The Court of Appeal has upheld a High Court ruling that injection mouldings company Linpac Mouldings has to pay sizeable rack-rents until 2070 on empty industrial premises in
The court rejected Linpac’s appeal against a ruling by High Court judge Lewison J in May 2009, in favour of Aviva Life & Pensions UK, landlord of the premises at Prittlebrook Industrial Estate,
Etherton LJ upheld Lewison J’s ruling that, by assigning the leases to an associated company in 2005, Linpac had irretrievably lost its right to rely on a break clause; the break clause applied only to the “original tenant”.
He said that the break clause made it “expressly clear” that Linpac was able to exercise the right to determine the leases only as the “original tenant”, adding: “That is to say, in its capacity as and so long as it is the tenant. It seems to me impossible to argue that the words ‘as original tenant’ are terms that denote the first tenant, whether or not it remains the tenant.”
He added: “Provision for a former tenant to bring a lease to an end when the lease is not vested in it would be extraordinary, even if technically possible.
“It would be reasonable to expect that competent property advisers would take particular care to make unambiguously clear, if intended, that a party will be entitled to break a lease not only when it is the tenant but even after it has assigned the lease.”
Sedley LJ said that he had misgivings about the result, but concluded: “Even so, on what I accept is the correct construction of the 2005 lease, Linpac, by assigning the term, have put it out of its power to break it. Whether this outcome was intended – there has been no claim for rectification – or simply not addressed, we do not know. But it is what the lease says – or at least what it means.
“The result is that Linpac remains liable until 2070 for an annual rack-rent on premises that they neither occupy nor have any use for.”
Commenting on the ruling, Roger Cohen, a partner at Berwin Leighton Paisner, said the decision should come as a warning to would-be tenants.
He said: “Two points stand out. For would-be occupiers negotiating a lease, a break clause must say what you want it to say. Do not accept a break right for the original tenant alone if your assignee might want to break.
“For lawyers , slight differences in language between one case and another do not provide an escape from previous case law.”
Linpac’s lawyers had sought to distinguish the case from Max Factor Ltd v Wesleyan Assurance Society [1996] 2 EGLR 210, in which the right to break was conferred by the lease, not contained in a licence to assign. However, Etherton LJ ruled that there was “no sound reason” for distinguishing the legal effect of the critical words from the similar words in Max Factor, and “good reasons of policy and principle for not doing so”.
Aviva Life & Pensions UK Ltd (formerly known as Norwich Union Life & Pension Ltd) v Linpac Mouldings Ltd Court of Appeal (Sedley, Dyson and Etherton LJJ) 22 April 2010.
Christopher
