Cineworld’s central London cinema at the iconic Trocadero Centre was “rendered unfit for use” by government lockdown legislation during the Covid-19 pandemic, which means the tenants were not liable to pay rent, Jonathan Seitler QC told the Court of Appeal today (21 June).
Seitler is representing the cinema chain’s operators in two eagerly awaited rent arrears cases that are being heard together at the Court of Appeal in a three-day hearing starting today.
The cases are London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2021] EWHC 2591 (Ch); [2021] EGLR 43 and Bank of New York Mellon (International) Ltd v Cine-UK Ltd and other appeals [2021] EWHC 1013 (QB); [2021] EGLR 26.
The Picturehouse case is being brought by the landlords of the Trocadero Centre in Piccadilly Circus, W1. It is the location of Picturehouse’s flagship cinema, Picturehouse Central. The Bank of New York Mellon case is being brought by Cine-UK, Mecca Bingo and Sports Direct, tenants of properties owned by the bank.
Seitler is representing Cineworld operators Cine-UK in one case and Picturehouse in the other.
The issue at the heart of both cases is whether government legislation during Covid, which closed non-essential shops, cinemas, theatres and other buildings on the grounds of public health, rendered those buildings unusable.
In both cases, the landlords won and were granted so-called summary judgment, although the judges said that the leases needed to be examined on a case-by-case basis.
This, said Emma Preece, a property lawyer at Charles Russell Speechlys, suggests that outright victory for the tenants would be a surprise.
“Given that this case involved an application for early judgment – where the landlord had to show that the tenants’ arguments had no real prospect of success – this would be quite a significant U-turn,” she said.
“There will inevitably be some interesting arguments about how previous arrears judgments should interact with the new rules on pandemic arrears – with potentially far-reaching consequences for landlords and tenants who have been parties to similar arrears claims.”
Opening the case this morning, Seitler quoted Cine-UK’s lease, which stated that rent may not be payable if the property is “damaged” and “not fit for occupational use”.
Government legislation closing the cinemas during the pandemic rendered the building “not fit for occupational use” he said.
“The word ‘damage’ can include financial damage,” said Seitler. “That’s the battleground.”
He added: “It should be said that the essence of our case is not ‘pandemic’ as such. The essence of our case is it being unlawful to use the premises because of legislation.
“We say a property is rendered unfit for occupation if it is illegal to use it for the sole purpose for which it can be used,” he said. “It is unfit to be used as a cinema. It is only fit to lie fallow.”
This premise will be tested over the next three days. The judges hearing the case have already asked whether the pandemic devalued the buildings in question or did any physical damage to them.
The case is scheduled to end on Thursday 23 June, with a written judgment to follow at a later date.
