Tesco is facing a damages inquiry for “arrogant” breaches of its lease of a Milton Keynes warehouse.
The High Court has held Tesco liable for subletting the warehouse in breach of a covenant that it would first obtain its landlord’s consent and in “arrogant disregard” of its insurance and repairing covenants.
The supermarket giant has been ordered to take back the lease, and may be forced to pay up to £120,000 in damages to landlord Crestford Ltd following the inquiry.
At the High Court, Lightman J said that Tesco had taken a “calculated gamble” that Crestford would be unable to obtain remedy for the breaches. “That gamble rightly has not paid off,” he said.
Tesco assigned the remainder of its 25-year lease of the 105,000 sq ft (9,750m2) warehouse and office, situated in the 4.5-acre Gloystarne Unit in Denbigh Road, Bletchley, Milton Keynes, to magazine distributor Magspeed in June.
At the time, Crestford opposed the underlease on the basis that Tesco had failed to carry out necessary repairs and to take out an insurance policy in the joint names of itself and the landlord.
Lightman J said that although “the conduct of Tesco in continuing in flagrant breach of its insurance covenant was deplorable”, this would not have been a sufficient reason for Crestford to refuse consent to the underlease.
However, he said that Crestford could “reasonably object to the grant of the underlease unless and until the matter of outstanding repairs was resolved”.
“It is scarcely a passport to favour that Tesco arrogantly persists in its deliberate breaches of covenant to this day: the required policy of insurance has not been taken in joint names and repairs have yet to be carried out,” he said.
In ordering the damages inquiry, he said: “Neither Tesco nor Magspeed should obtain any advantage from their wrongdoing, and the landlord should not be disadvantaged by it.”
According to Crestford, the premises have fallen into “serious disrepair”. It claims that Tesco is required to fix the first floor and main office ceilings, which have suffered damage by water ingress, to replace missing and collapsed brick cladding and to repair heating boilers.
Tesco was unavailable for comment.
Crestford Ltd and others v Tesco Stores Ltd and another Chancery Division (Lightman J) 25 May 2005.
Alan Johns (instructed by Pinsent Masons) appeared for the claimants/Part 20 defendants; Stephen Jourdan (instructed by Dewar Hogan) appeared for the first defendant/Part 20 claimant; Elizabeth Fitzgerald (instructed by Pickworths, of St Albans) appeared for the second defendant, Magspeed Ltd.
References: EGi Legal News