The Supreme Court has granted Marks & Spencer permission to appeal in its dispute with the landlord of its former head office premises at The Point, Paddington.
In May, the Court of Appeal allowed the landlord’s appeal, overturning a ruling that permitted Marks & Spencer to claw back around £1.1m in rent and other charges after exercising a break clause in its lease of the premises.
But now M&S will hope to persuade the Supreme Court to restore the initial decision.
Dellah Gilbert, Of Counsel in Hogan Lovells real estate disputes team, said that the court’s decision to grant permission “may take some by surprise”.
She said: “As break clause cases are very much based on their own facts, it seems unlikely that a simple interpretation point (based on whether the landlord was already adequately compensated by the penalty payment) here would attract the Supreme Court’s attention.
“The fact that leave has been given raises the prospect that the Supreme Court will look at the concept of reimbursement of excess monies in principle. In which case, there is the potential that this area of law will fundamentally change. Watch this space!”
Landlord BNP Paribas Securities Services Trust Company (Jersey) Ltd persuaded the Court of Appeal to overturn Morgan J’s ruling which it claimed wrongly gave M&S a “cashback” when it exercised its break clause to determine four leases of floors 3, 4, 8 and 9 of The Point, which it used as overflow space to its new HQ at nearby Waterside House, on 24 January 2012.
Arden LJ overturned a ruling by Morgan J that the court could imply a term into the lease to enable apportionment of rent paid in advance for the period after the break date, in circumstances where the parties negotiated a break premium but said nothing about such apportionment of rent.
The order she made was that, instead of the £1,147,696 the landlord was ordered to pay, M&S should only recover £204,972.
M&S served a break notice on 7 July 2011, paid the quarter’s rent due on 25 December 2011 plus the sum of £919,800 plus VAT payable as a condition of the break clause, but argued that it was entitled to be repaid the apportioned part of the quarter’s rent from 24 January 2012 to 24 March 2012. It claimed more than £1.1m in rent, service charges, insurance rent and car park licence fees.
In the High Court decision substantially overturned by the Court of Appeal, Morgan J held that, absent the break clause, a proportionate part of the rent would be payable on the last quarter day of the lease (25 December 2017) before it expired by effluxion of time on 2 February 2018 and that the tenant would have been in the same position had it been certain on 25 December 2011 that the lease would end on the break date.
As a result, he found that a term should be implied entitling the tenant to recover the sums from the landlord.
Marks & Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and anr
