Court of Appeal defends common sense and common courtesy in finding against landlord


The case of London Trocadero Limited v Family Leisure Holdings Limited is a useful reminder that parties who wish to take a literal approach to the interpretation of leases should ensure this is not done at the expense of common sense.  The case also serves as a useful reminder that when entering into what might be described as 'litigious' correspondence parties may wish to reflect on how a third party (such as a judge) might consider the correspondence some months down the line before sending.

The London Trocadero is an entertainment complex located at Piccadilly Circus.  One of its tenants (an arcade operator) went into administration leaving behind a number of arcade and gaming machines.  The tenant's parent company, FLH, owned the machines and wished to remove them.  Their solicitors (who were also appointed to act for the administrators of the tenant) corresponded with London Trocadero's solicitors in connection with removal but no agreement was reached with the landlord.  FLH subsequently issued proceedings for the return of the equipment.

The landlord's defence to FLH's claim was that the rights it was seeking to exercise were personal to the tenant and could not be exercised by FLH, notwithstanding the fact that the equipment in this case belonged to it and the administrators of the tenant had consented to FLH removing the equipment.  The landlord's rationale for this was that the provisions in the lease concerning the delivery and collection of goods referred to the tenant but did not specifically refer to "others authorised by the tenant".  The landlord relied upon this omission as being indicative that the right of access to collect the equipment could only be exercised by the tenant and not by anyone acting with the consent or approval of the tenant.

The High Court rejected the landlord's case and the Court of Appeal did likewise.  Both found that the terms of the lease relating to delivery and collection extended to others authorised by the tenant and that to decide otherwise would lead to an overly literal and technical approach to interpreting the lease in question which would lead to outcomes which would fly in the face of common sense.  If the landlord were right then it would result in, for example, the tenant not being able to engage a removal company to remove the items.

In allowing FLH access both the High Court and the Court of Appeal were somewhat critical of the approach taken by the landlords.  Lord Justice Davis in the Court of Appeal confessed to finding the stance taken by the landlord as puzzling and described the substantive arguments on interpretation as being unmeritorious.  As well as seeking to overturn the High Court's substantive decision which permitted FLH to enter the premises to remove the equipment the landlord also sought to appeal the High Court judge's decision on costs.  In upholding the High Court's decision on this point Lord Justice Davis described the correspondence from the landlord and its solicitors as being "suggestive of an aggressive and condescending attitude … scarcely designed to facilitate compromise."  He concluded his judgment by commenting that "it is most regrettable that this matter has ended up in the Court of Appeal."

A link to the judgment is here http://www.bailii.org/ew/cases/EWCA/Civ/2012/1037.html

by Nitej Davda, Associate