Lease of part of building for purpose of gift shop to serve London Aquarium – Lease forbidding landlord to operate gift shop elsewhere in the building – Landlord proposing to sell gift items from kiosks to be built on open-air walkway – Whether kiosks would breach express restriction – Whether and to what extent sales would be in breach of implied obligation not to derogate from grant
The claimant was the lessee of a gift shop serving the London Aquarium, which was one of the enterprises operating in Riverside Building (formerly County Hall) in London SE1. The defendant landlord was the leasehold owner of the building and certain surrounding parts, largely lying underground. By clause 4.6 of the claimant’s lease (the express restriction), the landlord covenanted not to permit any other gift shop, not being a hotel gift shop, to be operated “in the Building”. The present dispute arose out of a proposal by the landlord to sell gift items of all kinds from two kiosks to be erected on a walkway, known as Queen’s Walk, that ran between the west facade of Riverside Building and a river wall beside the Thames. The aquarium was partly located in a basement that extended into a number of vaults lying immediately beneath the walkway.
The claimant brought proceedings, contending that: (i) the proposed kiosks would, for the purpose of the restriction, be located “in the Building”; and (ii) even if not so located, the sale from them of aquarium-related products would amount to a breach of an implied obligation of the landlord not to derogate from its grant (the implied obligation).
Held: (1) The proposals were not affected by the express restriction; and (2) they were limited by the terms of the alleged implied obligation.
1. The kiosks would not be located “in the building”. In the present case, no assistance was to be derived from the other covenants in the lease, nor from the definitions assigned to “the Building” and “the Estate”, nor from the fact that, historically, the construction of the river wall, the vaults, County Hall and Queen’s Walk was part of a single conception resulting in a totally man-made structure. Accordingly, it had to be asked whether what one found on the ground at the present time could properly be regarded as part of the Riverside Building. As was ordinarily the case with a basement extending beneath a street, the presence of vaults beneath Queens Walk did not mean that the pavement above them had to be regarded as an integral part of the building, like the roof. Nor was there any reason for reading “in the Building” as meaning “within the curtilage of the Building”.
2. If the kiosks (as proposed) had been found to be located in the building, the landlord could not have relied upon the open-air nature of the retail operation to counter that finding. There was no compelling reason for equating “in” with “inside the walls of”: compare the expressions “in the garden” or “in the street”.
3. As regards the alleged implied obligation, it was well established that the mere fact that the premises were let for a particular trade did not prevent the lessor from letting adjoining premises for the same purpose: see Portv Griffith [1938] 1 All ER 295, as considered in Johnston & Sons Ltd v Holland [1988] 1 EGLR 264 and Romulus Trading Co Ltd v Comet Properties Ltd [1996] 2 EGLR 70. However, contrary to the landlord’s submissions, the rule applied in Port was not so wide as to exclude the non-derogation principle where the letting was of purpose-built premises, or of premises that were not just a separate and independent retail unit: see Chartered Trust plc v Davies [1997] 2 EGLR 83 and Petra Investments Ltd v Jeffrey Rogers plc [2000] L&TR 451. Having regard to the terms and background of the claimant’s lease*, the sale of aquarium-related products would amount to a derogation from grant.
4. Nor could the landlord contend that the implied obligation was necessarily excluded by the presence of the express restriction, as the content of the latter (gift shop use generally in the building) was substantially different from the former: see, by parity of reasoning, Hillmanv Rogers [1997] PLSCS 347 and [1998] PLSCS 142.
* Editor’s note: See earlier litigation between the parties, summarised in [1999] EGCS 83.
Paul Morgan QC and Nicholas Taggart (instructed by Winward Fearon) appeared for Oceanic Village Ltd; Jonathan Gaunt QC and David Lord (instructed by Goldsmiths) appeared for Shirayama Shokusan Co Ltd.
Alan Cooklin, barrister
