Property litigation weekly update – 9 July 2021
This week's bulletin covers an Upper Tribunal case concerning the scope of a telecoms provider's indemnity to a landowner, a successful tenant's appeal in relation to a recent disputed break clause case and 1954 Act business lease renewal case, concerning a Covid rent suspension clause.
In addition, we have logged other insights from across the firm, included a section on positive news and our weekly quiz.
EE Limited and Hutchison 3G UK Limited v The Mayor and Burgesses of the London Borough of Hackney.
Electronic Communications Code - indemnities in an interim rights case…
The Upper Tribunal (Lands Chamber) (UT) has found in favour of the operators, by limiting the scope of an indemnity sought by the site provider in an imposed agreement conferring interim Code rights.
The operators applied to the UT to impose an agreement conferring Code rights to allow them to carry out a multi-skilled visit (or survey) (MSV) on the rooftop of a mixed-use building owned by the London Borough of Hackney (the site provider). The purpose of the survey was to consider if the building might be suitable as a replacement site to house the operators' mast which had to be relocated from a nearby site due to its redevelopment.
The indemnity sought
The parties agreed that a MSV could take place, and the terms of the proposed Code agreement were largely agreed save for one outstanding issue relating to the indemnity to be given by the operators. The site provider sought the imposition of a wide indemnity provision as follows:
"[The operators] shall indemnify [the site provider] against all liabilities costs expenses damages and losses including but not limited to legal costs and all other professional costs and expenses suffered or incurred by [the site provider] arising out of or in connection with:
5.1.1 this agreement
5.1.2 any breach of [the operators'] undertakings contained in clause 3;
5.1.3 the exercise of any rights given under clause 2;
5.1.4 the enforcement of this agreement
such indemnity to be limited to £10,000,000 (ten million pounds)".
The parties' positions
The operators sought to limit the scope of the indemnity, so that it extended only to "all third-party liabilities costs expenses damages etc" and did not cover any costs of or losses sustained by the site provider itself.
The operators argued that the site provider's “comprehensive, open-ended” indemnity was unnecessary due to the "detailed and quite elaborative protections for the site provider" which limited the need for any indemnity for losses which might in theory be sustained by the site provider. The operators further highlighted that the comprehensive indemnity sought by the site provider overlapped with paragraph 25(1) of the Code which provides a statutory right to compensation.
The site provider contended in response that a claim for compensation may result in some irrecoverable costs, and we are in the very early days of the Code and there have, as yet, been no reported Tribunal decisions dealing with claims for compensation under paragraph 25. The site provider considered the indemnity sought was relatively standard and uncontroversial. The site provider referred to observations in EE Ltd v Islington LBC  UKUT 361 (LC) as to the correct approach to the terms of an agreement imposing interim Code rights – namely that "the full risk of the operation on which the operator wishes to embark" should be put "on the operator and none of the risk on the site provider".
The UT's decision
The UT recognised that whilst it has discretion to impose a Code agreement with such modifications as it thinks fit, the Code agreement must include terms which the UT thinks appropriate "for ensuring that the least possible loss and damage is caused by the exercise of the Code rights" to the site provider. However, this did not mean that the broad indemnity sought by the site provider should be awarded. The UT also had regard to the site provider's right to compensation under paragraph 25 of the Code, which meant that there was already protection for the site provider on legal and other professional expenses without having to duplicate this in the form of an indemnity. The indemnity was accordingly limited in favour of the operators.
Capitol Park Leeds v Global Radio Services
Tenant's removal of landlord's fixtures doesn't prevent the giving of vacant possession…
The Court of Appeal has this week handed down Judgment in a case which concerned whether the tenant had terminated a lease by the exercise of a break clause.
The Tenant, Global Radio Services Limited, served a break notice on the Landlord, Capitol Park Leeds, in accordance with clause 10 of the lease. The break had a number of conditions attached to it, one of which was set out at clause 10.1.4 of the lease and which required the Tenant to 'give vacant possession of the Premises to the Landlord on the relevant Tenant's Break Date'.
In an attempt to comply with the break condition, prior to vacating, the Tenant removed the Landlord's fixtures including (amongst other things) ceiling tiles, radiators, heating pipework to serve radiators and office lighting.
The Landlord argued that the Tenant had not complied with the condition at clause 10.1.4 as it had not given back 'the Premises' as defined in the lease and as a result, therefore, the lease (and all associated liabilities such as for rent) was continuing. The Tenant disagreed and the case proceeded to trial.
At first instance, the Judge found in favour of the Landlord and held that the Tenant had not complied with clause 10.1.4 as it have given back 'considerably less than 'the Premises''. A declaration that the lease had not terminated on the break date was granted.
The Tenant appealed and the Court had to decide whether the Tenant's removal of the Landlord's fixtures meant that it did not give vacant possession.
On appeal, the Court overturned the declaration and found that the intention of clause 10.1.4 was for the Tenant to return the premises free of people, chattels and interests (which it had done). The clause was not concerned with the repair or condition of the property.
Accordingly the Tenant's exercise of the break clause was found to be effective and the lease had terminated on the break date. Although this ruling meant that the Tenant had in effect been able to leave the property in a dire state, the Landlord was able to seek compensation for its losses under the lease by claiming damages for terminal dilapidations.
Poundland Ltd v Toplain Ltd
Tenant fails to introduce lockdown rent suspension clause on renewal…
In a business lease renewal under the Landlord and Tenant Act 1954, the County Court at Brentford refused to introduce a clause in a renewal lease which would reduce the rent and service charge payable by the tenant by 50% in the event that the Government imposes a lockdown.
By the time the matter reached the eCourt, a number of terms remained in dispute including a term requested by the tenant which would have the effect of reducing the rent and service charge payable in the event of any further national lockdowns.
The Tenant (Poundland) sought the inclusion of the clause reducing rent and service charge on the basis that it would modernise the lease, and sought to rely on the decision in WH Smith Retail Holdings Limited v Commerz Real Investmentgesellshaft mbH in arguing that it should be included.
The Landlord, Toplain, argued that there was no market precedent for this drafting, and that its inclusion would change the relationship between the parties.
The Court found in favour of the Landlord and stated that, in line with the judgement made on O'May v City of London Real Property Co Ltd, the inclusion of this clause would not be fair in the circumstances. The eCourt further stated that it was not the purpose of the Landlord and Tenant Act 1954 to rewrite previously negotiated risks and considered it unreasonable 'to impose on the landlord a sharing of the risk in circumstances over which the landlord would have no control whilst the tenant may have some by reference to reliefs or schemes that might be available to them'.
The eCourt decided this case could be differentiated from WH Smith case as, in that case, the parties had already agreed that a pandemic rent suspension clause would be included in the renewal lease and the eCourt was simply determining the mechanics of how the clause would work in practice.
Although only a County Court decision, the decision in the Poundland case provides tenants and landlords alike with a reminder that any party seeking to introduce a new term on renewal to the disadvantage of the other party will face an uphill struggle.
Insights from across the firm
- Professional Negligence – a return to first principles
- TrowersIncludes: Anti-racism – a reflection
- Climate Change litigation series – the requirement for companies to cut their greenhouse gas emissions - a review of the recent judgment in the Shell Case
- Subsidy Control bill – overview
- Honda is Designing an Ingenious In-Shoe Navigation System For The Visually Impaired - Honda is developing a in-shoe navigation system to support the visually impaired with walking, and it could be a game-changer. The Ashirase is a navigation system consisting of a smartphone app and a three-dimensional vibration device including a motion sensor, which is attached inside the shoe. Based on the route set with the app, the device vibrates to provide navigation.
- Drought Fix: California Eyeing Huge Water Savings As Evaporation is Slowed By Solar Panels Built Over Canals - UC Santa Cruz is investigating this method as a possible generator of solar energy that would allow for the saving of 63.5 billion gallons of water from evaporation annually, a massive windfall for a state that sometimes rations water and which regularly suffers from droughts.
- Cows are being touted as the latest solution to plastic pollution - Researchers have discovered that bacteria living inside a cow’s gut can break down several types of plastic. Scientists at the University of Natural Resources and Life Sciences in Vienna found that bacteria living inside a cow’s rumen – one of the four compartments of its stomach – can digest certain plastics, including those used to make single-use packaging.