Hush Brasseries Ltd v Rlukref Nominees (UK) One Ltd
| Jurisdiction | England & Wales |
| Judge | Klein |
| Judgment Date | 01 December 2022 |
| Neutral Citation | [2022] EWHC 3018 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No: PT-2021-000985 |
[2022] EWHC 3018 (Ch)
HH JUDGE Klein SITTING AS A HIGH COURT JUDGE
Claim No: PT-2021-000985
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE LIST (ChD)
Royal Courts of Justice, Rolls Building,
Fetter Lane, London, EC4A 1NL
Mark Sefton KC (instructed by Mishcon de Reya LLP) for the Claimant
Katharine Holland KC (instructed by DAC Beachcroft LLP) for the Defendants
Hearing date: 16 November 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HH JUDGE Klein
This is the judgment following the final hearing of a Part 8 claim in which the principal issue between the parties is a narrow one; namely, whether a clause in an option agreement which permits a grantor (or its successor-in-title) to terminate the option on the grantee's default of its obligations in a related lease is a forfeiture provision in respect of which the court can grant relief from forfeiture.
The parties prepared a statement of agreed facts, which also records that there are no facts in dispute between them. By way of introduction, I now set out that agreed statement, virtually verbatim, with a handful of interpolations.
The Claimant is the tenant under a lease (“the Lease”), dated 1 October 1999, of premises at 8 Lancashire Court, Mayfair, London, W1 (“the Premises”).
The Lease is registered at HM Land Registry under title number NGL852023.
The Lease was made originally between the Co-operative Insurance Society Ltd as landlord and the Claimant (then known as Steamroller plc) as tenant. It was granted for a term of 25 years, commencing on 27 July 1999 and expiring on 26 July 2024.
The Claimant runs a restaurant and hospitality business from the Premises.
On 24 March 2011, the Co-operative Insurance Society Ltd granted the Claimant an option (“the Option”).
The Option was registered, at HM Land Registry, as a unilateral notice against the freehold title number NGL748122.
The Option was a call option, by which the Claimant was granted the right to call for its landlord to grant it a new lease, on materially the same terms as the Lease, of the Premises. (The Option also contained an equivalent landlord's put option).
The terms of the Option were that it was exercisable by notice given during the last year of the term of the Lease (so between 27 July 2023 and 26 July 2024) and, if exercised, the Claimant was to be granted a new lease for a further term running from 27 July 2024 to 31 December 2030.
Clause 14.1 of the Option (“the Operative Provision”) provided that:
“The Landlord may determine this agreement by written notice to the Tenant if:
(a) the Tenant is in breach of any of the provisions of this agreement…
(b) any of the events set out in clause 5.1 of the Lease [(that is, the Lease executed in 1999)] occurs.”
Clause 11 of the Option had provided that:
“The Tenant shall not assign or charge or part with or otherwise deal with its interest under this agreement provided that the Tenant may with the prior written consent of the Landlord (such consent not to be unreasonably withheld or delayed) assign its interest in this agreement provided that the Landlord may withhold consent where:
(a) any of the circumstances specified in clauses 3.15(a) and 5.3(a) (sic) of the Lease exists;
(b) the Tenant is not also simultaneously assigning the residue of the term of the Previous Lease to the same assignee,
and provided further that such consent will be deemed to have been granted if consent is given by the Landlord to an assignment of the residue of the term of the Previous Lease to the identical assignee.”
Clause 5.1 of the Lease is a forfeiture clause. It entitles the landlord to forfeit the Lease on the occurrence of a number of events. One of those events (see clause 5.1.2(a)) is that any rent reserved under the Lease remains unpaid for 21 days after becoming due and payable. Another such event is that the tenant has failed to comply with an obligation under the Lease (see clause 5.1.2(b)). Clause 5.1 provides:
“5.1.1 If any event specified in sub-clause 5.1.2 occurs the landlord may at any time afterwards re-enter the…Premises, or any part of them in the name of the whole, and this Lease will then immediately determine…
5.1.2 The events referred to in sub-clause 5.1.1 are as follows:
(a) any rent reserved remains unpaid for twenty-one days after becoming due and payable, and in the case of the rent first reserved this means whether formally demanded or not;
(b) the Tenant fails to comply with any obligation which it has undertaken or any condition to which it is bound under this Lease…”
On 9 October 2017, the Defendants acquired the freehold of the Premises.
The Defendants acquired the freehold subject to the Lease and subject to the Option. The Defendants thereupon became the Claimant's immediate landlord.
In the course of 2020 and 2021, during (and apparently because of) the COVID-19 pandemic, the Claimant fell into arrears of rent under the Lease.
On 16 July 2021, the Defendants served notice (“the Notice”) on the Claimant to terminate the Option under clause 14.1(b) (that is, under sub-paragraph (b) of the Operative Provision), on the grounds that there was rent reserved under the Lease that was unpaid for more than 21 days, and that the Claimant had failed to comply with the obligation under the Lease to pay rent. The Notice provided as follows:
“The events set out in clause 5.1 [of the Lease] include the following:
“5.1.2…
(a) any rent reserved remains unpaid for twenty-one days after becoming due and payable, and in the case of the rent reserved this means whether formally demanded or not;
(b) the Tenant fails to comply with any obligation which it has undertaken or any condition to which it is bound under this Lease.”
As at today's date, significant arrears of rent reserved remain unpaid under the Lease in the total sum of £426,443.56, set out for illustrative purposes only in the attached Schedule of Arrears. These sums have remained unpaid for over 21 days.
Accordingly, being that rents reserved remain unpaid for substantially more than twenty-one days after becoming due. and being that you have failed to comply with your obligations under the Lease in respect of those rents, we hereby give you notice for and on behalf of our client to determine the Option Agreement pursuant to clause 14.1 thereof.
Pursuant to clause 14.3 of the Option Agreement you must now apply to the Land Registry for removal of all notices relating to the Option Agreement from our client's registered title and we look forward to receiving official copies of the duly amended title from you in due course.”
It is agreed that, as at the date the Defendants served the Notice, the Claimant was in arrears of rent under the Lease, and that therefore the Notice was effective to terminate the Option. When terminating the Option, the Defendants did not also seek to forfeit the Lease.
On 12 August 2021, after a period of negotiations, the Claimant and the Defendants entered into a settlement in relation to certain of the rent arrears then outstanding under the Lease (being rents due for the September 2020 and December 2020 quarters), by which a proportion of those rent arrears was waived and the Claimant agreed to pay various sums on various dates (“the Rent Concession Agreement”). The Claimant has now discharged those arrears in accordance with the terms of the Rent Concession Agreement. The Claimant's arrears in respect of March 2021 quarter were not compromised by the Rent Concession Agreement but were paid separately on or about the time of its completion.
Accordingly: (i) the Claimant has discharged the September 2020 and December 2020 rent arrears which the Rent Concession Agreement covered; and (ii) by about 12 August 2021, the Claimant had paid the Defendants the additional arrears then outstanding under the Lease as set out on the Schedule to the Rent Concession Agreement.
Following the Defendants' service of the Notice, the parties' solicitors corresponded. By the correspondence, the parties' solicitors took the positions which, broadly, the parties now take. Because the parties remained in dispute, the Claimant began the claim on 16 November 2021, by which it seeks relief from forfeiture of the Option, either unconditionally (because all the rent arrears in issue were paid as contemplated in the Rent Concession Agreement), or conditionally.
During the course of the claim, the Defendants have publicly consulted about a redevelopment scheme, to be completed by July 2025, which will involve the demolition and rebuilding of the Premises.
At the final hearing, the Claimant was represented by Mark Sefton KC and the Defendants were represented by Katharine Holland KC. I am grateful to both counsel for their clear, focused and insightful submissions. Before reaching my decision, I considered all of the documents and other evidence to which I was referred (but I have attached no weight to the Defendants' redevelopment proposals, because they are not referred to in the parties' witness statements or in the statement of agreed facts) and all of counsels' submissions, both written and oral. In this judgment, I set out the reasons for my decision.
Counsel agreed that, for the court to have jurisdiction, in this case, to grant relief from forfeiture, the Claimant must establish that at least two pre-conditions have been satisfied; namely, that:
i) by the Option, it obtained a, or, as the Defendants contend, a sufficient, proprietary interest in the Premises. I will...
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