A claim for reimbursement of rent has failed in Rail for London Ltd and another v Mayor and Burgesses of the London Borough of Hackney [2022] EWHC 2929 (Ch), a decision in which the court considered issues of construction, implied terms and estoppel.
The claimants were former and current tenants of railway arches and outbuildings at Kingsland Viaduct in Hackney pursuant to a series of transactions entered into by their predecessor in title, London Underground Ltd, and the defendant as a result of the extension of the East London Line. One transaction, a lease dated May 1996, provided for rent to be payable by reference to a sub-lease of the same date. The sub-lease was surrendered in July 2003 when LUL became direct landlord of the sub-tenants. Rent continued to be paid between 2004 and 2019 by LUL and from 2009 onwards, the first claimant, using an approximation of the sub-lease calculation mechanism applied to the occupational tenancies of the individual arches.
In 2019 the first claimant informed the defendant that, given the sub-lease surrender, the rent payable under the 1996 lease was nil and sought to recover the rent paid since the surrender. The court was asked to decide: (i) whether the claimants had an ongoing liability to pay rent to the defendant or if the liability ceased on the surrender; (ii) whether there was an implied term for the payment of rent in the event of determination of the sub-lease; and (iii) whether the claimants were estopped from denying that rent was payable.
The lease was a professionally drafted contract which was not lacking in precision. The rent was identified as payable yearly and was defined solely by reference to the rent received by LUL pursuant to the underlease. The rent payable under the sub-lease was defined as a percentage of net income ie gross income less expenses in any year. The judge concluded that there was no ambiguity in the definition which was clear. Both sides agreed that some implication of words was necessary as to the manner of payment in schedule 4 but this did not result in ambiguity.
The court was prepared to imply into the lease a provision that rent would continue to be paid if the sub-lease was determined because without it the lease would lack commercial or practical coherence within the suite of documents executed in May 1996 Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742. Business sense and efficacy pointed to the parties having overlooked the need for the lease to provide an alternative calculation mechanism if the sub-lease was determined. It was obvious what was required and such a term was not inconsistent with the express terms of the lease.
The judge also considered that the claimants were estopped from denying that rent was payable. There was a common assumption between the parties 2004-2019 that rent continued to be payable under the lease despite the surrender of the sub-lease. The defendant had relied on that common assumption and suffered detriment in not being able to pursue a possible claim against its solicitors.
Louise Clark is a property law consultant and mediator
