The high court has ruled that a Sports Direct subsidiary is still liable for the rent on a Nuneaton store premises, four-and-a-half years after it purported to transfer the lease to rivals JJB Sports.
Arnold J ruled that Sports Direct subsidiary Gilesports had assigned the lease of premises in the Abbeygate shopping centre without the consent of former head leaseholder Central Networks East, when the then-occupier and fellow group company, the Original Shoe Company (OSC), was sold to JJB in January 2008.
As a result, he found that Gilesports is still bound by the terms of its lease, after OSC went into administration in February 2009.
When E.ON UK acquired the headlease, it took action against Gilesports to recover arrears of rent, which stood at almost £140,000 in September 2009.
E.ON served notices on Gilesports, under section 17 of the Landlord and Tenant (Covenants) Act 1995, of its intention to claim the rent, continuing to accrue at quarterly intervals, from Gilesports as the former tenant.
Arnold J ruled that the sublease did contain an obligation on Gilesports, imported from the headlease, not to assign the property without obtaining written consent from the headlessee.
He ruled that a request for consent to the transfer sent by email in May 2008 was not enough to constitute effective service on the headlessee, and that, as a result, it had not failed to give consent within a reasonable time, contrary to section 1(3) of the Landlord and Tenant Act 1988.
He said: “I therefore conclude that Gilesports executed the transfer in breach of covenant. It is common ground that it follows that the transfer was an excluded assignment within section 11(1) LTCA 1995, and accordingly Gilesports remains liable under the tenant’s covenants in the sublease.”
Sports Direct sold OSC to JJB Sports for £5m in January 2008, involving a transfer of eight leases, including the property at the centre of this dispute, Unit 17, Abbeygate, where Gilesports had previously operated a sports store. The head lessor of the property is The Royal London Mutual Insurance Society.
E.ON UK plc v Gilesports Ltd Chancery (Arnold J) 31 July 2012
Jonathan Seitler QC (instructed by Wragge & Co LLP, of Birmingham) appeared for the claimant; Charles Harpum (instructed by Cobbetts LLP, of Manchester) appeared for the defendant.
