Alienation clause — Shared occupation — Lease containing clause prohibiting respondent tenant from sharing occupation of premises used as nightclub — Respondent hiring out premises to external club promoters — Whether breach of alienation clause — Appeal dismissed
The appellant council compulsorily purchased premises that were leased to the respondent. The lease contained an alienation clause, prohibiting the respondent from parting with, or sharing possession or occupation of, all or part of the property without the landlord’s consent. The respondent used the premises as a nightclub, which it hired out to external promoters. Under that arrangement, the respondent provided the venue and staff in return for a flat fee, while the promoter was responsible for organising and promoting the event. The respondent remained solely responsible for all matters concerned with the building, including maintenance, security and health and safety.
The respondent made a compensation claim of £1.96m, representing the value of its leasehold interest, including the total extinguishment of its nightclub business. The council claimed that the respondent was not entitled to the compensation representing the extra profits it derived from hiring out to promoters, as opposed to running its own events, because that activity amounted to a sharing of occupation in breach of the alienation clause. Determining a preliminary issue, the Lands Tribunal considered that the word “occupation” had to be construed in the context of the covenant, the purpose of which was to regulate control of the property. It considered the promoters’ presence to be significant only so far as it affected the control of the premises, and not their use, and that, on that basis, no shared occupation or breach of the clause had occurred.
The council appealed, contending that alienation clauses were intended to protect a landlord from having its property used in an undesirable way, and that, in that context, the operation of two business ventures on the same premises, by the respondent and the promoters respectively, amounted to shared occupation.
Held: The appeal was dismissed.
Per Carnwath LJ: Whether shared occupation had taken place in any given case was a mixed question of fact and law, and there was a large margin within which an appeal court ought not to interfere with the findings of the judge. It was not possible to establish a fixed test, and it was inappropriate to lay down general propositions: Graysim Holdings Ltd v P&O Property Holdings Ltd [1996] 1 EGLR 109 considered. When ascertaining the meaning of “shared occupation” in the lease, it was relevant to note that the alienation clause restricted the respondent from parting with all or “part of” the premises. That wording was apparently concerned with preventing the splitting of control of the premises, not with their overall use. It was also relevant that the permitted use of the premises involved regular access by the public, so that the issue of shared occupation in this instance had to be approached differently from that in other cases, such as those involving offices: International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 EGLR 39 and Tulapam Properties Ltd v De Almeida [1981] 2 EGLR 55 distinguished. In the present case, the judge had been entitled to treat the fact that the respondent retained exclusive responsibility for the property itself, as distinct from the events that were held there, as showing that the building remained in its sole occupation. Accordingly, no breach of the alienation clause had occurred.
Per Sir Christopher Staughton: In determining the meaning of “shared occupation” in the particular contract, the test was whether the promoter carried on a separate business on the premises from that of the respondent, since those were the circumstances in which the landlord would want some right of approval. Where, on the other hand, the promoter was simply participating in a single business run by the respondent, as was the case here, no breach of the alienation clause had taken place.
Jonathan Gaunt QC (instructed by Nabarro Nathanson) appeared for the appellants; Kim Lewison QC (instructed by Hodders) appeared for the respondent.
Sally Dobson, barrister
