Moss Bros Plc (Plaintiff) v Csc Properties Ltd

APPEARANCES:

Introduction

This is a claim brought by the Plaintiff, Moss Bros Group plc, for a declaration that its landlord, the Defendant, CSC Properties Limited, has unreasonably withheld consent to a proposed change of use and assignment of its lease ("the lease") of Unit 41A ("Unit 41A") in the Metro Centre, Gateshead.

The Metro Centre is the largest and oldest covered retail shopping centre out of town in England. It has a gross internal area of around 2.25 million square feet and a gross aggregate lettable area of about 1.57 million square feet. It comprises some 330 shops and stores over two floors. The ground floor has malls which are set out very roughly in an 'H' formation: one side of the H is a mall called Cameron Walk, with Marks and Spencer at one end, and a vacant store, formerly occupied by Asda until about 1997 or 1998, at the other end; the other side of the H consists of a mall, one half of which is called Garden Walk and the other Russell Way; joining these two sides of the H is a mall called The Parade.

Unit 41A, is on Cameron Walk, with three units separating it from Marks and Spencer and two units separating it from British Home Stores. On the other side of British Home Stores there are three units and then WH Smith. Opposite WH Smith, and therefore on the other side of Cameron Walk, is Boots. Also on the other side of Cameron Walk, five units the other side of Boots is a House of Fraser Department Store: this is opposite where The Parade goes off at Cameron Walk.

Because the Metro Centre is very large, for the benefit of shoppers, the malls are coloured and divided into four areas. On the ground floor the green area consists mostly of Cameron Walk from the House of Fraser to Marks and Spencer, and I shall call it "the Green Mall". The red area �which I shall call "the Red Mall" �is mostly the other part of Cameron Walk, i.e. from but not including House of Fraser to the former Asda store. The yellow area is mostly Garden Walk and the blue area is mostly Russell Way. I use the word "mostly", because The Parade is divided between the four colour-coded areas. Unit 41A is thus in the Green Mall.

The Metro Centre was developed in three phases during the 1980s and is owned by the Church Commissioners, who granted a long leasehold interest in the Centre to the Defendant in or about October 1995, retaining effectively a 10 per cent interest in the form of a profit share under the terms of the lease. The Defendant thus inherited the distribution of tenants installed by its predecessors.

Until 1997, Units 41A and 41B consisted of a single unit occupied by a shoe shop, C and J Clark trading as Roland Cartier, who wished to vacate, and the Defendant took a surrender back of their lease. Following marketing of the unit as potentially a single unit or two smaller units, the Defendant opted for the latter and eventually let Unit 41A to the Plaintiff and Unit 41B to USC. The Plaintiff (who trades in Unit 41A under the style of Cecil Gee) and USC, are both men's fashion retailers, albeit of different styles.

Unit 41A consists of just under 2,000 square feet of gross internal area. The lease expires on 28th September 2012, and it reserves a substantial rent subject to increase every five years.Clause 3.16.1 imposes a covenant on the Plaintiff not to use Unit 41A or any part thereof otherwise for a "permitted trade" as specified in the Fifth Schedule, or for the sale of such articles as the landlord shall have approved in writing such approval not to be unreasonably withheld "if in the reasonable opinion of the landlord the grant of such approval will be consistent with the principles of good estate management, having regard in principle to the distribution of retail trade within the Metro Centre".

Paragraph 8 of the Fifth Schedule describes "a permitted trade" as "A retail shop with ancillary accommodation for the sale, display and/or hire of all or any �all or any of clothing, shoes, fashion accessories and associated items and repair and/or attraction of clothing purchased or hired at the premises". As Miss Hazel Williamson QC who appears with Miss Carolyn Walter on behalf of the Defendant says, the word "attraction" must be a misprint for "alteration".

Clause 3.23.3.1 of the lease is a covenant by the Plaintiff not to assign the whole of Unit 41A without the prior written consent of the landlord, such consent not to be unreasonably withheld or delayed, subject to the agreements contained in Clause 3.23.3.2 and 3.23.3.4.Clause 3.23.3.2 provides:

"It is agreed that the landlord shall not be regarded as unreasonably withholding its consent to any proposed assignment of the whole of the demised premises if it withholds it on the ground �and it is the case �that any one or more of the below-mentioned circumstances exists, whether or not such withholding of consent is solely on such ground, or on that ground together with other grounds:

1. The effect of the assignment upon the value of the landlord's reversionary interest in the demised premises will be to diminish such value, provided always that this grant shall not apply for so long as the lease is vested in Moss Bros Group plc, or

2. The use to which the proposed assignee intends to put the demised premises and/or the proposed use of the proposed assignee is unsuitable for the demised premises, and/or the development, whether on estate management grounds or otherwise".

Finally I should refer to Clause 3.23.3.3 of the lease,

which provides that:

"Clause 3.23.3.2 shall operate without prejudice to the right of the landlord to the (inaudible) consent on any other ground or grounds where such a withholding of consent would be reasonable".

The lease is a new lease for the purpose of the Landlord and Tenant Covenants Act 1995. Accordingly the provisions of Section 19(1A) to (1E) of the Landlord and Tenant Act 1927 apply to it, and the landlord is permitted to specify circumstances in which a withholding of consent is reasonable, subject to the limitations contained in those subsections.

Following the grant of the lease, the Plaintiff fitted out Unit 41A and started to trade. Not very long thereafter, apparently because trading was not proceeding satisfactorily, the Plaintiff decided to assign the lease. Having entered into negotiations and agreement in principle with Game Stores Limited ("Game") the Plaintiff contracted to assign the lease to Game, subject to landlord's consent, for a premium of �300,000, and on terms that, if the question of landlord's consent had not been decided by the 25th of March 1999, the contract could be determined.

By a letter dated 11th June 1998 from its solicitors, the Plaintiff sought from the Defendant its consent for the assignment of the lease to Game and to a change in the permitted use of the unit, so that the user covenant was to be read as authorising Unit 41A to be used as

"A retail shop for the sale and display of games, computer software, computer hardware, computer peripherals, console software, console hardware, hand-held consoles, multimedia-related products, visual entertainment items, computer and console-related products and magazines, videos and compact disks, cassettes and ancillary thereto, the retail sale of models, hobby equipment and other related items including books, magazines and equipment".

On 24th June 1998, the Defendant's solicitors wrote refusing consent to the change of use, "in accordance with the principles of good estate management pursuant to Clause 3.16 of the lease". By a letter of 2nd July 1998 those solicitors refused the proposed assignment on the grounds that "The use to which the proposed assignee intended to put the demised premises and/or the proposed use of the proposed assignee is unsuitable for the demised premises and/or the development �" �by which was meant the Metro Centre �"� on grounds of estate management and/or on the grounds that it is inconsistent with our client's tenant mix policy in this area of the Centre". Following those two refusals, the Plaintiff commenced these proceedings on 14th August 1998.

In Paragraph 9 of its defence, the Defendant makes it clear that it "does not object to Game as a tenant per se" and indeed that it would not object to Game "� as a tenant in the Metro Centre elsewhere in an appropriate location". The essence of its grounds for refusal is accurately summarised in the skeleton argument of Mr. Derek Wood QC and Mr. Anthony Tanney, who appear on behalf of the Plaintiff:

1. The Defendant has a general policy of good estate management, to have regard to the distribution of different retail trades within different locations within the Centre.

2. The policy includes creating the optimum level of prime retail locations with the best tenant mix.

3. One of the prime locations is the Green Mall between Marks and Spencer and House of Fraser.

4. The implementation of this policy in relation to the Green Mall requires the use of other units in the Green Mall to be restricted to "retail fashion" or to be "dominated by fashion retailers".

5. This policy was framed by the Defendant when it acquired the Centre in late 1995, and has been substantially implemented by the Defendant since that date.

4. Pursuant to a reply to Further and Better Particulars,...