Virtually all of the business tenancy renewal litigation in England and Wales is heard in the county court (save for the few cases that are dealt with through PACT and by the First-tier Tribunal under the Landlord and Tenant Act 1954 pilot scheme).
The fact that most of us are unaware of this is attributable to the fact that the county court is not (unlike the High Court and the Upper Tribunal (Lands Chamber)) a court of record: its judgments are unreported, and largely unremarked. So let us try to restore the balance by drawing attention to some seminal decisions over the course of the past couple of years, in which some seriously hairy issues were raised and decided.
The pandemic response
Firstly, the lockdown caused by the Covid-19 pandemic has stretched the ingenuity of the courts in adjudicating on appropriate lease terms, and in determining the rent in a market virtually without comparables, as exemplified by the decision of Judge Richard Parkes QC in WH Smith Retail Holdings Ltd v Commerz Real Investmentgesellschaft MBH [2021] PLSCS 68.
Secondly, on 18 February 2022, Judge Fine in the Nottingham County Court decided in W (No 3) GP (Nominee A) Ltd v JD Sports Fashion plc that it was not appropriate to include a turnover rent in the new tenancy (despite the fact that there was such a provision in the current tenancy), given that it would far exceed the rental value of the premises – and decided on that topic, having considered the 40 comparables that the parties put in evidence, that, given the rise in online shopping, the effects of the pandemic and the size and configuration of the premises, there would be limited interest in the premises and that any hypothetical tenant would have an extremely strong negotiating position, leading to a low rent.
Thirdly, a number of county courts have had to rule on the interesting question whether the lack of any express direction in section 34 of the 1954 Act to disregard inducements available in the market should have the consequence that the rent should be discounted correspondingly. So far, the ayes largely have it, with earlier decisions to that effect (Judge Bailey in HMV Music v Mount Eden Land in 2012; Mr Recorder Clayton in Iceland Foods Ltd v Castlebrook Holdings Ltd [2014] PLSCS 100; Judge Mitchell in Britel Fund Trustees Ltd v B&Q plc in 2016; and Judge Lochrane in Odey Asset Management v Telford Properties, also in 2016) followed more recently by WH Smith and the decision of HH Judge Richard Roberts in Old Street Retail Trustee (Jersey) 1 Ltd and another v GB Healthcare Ltd [2022] PLSCS 189. Only one recent decision stands to the contrary (joining the much earlier decision of Judge White in Max Mara Ltd v Pearl Assurance plc in 1996): that of Judge Dight CBE on 24 May 2021 in HPUT Trustees No 1 Ltd v Boots UK Ltd. Because county courts need not strictly follow each other’s decisions, the room for judicial difference of opinion on this topic looks set to continue, unless and until the High Court or the Court of Appeal can be persuaded to pronounce on the issue.
Hot off the press
Fourthly, to bring this survey bang up to the minute, judgment has just been handed down in the Central London County Court by Judge Saunders in B&M Retail Ltd v HSBC Bank Pension Trust (UK) Ltd, in another uncontested business tenancy renewal. The main issue in the hearing, which lasted for three days, was whether the expert planning evidence led by the parties justified the inclusion in the new tenancy of a lease of premises on a retail park in Willesden, north-west London, of a redevelopment break clause, and, if so, when that break clause should be operable. The judgment reviews the authorities on the subject before accepting HSBC’s argument that the court will only upset a landlord’s redevelopment ambitions if there is a major factor which points the other way; and that the court should reject any terms which would either prevent redevelopment or delay it unduly.
HSBC’s evidence, which the judge accepted, was that it would have opposed any section 26 request served by B&M, and only failed to do so because of a mishap in its post room during the Covid lockdown period. Had it been otherwise, then HSBC would have opposed the grant of a new tenancy on the ground set out in paragraph (f) of section 30(1) of the 1954 Act. Its aim was therefore to re-enable its redevelopment plans by having included in the new tenancy a redevelopment break clause, operable at the first conceivable moment.
The expert evidence before the court on behalf of the tenant, B&M, was that there was no real possibility of the local planning authority granting permission for HSBC’s proposed works, on the footing that they ran contrary to a number of established policies for the area. HSBC’s planning expert, on the other hand, pointed to the practical limitations of those policies, which were largely inchoate. The judge preferred HSBC’s evidence, holding that it was a “sound and practical opinion”, and that it would be wrong for the court to prejudge the outcome of the planning application.
This decision illustrates the hurdles that a resourceful tenant is able to erect in an attempt to prevent a redevelopment of its premises, but also serves as a useful reminder of the importance of strategic planning in 1954 Act renewals, and the steps a landlord may take to overcome such hurdles. It also, taken together with the other decisions we mention, demonstrates the wide range of the property disputes that the county court is asked to determine up and down the country each day.
Guy Fetherstonhaugh KC and Julia Petrenko acted on behalf of HSBC in B&M Retail
