Tenant of men’s fashion store in major shopping mall seeking consent to assign to electronic games retailer – Landlord refusing on ground that assignment and change of use would conflict with policy of reserving that part of the mall for fashion-related stores – Whether consent unreasonably withheld – Whether landlord’s views on tenant mix stemmed from a “policy” – Tenant seeking declaration of unreasonable refusal – Declaration refused
Under a lease granted in 1997 the plaintiff, trading under the name of Cecil Gee, occupied unit 41A Cameron Walk, located on the ground floor of the “Green Mall” of the Metro Centre, Gateshead. The plaintiff owned the freehold of the centre, which comprised some 360 shops and stores. Clause 3.16.1 of the lease restricted the use of the premises to the “permitted trade” or for the sale of such articles as the landlord approved of in writing, such approval not to be unreasonably withheld if, in the reasonable opinion of the landlord, such approval would be “consistent with the principles of good estate management having regard in particular to the distribution of retail trades within [the centre]”. The permitted trade was defined in terms of the sale or hire by retail of clothing, shoes, fashion accessories and associated items. By clause 3.23.3.1 assignment of the whole of the premises could not be effected without the landlord’s prior written consent, which was not to be unreasonably withheld or delayed. However, that proviso was amplified (in the manner allowed by section 19(1A) of the Landlord and Tenant Act 1927, as inserted by the Landlord and Tenant (Covenants) Act 1995) so as to permit the landlord to specify the circumstances in which withholding consent was reasonable. At all material times the majority of the shops in the near vicinity of the plaintiff’s unit were devoted to fashion-related trades.
In June and July 1998 the plaintiff applied for the defendant’s consent to: (a) the assignment of the unit to Game (Stores) Ltd; and (b) a corresponding change of use to the sale of computer games, computer hardware and software and related accessories. The applications met with the immediate disapproval of the defendant, whose solicitors, by letters dated 24 June and 2 July 1998, sent letters of formal refusal stating that the proposed use by the proposed assignee would be inconsistent with the defendant’s “tenant mix policy in this area of the centre”. The plaintiff sought a declaration that the consents had been unreasonably withheld, and argued that: first, no such policy existed; second, such a policy was, in any event, irrational; and, third, it was unreasonable to dismiss the applications in such a peremptory fashion.
Held: The declaration was refused.
1. A relevant policy did exist. Although the defendant had a policy of attracting “anchor tenants”, fashion-related or otherwise, to strategic locations, the existence of such a policy did not preclude a limited policy in the shape of a management aim directed to the tenant mix in the part of the centre under consideration. On the evidence before the court there was undoubtedly such an aim, even though not enshrined in a formal policy document.
2. The fact that other centres, many much smaller, placed the highest priority on attracting anchor tenants did not of itself demonstrate that it was irrational to reserve that part of the Metro Centre for a particular area of retail activity. Given such a policy, it was not unreasonable to conclude that Game (Stores) would attract a clientele that was, for the most part, quite different from the shoppers who would seek out the fashion-related stores: International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 EGLR 39 considered.
3. Little importance could be attached to the peremptory nature of the refusal. The challenge had to be directed at the reasons, rather than the way in which they had been reached: see Tollbench Ltdv Plymouth City Council [1988] 1 EGLR 79.
Derek Wood QC and Anthony Tanney (instructed by Eversheds) appeared for the plaintiff; Hazel Williamson QC and Carolyn Walton (instructed by Nabarro Nathanson, of Sheffield) appeared for the defendant.
Alan Cooklin, barrister
