Burgerking Limited V. Castlebrook Holdings Limited
| Jurisdiction | Scotland |
| Judge | Lord Tyre |
| Neutral Citation | [2014] CSOH 36 |
| Court | Court of Session |
| Docket Number | CA97/13 |
| Published date | 25 February 2014 |
| Date | 25 February 2014 |
| Year | 2014 |
| OUTER HOUSE, COURT OF SESSION | |
| [2014] CSOH 36 | |
| CA97/13 | OPINION OF LORD TYRE in the cause BURGERKING LTD Pursuer; against CASTLEBROOK HOLDINGS LTD Defender: ________________ |
Pursuer: McColl; Davidson Chalmers.
Defender: D. Thomson; Burness Paul LLP
25 February 2014
Introduction
[1] The parties to this action are, respectively, the tenant and the landlord of premises at Queens Drive Leisure Park, Kilmarnock, consisting of a fast food restaurant and surrounding land including car parking spaces. The pursuer wishes to sub-let the whole of the premises to a company named Caspian Food Retailers Limited ("Caspian") and, in terms of its lease, requires the consent of the defender. The defender has refused to grant consent. The pursuer seeks (1) declarator that the defender has unreasonably withheld consent and (2) decree ordaining the defender to issue written consent to a sub-lease by the pursuer in favour of Caspian. The matter came before me for debate of both parties' preliminary pleas to relevancy.
The lease
[2] The lease with which these proceedings are concerned was granted to the pursuer by the defender's predecessors in title, Dawn Developments Limited, in 1998. The relevant clause is paragraph 16 of Part 4 (Tenant's Obligations) of a schedule annexed to the lease. Under the heading "Alienation", the tenant's obligations are stated, with economy of punctuation, inter alia as follows:
"16.1 Not to assign charge (by way of a fixed charge) sub-let or in any way for any purpose deal with the Tenant's interest in this Lease in whole or in part or share or part with possession of the Premises in whole or in part except as herein permitted.
16.2 Notwithstanding the foregoing generality, not to assign this Lease without the prior written consent of the Landlord which consent shall not be unreasonably withheld or a decision thereon unreasonably delayed in the case of an assignation of the whole to a party demonstrably capable of implementing the obligations hereunder of the Tenant.
16.3 Notwithstanding the foregoing generality, not to sub-let the whole of the Premises without the prior written consent of the landlord whose consent shall not be unreasonably withheld or a decision thereon unreasonably delayed to a sub-tenant who is respectable and responsible..."
The pursuer's application for consent
[3] On 9 August 2012, English solicitors acting on behalf of the pursuer wrote to the defender formally requesting consent to the sub-letting of the premises to Caspian, a company incorporated in England with a registered office in Surrey. Enclosed with the letter was a note prepared by the proposed sub-tenant. As this note contains most of the information that was available to the defender when it took its decision to refuse consent, I shall set it out in full:
"CFRL [i.e. Caspian] is owned by Mr Taji Zadeh and has acquired the operations of 26 restaurants from Burger King in Scotland. CFRL has been granted the exclusive right for future store openings in Scotland, and it is their intention to open a further 50 Burger King restaurants throughout the UK in the next five years. The estimated turnover for the business being run by CFRL is £25,000,000.
Mr Taji Zadeh has since 1993 through another company he owns, owned and operated Burger King Restaurants. By 2004, through new store openings and acquisitions, he had 12 stores operating around the M25 including stores at the large shopping centres at Thurrock, Brent Cross and Woking.
In December 2004 his company acquired Gowrings Plc. Gowrings owned and operated 41 Burger King restaurants in the South, South West and the Midlands including 16 Drive Thrus. Gowrings was the oldest UK Burger King franchisee, having started the business in 1985. Prior to the acquisition of the Scottish stores, his company was operating 54 restaurants with a combined turnover of £44 million for the 2011 financial year.
Mr Zadeh's company appeared in the Sunday Times Fast Track 100 listing in 2008, and in 2010 Mr Zadeh was presented with the Brand Leadership award by Burger King in recognition of his outstanding contribution to the support and development of the Burger King brand in the UK.
We attach details of the Landlords for the existing 54 restaurants and Mr Zadeh has stated 'we have an excellent relationship with our Landlords, with dealings going back in some cases in excess of 20 years.'"
[4] On 14 August 2012, the defender's Scottish agents replied by email seeking further information to enable their clients "to consider the matter properly". The information sought included Caspian's last three years' audited accounts and references from at least two landlords of that company. On 20 August, the pursuer's English agents replied, advising that they did not have accounts for Caspian as it was a new company, formed in February 2011, which had been dormant until becoming involved with the pursuer in relation to purchasing the latter's Scottish business. For the same reasons no references from landlords were available. On 28 August, the defender's agents responded that as Caspian had no track record, they had no idea whether the company was "respectable and responsible" (as required by sub‑paragraph 16.3 above) and noted that no evidence to that effect had been produced. The email continued:
"However, my clients will consider further applications either for [Caspian] with a guarantee by either Mr Zadeh or the main company in the group or consider an application to sub-let to either of these parties.
If another company or Mr Zadeh wishes to be involved in the transaction my clients will need to be satisfied that they too are respectable and responsible and further financial information will be sought at that point."
[5] Further email correspondence ensued, in the course of which the pursuer's English and subsequently Scottish agents attempted unsuccessfully to persuade the defender, through its agents, that Caspian's corporate background, taken together with the fact that the defender would retain the benefit of the pursuer's covenant as tenant, was such that there were no reasonable grounds on which to refuse consent to sub-letting. In one of those emails, dated 28 November 2012, the pursuer's agents asserted inter alia that Caspian were currently operating under subleases by it at various premises, namely "Overgate, St Enoch, Gyle, Braehead as well as all the others". The defender's final position was stated in an email from its agents dated 29 November 2012 as follows:
"Not only must the sub-tenant be respectable and responsible, but the obligation to be satisfied when a landlord must not unreasonably withhold consent is that it must be shown that the proposed sub-tenant can perform the obligations under the lease.
You have provided no evidence that this particular person (Caspian Food Retailers Limited) can carry out the non-monetary obligations under the lease. Nor have you provided any evidence that they are respectable and responsible.
On the other hand, all you are saying is that there is nothing to say that they are not respectable and responsible, which is quite a different thing.."
The remainder of this email emphasised the distinction, in the defender's perception, between the track record (which the defender acknowledged was "superb") of Mr Zadeh and his other companies on the one hand and the absence of any track record of Caspian itself on the other. It was reiterated that if the head company in the group were to provide a guarantee or to take the lease itself, then the defender would grant consent. The pursuer declined to procure any such guarantee and instead raised...
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