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Summer 2019
Commercial Property
Frustrated by Brexit?
Is Brexit a sufficiently significant supervening event that it can terminate a
long term contract such as a lease under the legal doctrine of frustration?
Whatever your political persuasion, we have all been
experiencing frustration with the ongoing Brexit
saga. One tenant has gone so far as to suggest that
Brexit is now even frustrating leases. So, what was the
case about and why did the High Court rule that this
particular lease was not frustrated?
A long time ago …
August 2011 is not actually that long ago, but the
world was a very different place when the European
Medicines Agency signed an agreement for lease to
take office premises at Churchill Place in Canary Wharf.
The lease was duly completed in October 2014, at an
annual rent in excess of £13 million. Significantly, the
lease was for a 25 year term and did not include a
break clause. In return, Canary Wharf paid EMA
£40 million.
On 23 June 2016, the UK voted to leave the EU.
As an EU agency, EMA obviously could not stay in
London after Brexit and the EU required it to move
to Amsterdam. Unable to find anyone to take over its
lease, EMA wrote to Canary Wharf claiming that Brexit
would operate to frustrate the lease, so that EMA could
simply walk away without further liability.
Canary Wharf issued proceedings for a declaration
that Brexit would not in fact frustrate the lease. The
proceedings were expedited and a nine day trial took
place in January, with judgment being published on
20 February.
>>> continues on page 2
It’s now or never Frying tonight Consenting adults
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hilldickinson.com
COMMERCIAL PROPERTY NEWSLETTER Summer 2019
Welcome >>> continued from page 1
Frustration
Welcome to the summer edition of The legal doctrine of frustration operates to bring a contract to an end and
Hill Dickinson’s commercial property discharge the parties, following the occurrence of a supervening event for which
newsletter, which we hope you will find the contract does not provide (and that neither party has caused).
of interest.
We would like to start by thanking
It is not enough that the supervening event makes performance of the contract
It’s now or never
everyone who attended the spring more onerous or expensive, it must so significantly change the nature of the
construction update seminars in bargain that it would be unjust to hold the parties to it.
February and the spring property Although the courts have indicated in previous cases that frustration can in
update seminars in March. We hope
theory apply to leases, frustration cases involving leases invariably fail.
you found the events informative and
enjoyable.
Judgment day Landlords who fail to get things right before the tenancy is even granted
Our next event sees the return of the
developers conference, which will Given the legal and political issues at stake, Mr Justice Marcus Smith delivered a can lose the key benefit of an assured shorthold tenancy.
take place on Thursday 27 June in very thorough 95 page judgment. He divided EMA’s various arguments into two
the magnificent Victoria Gallery and broad categories:
Museum at the University of Liverpool. There is a myth in certain circles that • Energy performance certificates reached the same conclusion. It was
If you haven’t already done so, book
1 Frustration by supervening illegality
dealing with residential property • Gas safety certificates not enough for the landlord to provide
your place now! The first set of arguments failed. is somehow easier than dealing the gas safety certificate after the
This edition contains two more articles Even if EMA had to relocate within the EU, the judge was not convinced that it with commercial property. Even if Electrical safety certificates are likely tenancy was granted but before the
that the team has written for leading would be unlawful for EMA to continue to hold premises in London or continue that was true at some point, the to be added to that list in the not too landlord’s section 21 notice.
property journal Estates Gazette. to perform its obligations under the lease. residential property landscape distant future.
Following the success of the property
Furthermore, even if it was illegal under EU law, that would not assist EMA is now littered with countless For ASTs granted before 1 October Once and for all
litigation team’s ‘frying tonight’ talk at
because the doctrine of frustration was only triggered if performance of the traps for the unwary landlord. 2015, the requirements had to be Although county court decisions
the autumn property update seminars,
Ralph Bullivant was asked to write an contract became illegal under English law. It is hard enough to keep on top complied with by 1 October 2018. are not technically binding,
article based on the theme of fish and 2 Frustration of common purpose of the ever-increasing obligations An obligation to provide the tenant they are persuasive and the
chips shops. The other article is from Bill on residential landlords if that is with a copy of the government’s ‘how judge in the Trecarrel House
The second set of arguments similarly failed.
Chandler and concerns problems that all you do. The risk is multiplied to rent’ checklist was also introduced case drew heavily from the
can arise where a restrictive covenant The judge agreed that Brexit was a ‘seismic’ event that made performance of the judgment in the Caridon case.
for landlords whose interests for ASTs granted since 1 October
requires the landowner to obtain lease ‘radically different’. He was even prepared to accept that Brexit was not in
are primarily in commercial 2015, but this is not a pre-requisite to The Residential Landlords Association
consent for a development or change the contemplation of the parties, even though it was foreseeable as a ‘theoretical
property but who encounter the service of a section 21 notice. is supporting the landlord Trecarrel
of use. possibility’ when contracts were exchanged in 2011.
occasional residential tenant. House Limited in an appeal to
We also discuss some significant recent However – and fatally for EMA - the judge also found that:
Here is another trap, revealed Repent at leisure the Court of Appeal. Whichever
cases concerning fencing obligations,
residential tenants and Brexit. • there was no common purpose between Canary Wharf and EMA beyond the by a couple of recent county Many landlords have assumed that the way that decision goes, it will be
fact that Canary Wharf had premises it wanted to let and EMA wanted to rent court decisions … EPC and gas safety certificate simply helpful to have a ruling on the
If you have any queries relating to the
them; had to be provided before serving a point from the higher courts.
issues raised in this newsletter, please
contact the relevant author, or your • by accepting a 25 year term without breaks, in return for a significant Assured shorthold tenancies section 21 notice, but this may not be In the meantime, landlords of
usual Hill Dickinson contact. inducement from the landlord, EMA had effectively assumed the risk that The AST is the usual weapon of choice the case. residential premises must proceed on
If you have any comments on the something might happen during the term; and for the owner of residential premises Two recent cases have adopted a the basis that they have a once and
newsletter in general, or suggestions for • the ability to assign and sublet gave EMA an exit route in the event that the who wishes to rent out their premises very strict interpretation of the new for all opportunity to get things right
topics to cover in future editions, please premises became surplus to requirements. but doesn’t want the tenant to gain requirements. These cases suggest before a new AST is granted.
contact our editor: statutory protection. that if the required documents have Nick Pye
Bill Chandler What next? By granting an AST, the landlord not been provided before the tenancy nicholas.pye@hilldickinson.com
bill.chandler@hilldickinson.com knows they can serve a section 21 is granted, the landlord can never
The High Court decision confirms how difficult it is to successfully argue that a
notice to regain possession on two retrieve the situation and will never be
lease has been frustrated. If an EU agency cannot successfully argue that their STOP PRESS
months’ notice once the initial fixed able to serve a section 21 notice.
David Chinn lease is frustrated by Brexit, what chance does anyone else have?
term (usually six months) expires. Caridon Property Ltd –v- Monty Things may be about to get even
Head of Business Services Inevitably, as with all things Brexit, the uncertainty hasn’t ended quite yet.
david.chinn@hilldickinson.com Shooltz was heard in the Central worse for landlords of residential
Although the odds seem stacked against them, EMA are keen to put this matter Prescribed requirements London County Court in 2018. The property. Since writing the above
Jim Purves to a meaningful vote in the Court of Appeal. Leave to appeal has been granted, article, the government announced
Head of Property & Construction Changes to the AST regime in England gas safety certificate was provided 11
although no date has been set at the time of writing. in April 2019 that it intends to
jim.purves@hilldickinson.com prevent landlords from serving a months after the tenancy had begun
consult on proposals to abolish no
Whatever the final outcome of this case, we may see arguments that Brexit section 21 notice in respect of an AST and this rendered the landlord’s
fault evictions under the section 21
can cause frustration of other types of contract, especially where there is no granted since 1 October 2015 unless section 21 notice invalid.
procedure in England altogether. The
equivalent escape route and where risk hasn’t been allocated through a massive the landlord has complied with its Trecarrel House Limited –v- Welsh Government has announced a
inducement payment. statutory obligations relating to: similar consultation for Wales.
Rouncefield was heard in Exeter
Bill Chandler County Court in February 2019 and
bill.chandler@hilldickinson.com
2 3
COMMERCIAL PROPERTY NEWSLETTER Summer 2019
Frying tonight
Newcastle Washington
Mohammed -v- Newcastle City Council (2016) Singh -v- Redford (2018)
We now move further north to Newcastle. The case concerned We conclude in Washington near Sunderland and a case
the compulsory acquisition of a fish and chip shop on decided towards the end of last year. The court had to decide
Ralph Bullivant takes a look at the role of fish and chip shops in property litigation. Waterloo Street. Following the loss of their business, the if there was binding agreement for the sale of Mr Redford’s fish
Mohammeds claimed compensation of £8,764,000. and chips business to Mr Singh for £165,000.
With thanks to Gerald Priestland and his book on the history of fish and chips, from where the title of this article is taken.
The trial in the Upper Tribunal ran for 20 days. It was said The cast of characters included:
On 7 September 2018, Judge Martin Rodger QC gave judgment in the High Court in Newcastle in a case in which he had to grapple the matter had taken up too much time as it was obvious
with what may or may not have been agreed between the parties when there was nothing in writing. • Mr Gurdip Singh – the claimant, who spoke limited English
the heads of claim were exaggerated and unsupported by and left court after giving his evidence.
The facts read a bit like a Godfather movie but set in a fish and chip shop in Sunderland, with some of Ronnie Barker from Open All evidence. Further, the claimants’ experts had failed to exercise
Hours thrown in for good measure. It got me to thinking of some other fish and chip shops that have been litigated over during the meaningful critical and objective judgement. • Mr Chahal – the claimant’s brother-in-law, who ran the
last 100 years. business. The judge described him as ‘a larger than life
There were a total of six experts for the claimants, including a character’ and believed him to be ‘capable of being
Mr Cairns of whom it was said: intimidating if he chose to be’ and ‘despite his charm, there is
Dursley ‘Mr Cairns is not a chartered surveyor or a qualified valuer. evidence…that he has resorted to threats in connection with
He is not an experienced expert witness and has no working his business dealings’.
Adams -v- Ursell (1912) knowledge of compulsory purchase. He found cross-
• Mr Fernandez –ostensibly a debt counsellor and mediator,
Our journey starts in Dursley, on the edge of the Cotswolds. Its pub, the Old Spot, is regularly voted Gloucestershire examination a challenging experience and was frequently
but also in the business of debt collecting and process
‘Pub of the Year’. But in 1912, Dursley was more famous for the stench given off by its fish fryers. confused and often contradictory in the
serving. Described as ‘into fitness and martial arts’, the judge
evidence he gave. He admitted to having
Mr Adams bought a house on Silver Street in 1907. A couple of years later, Mr Ursell bought the house next door and started his said, ‘…he might cause a debtor to feel intimidated and I
made mistakes’.
business as a fried fish shop. The vapour from Mr Ursell’s cooking stove appeared like a mist in Mr Adams’ house and Mr Adams think it likely that he was brought to meetings by Mr Chahal
complained that the smell was so bad that it ‘affected the flavour of butter in his larder’. The Mohammeds claimed for for his physicality rather than his skills as a mediator’.
the value of land which they said
Mr Adams sought an injunction on the basis the smell was a nuisance. • Mr Redford – the defendant, who ‘made a number of lurid
was used by their customers for
The judge was satisfied that a nuisance was made out. Mr Ursell argued that it would cause a hardship to the poor people of Dursley allegations about Mr Chahal’s private life’.
parking cars whilst collecting chips.
if they could not get their fried fish, but the Judge’s response was that he would have to carry on the business elsewhere, stating: It transpired that the land formed • Mr Doyle – Mr Redford’s shop manager. Also into his martial
‘It by no means follows that because a fried fish shop is a nuisance in one place it is a nuisance in another’. part of the public highway and arts, he might have been chosen less for his skills with the
anyone parking there was doing fryer but more because he would not be easily intimidated.
So Mr Ursell moved his fish shop closer to the poor people who were better able to tolerate his smells,
leaving Mr Adams free to enjoy his butter untainted by the whiff of fish. so unlawfully. This aspect of the Mr Singh was based in the Midlands. In March 2012, he and Mr
claim failed, as did the majority Chahal travelled north to view Mr Redford’s business, which
of the rest. was advertised for sale online. They liked what they saw and
After the 20 days after 15 minutes a price of £165,000 was agreed. Mr Chahal
Redcar Keighley of hearing and said he would spend time at the premises to see how it traded.
the numerous By June, £135,000 had been paid to Mr Redford. Mr Chahal
Marquess of Zetland -v- Driver (1936) Winterburn -v- Bennett (2016) experts, the had the keys to the business and was receiving the takings.
We then move up to the North East, the spiritual home of the Next we are in the village of Keighley, West Yorkshire. The Mohammeds
Solicitors were instructed but, whilst drafts were produced,
litigated fish and chip shop. Winterburns operated a fish and chip shop next to the local were awarded
time was taken up getting the appropriate undertakings as
Conservative Club. The inhabitants of Keighley could take the grand sum
A vendor was the tenant for life of settled land at Redcar, to costs.
a shortcut to get their chips, cutting across the car park of of £234,865.
North Yorkshire. By a 1926 conveyance, part was conveyed to Inevitably things started to go wrong. The business did not
a purchaser who covenanted: the Conservative Club. Customers parked cars in there and
delivery vehicles, offloading another bag of potatoes, would do as well as anticipated, there was a query over planning and
‘…that he would observe a restriction on use which, in the stop there. disagreements over the trading name.
opinion of the vendor, might be detrimental to him or Mr Singh wanted his money back. It was at this point that Mr
the owners or occupiers of any adjoining property in the They had been doing all this for so long that the Winterburns
felt able to apply for a prescriptive easement. The case came Fernandez’s debt collecting services were engaged by Mr
neighbourhood.’ Chahal. Threats were made and Mr Redford had to move out
to the Court of Appeal. Along the way it was held that the
Driver was a fryer of fish and the plaintiff complained that customers walking across the car park had been doing so of his home.
the smell was detrimental to his property. An action was without force, without secrecy and without permission and Mr Singh then pursued a more orthodox route to get his
brought to restrain Driver from using any parts of his premises so they could continue to do so. money back and he brought a claim for restitution. It was
for frying fish ‘or other substances’ because the smell was heard in the High Court in Newcastle, at a trial that lasted
‘detrimental to the amenities of the neighbourhood’. The The issue for the Court of Appeal was whether a right to park
cars had also been acquired, when there were signs in the car four days.
action succeeded, although the injunction was limited to
fried fish. park which read: The court dismissed the claim for restitution and was satisfied
‘Private car park. For use of club patrons only. By order of that, whilst there had been an informal agreement between the
It was held that where a covenant benefits part of land, it parties, the conclusion of negotiations between solicitors of
will be deemed to benefit the whole of that land via express the committee.’
more detailed terms had not been treated by the parties as a
annexation provided that the land is easily ascertainable. The court was satisfied that any fish and chip shop customer
precondition of their bargain becoming binding.
We are left wondering as to exactly what the ‘other parking in that car park knew it would be contentious;
substances’ were that Mr Driver had been frying. the erection of that sign was enough to establish that.
Accordingly, they could not park their cars when collecting Ralph Bullivant
their chips. ralph.bullivant@hilldickinson.com
An earlier version of this article appeared in Estates Gazette
4 5
COMMERCIAL PROPERTY NEWSLETTER Summer 2019
Consenting adults
covenantee’s estate remaining unsold. In Mahon-v-Sims, the judge Seymour Road- v- Williams (2010),
This avoided the ‘contradiction appreciated that he was dealing by the Upper Tribunal in Re Cook
and disorder’ that would result with ‘a private treaty relating (2014) and by Leeds County Court
from needing to obtain consent to a single property’, where the in Tupholme -v- Firth (2015).
from multiple purchasers of part. original covenantee had no obvious
Companies too may cease to exist.
reason for wanting to preserve a
In Crest Nicholson -v- McAllister
A restrictive covenant that prevents development or change of use without consent sounds … or the original continuing interest in the covenant.
(2003), the High Court found that the
straightforward enough, but as Bill Chandler explains it is not always easy to identify whose covenantee? In contrast, the status of the Port dissolution of the company whose
consent must be obtained and what happens if they are not around to give it. It may therefore seem surprising that a of London Authority made it far consent was required operated to
succession of subsequent cases have more likely that it intended to retain discharge the relevant covenants
declined to follow Mahon -v- Sims. sole control over the Ten Trinity rather than to make them absolute.
If the covenant specifically requires Square covenant, even if it disposed
consent from ‘the transferor or its In City Inn (Jersey) Limited -v- Ten of some of the dominant land. Concerns
successors in title’, the position is Trinity Square Limited (2007), the
clear. Similarly, where the document The main problem with consent
Court Of Appeal ruled that references Impossibility covenants is that it is frequently
contains a definition of ‘transferor’ to successors elsewhere in the
which includes successors. But whose Where consent is required from impossible to establish with any
transfer precluded section 78 from
consent is required where successors the original covenantee, what certainty whose consent is required
applying and instead suggested
are not specifically mentioned? happens when they inevitably die? and what happens if they are not
that a requirement for consent from
Once again, the courts have failed available to grant it. This is illustrated
‘the transferor’ meant just that,
Successors … even though the original transferor
to adopt a consistent approach. by the volume of conflicting case law.
In Mahon -v- Sims (2005), the (the Port of London Authority) no A series of older cases, from Bell The willingness of the courts to find
High Court recognised that a literal longer owned any of the dominant -v- Norman Ashton (1957) to Re that consent is required from the
reading of the transfer would require land. Reference in one covenant Beechwood Homes (1994) and Briggs original covenantee rather than the
consent from the original covenantee. to a specific office holder of the -v- McCusker (1996), suggested current owner of the dominant land
However, keen to avoid consent transferor reinforced this conclusion. that the death of the original is also potentially worrying. Is it really
being required from a party who covenantee - and the consequent desirable to divorce the right to grant
A similar result was reached in
now held no interest in the property, impossibility of obtaining their consent from the ability to enforce
Margerison -v- Bates (2008). The High
the court invoked section 78 of consent - effectively converted the the covenant? The owner of the
Court considered it ‘quite clear that
the Law of Property Act 1925. consent covenant into an absolute dominant land may find themselves
the draftsman was more than well
prohibition. As recently as 2010, the unable to prevent a previous owner
Section 78 provides that covenants aware of the distinction between [the
Upper Tribunal adopted this position (with no continuing interest in the
relating to land are deemed to be seller] and [the buyer] personally on
in Woodhouse, Re Hutchins Cottage, land) from granting consent.
When a landowner sells part of development without the seller’s made with the covenantee and his the one hand and their successors in
although they made a distinction
their land, they will obviously want consent, usually with the proviso successors in title. This annexes the title on the other’. Accordingly, the Interestingly, in the quite different
between covenants prohibiting
to protect the value and amenity that the seller may not unreasonably benefit of the covenant to the seller’s absence of reference to successors in context of marine insurance, Mr
change of user and covenants
of their retained land. Restrictive withhold or delay its consent. retained land, allowing the seller’s the consent provision was assumed Justice Flaux noted in Starlight
requiring approval of building plans.
covenants are frequently imposed successors to enforce the covenant to be deliberate, so that consent was Shipping Company -v- Allianz
For so long as the original seller still required from the original covenantee. This is a harsh outcome, placing (2014) that the ‘rigid’ approach
to limit the use and development even if it does not refer to them.
owns the dominant land, the buyer the owner of the servient land in a to interpretation in Ten Trinity
of the land being sold. Section 78 does not explicitly bring In the other cases mentioned below
knows exactly who he needs to ask for far worse position once the original Square was the ‘antithesis’ of the
A properly drafted restrictive consent. But what happens after the successors into play for the purposes under ‘Impossibility’, the courts
covenantee dies. Recent cases have holistic approach propounded by
covenant will not just bind the original seller has sold the dominant of granting consent. However, in again preferred to follow the literal
largely tempered that approach. the Supreme Court in Rainy Sky
immediate buyer, but will run with land? Does the buyer still have to ask the absence of specific reference to meaning of the covenant and
-v- Kookmin Bank (2011) and he
the land being sold (the servient the original covenantee, or should they successors anywhere in the transfer, concluded in each case that consent The judge in Churchill -v- Temple
doubted whether Ten Trinity Square
land) and bind all future owners. instead be asking the new owner? the judge felt able to give ‘transferor’ was required from the original (2010) considered the most likely
can still be regarded as good law.
Similarly, the benefit will attach to its extended meaning throughout, covenantee rather than from the intention was that the original
Since a restrictive covenant runs current owners of the dominant land. covenantee only required control The compelling story of consent
the land retained by the seller (the thereby making ‘far better sense of
with the land, it is enforceable by during her lifetime, so that the covenants rumbles on.
dominant land), so that the covenant this covenant than the literal meaning’.
can be enforced by future owners.
and against the current owners of Presumed intention covenant was discharged by her
the dominant land and the servient If consent must be obtained from Bill Chandler
The covenant cannot be read in death. A similar outcome was
land. It would therefore seem the current owners, what happens bill.chandler@hilldickinson.com
Consent sensible that consent should be if the dominant land has been isolation. It must also be construed reached by the High Court in
Margerison -v- Bates (2008) and An earlier version of this article
An absolute prohibition is often required from the person who is sub-divided? In Howard Pryor -v- in the context of the known
appeared in Estates Gazette
considered too draconian. A entitled to enforce the covenant, Christopher Wren Limited (1995), the circumstances of the transaction.
common compromise is to but that is not always the case. benefit of the covenant was limited
prohibit particular uses or types of to the reducing part of the original
6 7
COMMERCIAL PROPERTY NEWSLETTER Summer 2019
If you have any queries about matters
raised, please contact:
Bill Chandler
Editorial contact
bill.chandler@hilldickinson.com
David Chinn
Case
Head of Business Services
david.chinn@hilldickinson.com
update
Jim Purves
Head of Property & Construction
jim.purves@hilldickinson.com
Fencing obligations
Normal service has been
resumed, following a recent
decision of the Court of
Appeal.
In the spring 2018 edition, Kevin Lee discussed the potentially
significant decision in Churston Golf Club -v- Richard Haddock.
The High Court had to consider the Lord Justice Patten gave the leading
legal status of a covenant to maintain judgment in the Court of Appeal. He
a fence between the golf course and noted that words will normally be
adjoining farmland. The covenant given their conventional meaning in About Hill Dickinson
had been imposed in a conveyance a professionally drawn document. In The Hill Dickinson Group offers
of part when the golf course was this case, the fencing obligation had
sold off in 1972. The High Court ruled clearly been drafted as a covenant
a comprehensive range of
that, although worded as a positive rather than an easement and there legal services from offices in
covenant, the fencing obligation took was no justification for the court to Liverpool, Manchester, London,
effect in law as an easement. construe it as something else. Leeds, Piraeus, Singapore,
The significance of this distinction The practical result of the appeal Monaco and Hong Kong.
is that easements run with land and decision is that Mr Haddock cannot Collectively the firms have more
can be enforced against successors require the golf club, as successors than 850 people including 175
to the original parties, whereas to the original contracting party, to partners and legal directors.
positive covenants do not run with comply with the fencing obligations in
land and cannot be enforced against the 1972 conveyance. The information and any commentary contained in this
successors. newsletter are for general purposes only and do not con-
Although the Court of Appeal stitute legal or any other type of professional advice. We
An appeal by the current operators of refused to interpret this particular do not accept and, to the extent permitted by law, exclude
liability to any person for any loss which may arise from
the golf course was heard in February positive covenant as an easement, relying upon or otherwise using the information contained
2019, but judgment was reserved the question of whether it is possible in this newsletter. Whilst every effort has been made when
until April 2019. As expected by the in theory to expressly grant a fencing producing this newsletter, no liability is accepted for any
error or omission. If you have a particular query or issue,
vast majority of commentators, the easement remains unanswered. Lord we would strongly advise you to contact a member of the
Court of Appeal reversed the decision Justice Patten refused to be drawn, commercial property team, who will be happy to provide
specific advice, rather than relying on the information or
of the High Court and ruled that the preferring to leave this question to be comments in this newsletter.
covenant was simply a covenant after resolved by a future case.
all, as it had been drafted.
Kevin Lee
kevin.lee@hilldickinson.com
hilldickinson.com
Liverpool Manchester London Leeds Piraeus Singapore Monaco Hong Kong
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