E.on Uk Plc v Gilesports Ltd
| Jurisdiction | England & Wales |
| Judge | THE HON MR JUSTICE ARNOLD,MR JUSTICE ARNOLD |
| Judgment Date | 31 July 2012 |
| Neutral Citation | [2012] EWHC 2172 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC11C00275 |
| Date | 31 July 2012 |
[2012] EWHC 2172 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Rolls Building
Fetter Lane, London, EC4A 1NL
The Hon Mr Justice Arnold
Case No: HC11C00275
Jonathan Seitler QC (instructed by Wragge & Co LLP) for the Claimant
Charles Harpum (instructed by Cobbetts LLP) for the Defendant
Hearing dates: 18–20 July 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
In these proceedings the Claimant ("E.ON") seeks a declaration that the Defendant ("Gilesports") remains the tenant of the property known as Unit 17, Abbeygate, 132 Abbey Street, Nuneaton ("the Property") under a lease dated 28 October 2008 ("the Sublease") and arrears of rent, alternatively damages. E.ON is the leasehold owner of the property under a lease dated 12 December 1991 ("the Headlease"). At the times relevant to this claim, the owner of the leasehold interest was a company then called East Midlands Electricity plc and later Central Networks East plc ("Central Networks"). E.ON was substituted as Claimant following an assignment by Central Networks to E.ON of the leasehold interest and its cause of action.
Relevant terms of the Headlease
The Headlease and its Schedules runs to 42 pages. Clause 2.3 provides for the Tenant to pay the Rent, the Insurance Rent and Service Rent (all as defined in clause 1.1). The Headlease includes the following tenant's covenants:
"3. TENANT'S COVENANTS
THE TENANT COVENANTS with the Landlord as follows – that is to say:—
…
3. 12 User
3. 12.1 Not to use the Demised Premises otherwise than as a shop for the retail sale of electrical products and ancillary thereto the servicing of customer accounts or any other use within Class A1 of the Town and Country Planning (Use classes) Order 1987 with the prior consent of the Landlord but:—
3. 12.1.1 the Demised Premises shall not in any case be used for the sale of hot or cold food or beverages nor in connection with the business of a sex shop betting shop nor for the playing of amusement machines;
3. 12.1.2 subject to the foregoing the Landlord's consent shall not be unreasonably withheld or delayed
3. 14 Alienation
3. 14.1 Not to assign or charge part only of the Demised Premises nor to underlet the whole or part of the Demised Premises in consideration of a fine or premium
3. 14.2 Not otherwise than as may be permitted under clause 3.14.9 to share possession or occupation of the whole or any part of the Demised Premises
3. 14.3 Not otherwise than by assignment or underletting permitted under the following provisions of this Clause 3.14 nor otherwise than as provided in clause 3.14.9 to:—
3. 14.3.1 part with or share possession or occupation of the whole or any part of the Demised Premises;
3. 14.3.2 grant to third parties any rights over the Demised Premises
3. 14.4 Not to assign or charge the whole of the Demised Premises without the previous written consent of the Landlord which shall not unreasonably be withheld
3. 14.5 Upon any assignment to obtain (if the Landlord shall reasonably so require) a guarantor reasonably acceptable to the Landlord for any assignee and to obtain a direct covenant by the assignee with the Landlord to observe and perform the covenants and conditions on the part of the Tenant contained in this Lease and a direct covenant by any such guarantor in the terms set out in Schedule 5
3. 14.6 Not to underlet the whole or any part of the Demised Premises without the previous written consent of the Landlord which shall not be unreasonably withheld
3. 14.7 Upon the grant of any underlease to obtain covenants on the part of the underlessee that the underlessee will:—
3. 14.7.1 not assign underlet or charge part only of the premises comprised in the underlease nor underlet the whole of the premises comprised in the underlease
3. 14.7.2 not part with or share possession or occupation of the whole or any part of the premises comprised in the underlease nor grant to third parties rights over them otherwise than by an assignment permitted hereunder or in accordance with clause 3.14.9 (but substituting 'underlessee' for 'Tenant')
3. 14.7.3 not assign or charge the whole of the premises comprised in the underlease without obtaining the written consent of the Landlord under this Lease
3. 14.7.4 provide for the inclusion in any sub-underleases granted out of such underlease (whether immediate or mediate) covenants to the same effect as those contained in this clause 3.14
3. 14.8 Upon the grant of any underlease:—
…
3. 14.8.3 to include such covenants on the part of the underlessee as shall secure the due performance and observance of the covenants on the part of the Lessee herein contained
3. 14.8.4 to obtain (if the Landlord shall reasonably so require) a guarantor reasonably acceptable to the Landlord for any underlessee the guarantee to be in the form set out in Schedule 5 (mutatis mutandis) or such other form as the Landlord shall approve such approval not to be unreasonably withheld
3. 14.9 Not to part with possession or occupation or share possession or occupation of the Demised Premises otherwise than to or with a member of a group of companies of which the Tenant is itself a member of having no interest in the Demised Premises other than a licence at will (which shall forthwith be determined if the Tenant and the relevant member shall cease for any reason whatsoever to be members of the same group of companies) …
…
3. 15 Registration of assignments etc
Within one month after the execution of any assignment charge transfer or upon any transmission by reason of a death or otherwise affecting the Demised Premises to produce to the solicitors for the time being of the Landlord the deed instrument or other document (and in each case a certified copy thereof for retention by the Landlord) evidencing or effecting such transmission and on each occasion to pay to such solicitors a reasonable registration fee (being not less than TWENTY POUNDS (£20))".
Relevant terms of the Sublease
The Sublease runs to just seven pages. Clause 1.1.5 defines the Headlease in the same manner as I have. The other relevant terms are as follows:
" 2.3 Subjections:
The Demise is made subject to and with the benefit of all the rights easements exceptions reservations covenants and other matters contained mentioned or referred to in the Headlease as if the same were repeated herein in full mutatis mutandis save where the same are amended by the provisions hereof
…
4. TENANT'S COVENANTS
The Tenant covenants with the Landlord in the terms set out in this Clause:
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4.2 Alienation:
Not to assign underlet or charge part only of the Demised Premises nor underlet the whole of the Demised Premises.
…
4.4 To Observe and Perform Covenants in Headlease
At all times during the term to observe and perform the covenants and conditions contained in the Headlease on the part of the tenant thereof to be observed and performed with the exception of the covenant to pay rent (but including the obligation to pay insurance rent and service charge rent) and so far as the same are not inconsistent with the terms hereof as if the same had been herein repeated and set out in full mutatis mutandis and to indemnify the Landlord and by way of separate indemnity the Head Landlord against all costs claims damages and demand whatsoever and howsoever arising as a result of any breach non-performance and non-observance of such covenants and conditions as aforesaid
…
5. LANDLORD'S COVENANTS
The Landlord covenants with the Tenant in the terms set out in this Clause:
…
5.4 To Obtain Consents
At the reasonable cost of the Tenant to take all reasonable steps to obtain the consent and/or approval of the Head Landlord whenever the Tenant makes an application for any such consent and/or approval required hereunder where the consent of both the Landlord and the Head Landlord is required by virtue of this Lease and the Headlease
…
6.6 Notices:
This Lease shall incorporate the provisions as to notices contained in Section 196 of the Law of Property Act 1925 as amended by the Recorded Delivery Service Act 1962."
Factual background
Abbeygate is a shopping centre in Nuneaton. As can be seen from clause 3.12.1 of the Headlease, at the time of the Headlease, the Property was to be used as a shop for the retail sale of electrical products. Gilesports is, and has at all material times been, a subsidiary of Sports Direct International plc ("Sports Direct"). It used the Property as a shop selling sports clothing and equipment.
In March 2006 Sports Direct acquired Original Shoe Company Ltd ("OSC"). It appears that in late October 2006 OSC moved into occupation of the Premises. E.ON's case is that this was permissible by virtue of clause 3.14.9 of the Headlease as incorporated into the Sublease by clause 4.4. It is not clear to me on what basis Gilesports contends that it was permissible.
On 17 December 2007 Sports Direct contracted to sell OSC to JJB Sports plc ("JJB") for £5 million, the sale to be completed on 28 January 2008. This entailed a transfer of eight leases to OSC, including the Property, since occupation would no longer be permissible under group sharing arrangements such as clause 3.1.4.9/clause 4.4. Sports Direct instructed Cobbetts as its solicitors to deal with this, while JJB instructed Halliwells.
On 11 January 2008 Cobbetts sent Sports Direct an email requesting the name and address of the landlord and/or managing agent of the Property, together with any contact details so that they could make an application for a licence to assign. Sports Direct replied on the same day to say that the landlord was The Royal London...
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