Sublet Use of any other premises on the Estate or to any other use with the prior written consent of the Landlord not to be unreasonably withheld or delayed.”
Clause 7 is headed “Insurance” and under it the landlord and the tenant covenant with each other. Clause 7.1 is headed “Landlord to insure” and provides:
“the Landlord shall insure and keep insured with a reputable insurer or underwriters with the interest of the Tenant noted thereon and subject to such exclusions excesses and limitations as may be imposed by the insurers and which are normal in the marketplace:
7.1.1. the Property against loss or damage by the Insured Risks in the Reinstatement Cost
7.1.2. the loss of Basic Rent and Service Charge from time to time payable or reasonably estimated to be payable under this Lease…”
“Insured Risks” is defined in clause 2.10. I have underlined the words to which Mr Jonathan Seitler QC on behalf of the Hengrove tenant drew particular attention:
“Means the risk of fire lightning explosion aircraft (save for damage caused by hostile aircraft following the outbreak of war) and other aerial devices or articles dropped therefrom riot civil commotion strikes and labour disturbances or malicious persons storm or tempest flood bursting or overflowing of water tanks apparatus or pipes earthquake impact collapse resulting from subsidence ground heave or landslip and accidental damage to Conduits weather under or above ground fixed or plate glass and three years' loss of Basic Rent payable to the Landlord in the event that the whole or part of the property becomes unusable due to the occurrence of the matters listed in this definition other than the loss of Basic Rent and such other insurable risks as may be reasonably required from time to time during the term by the Superior Landlord under the Superior Lease and notified to the Tenant but may from time to time exclude at the discretion of the Tenant any risk in respect of which cover is not available in the normal market in the United Kingdom on reasonable commercial terms in relation to the risks to be insured and subject to such exclusions terms and conditions as the insurers may reasonably require and are usual in the marketplace from time to time.”
Clause 7.4 is headed “Cesser of Rent” and provides:
“In case the Property or any part thereof or access thereto or any other part of the Estate shall at any time during the Term be destroyed or damaged by any of the Insured Risks so as to render the Property unfit for occupation or use and the insurance shall not have been vitiated or payment of the policy monies refused in whole or in part as a result of some act or default of the Tenant...
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