High Court Final Judgment: Double-click to enter the short title

Neutral Citation Number: [2021] EWHC 1013 (QB) Case No: QB-2020-002783 And Case
No. QB-2020-002786 And Case No. QB-2020-002792
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice Strand, London, WC2A 2LL

Date: 22/04/2021

Before :

MASTER DAGNALL
---------------------
Between :
QB-2020-002783 (“the First Claim”)
BANK OF NEW YORK MELLON
(INTERNATIONAL) LIMITED Claimant

- and -

CINE-UK LIMITED Defendant

And QB-2020-002786 (“the Second Claim”)

Between:

AEW UK REIT PLC Claimant

• And -

MECCA BINGO LIMITED Defendant

And QB-2020-002792 (“the Third Claim”)

Between:

Page 1

AEW UK REIT PLC Claimant

High Court Final Judgment: Double-click to enter the short title

• And -

SPORTSDIRECT.com RETAIL LIMITED

Defendant

Mr Guy Fetherstonhaugh QC and Ms Elizabeth Fitzgerald (instructed by Mishcon de

Reya LLP) appeared for the Claimants in the First Claim, the Second Claim and the
Third Claim
Ms Philomena Harrison (instructed by Maples Teesdale LLP) for the Defendant in the
First Claim
Mr Tim Calland (instructed by Estate Legal Limited) for the Defendant in the Second
Claim
Ms Katharine Holland QC, Ms Kimberley Ziya, and Mr Admas Habteslasie (instructed
by Shoosmiths LLP) for the Defendant in the Third Claim

Hearing dates: 24 and 25 November and 17 and 18 December 2020

---------------------

JUDGMENT

MASTER DAGNALL :

Introduction
1. The COVID-19 pandemic (“the Pandemic”) and its consequences have had
a massive effect on public, private and business life in this country and
elsewhere in the world. This Hearing has concerned questions as to upon
whom (landlords, tenants and/or insurers) certain of the resultant financial
detriments should fall, and, in particular, whether tenants of commercial
premises have remained responsible to pay their rents notwithstanding that
they have been subject to the enforced closure of, or inability to trade from,
their premises.

2. There are before me applications for summary judgment made by the

Claimant landlords (“the Landlords”) against the Defendant tenants (“the
Tenants”) in these three Claims for rents (“the Rent(s)”) which have (in
principle) fallen due under three leases (“the Lease(s)”) of commercial
premises (“the Premises”) during the currency of the Pandemic and
consequent statutory regulations (“the COVID Regulations”) restricting the
use of and access by the public to the Premises and, at least according to the
Tenants, compelling or necessitating their closure for (at least) substantial
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Page 2

periods of time (and so that they were all closed as at the dates of the
hearing, and see below).

3. The Landlords contend that the Rents (including value added tax (“VAT”)
and interest (“Interest”)) simply continue to fall due and payable
notwithstanding the existence of the Regulations and their effects. The
Tenants assert that, for various differing reasons, the consequence of what
has happened is that they do not have to pay all or part of the Rents.

4. The Landlords are Bank of New York Mellon (International) Limited

(“BNY”) and AEW UK REIT Plc (“AEW”). They are associated entities
being, for these purposes, entities which hold the assets of commercial
property funds, essentially (although I am not concerned with the precise
legal structure) on behalf of investors to whom they will owe responsibilities
to seek to collect income such as the Rents. In each case they are landlords
by assignment. They act by the same solicitors and counsel being Guy
Fetherstonhaugh QC and with him (and who appeared on her own at
previous hearings) Ms Elizabeth Fitzgerald.

5. The Tenants are three well-known substantial commercial entities, being:

a. Cine-UK Limited (“Cine-UK”) which is the tenant of a Lease (“the
Cine-UK Lease”) dated 24 January 2002 made between (1) Sun Life
Assurance Society Plc (2) Cine-UK Limited and (3) Hengrove Park
Bristol (Phase 1) Management Company Limited of the land and
multiplex cinema forming part of the leisure development at
Hengrove Park, Hengrove, Bristol and which are (or were) a cinema
(“the Bristol Cinema”). The Landlord (and also the Superior
Landlord) is BNY and the Claim is QB-2020-002783. Cine-UK
appears by Ms Philomena Harrison

b. Mecca Bingo Limited (“Mecca”) and which is the tenant of a Lease

(“the Mecca Lease”) of Premises at Ground Floor and Part First
Floor, Unit 6 and adjacent smoking area, East Thames Plaza,
Dagenham dated 18 September 2017 and made between (1) Meadow
Dagenham Retail Limited and (2) Mecca Bingo Limited. and which
Premises are (or were) used for the playing of bingo (“the Dagenham
Bingo Hall”). The Landlord is AEW and the Claim is QB-2020-
002786. Mecca appears by Mr Tim Calland

c. SportsDirect.com Retail Limited (“Sports Direct”) and which is the

tenant by assignment of a Lease (“the Sports Direct Lease”) of
Premises known as part of the Ground Floor, the First Floor and part of
the Second Floor of the Woolworth Building, Bank Hey Street,
Blackpool, Lancashire dated 20 March 2008 and made between (1)
Development Securities (Blackpool Developments) Limited and (2)
Sports World International Limited, and which Premises are (or
were) used as a retail shop (“the Blackpool Shop”). The Landlord is
AEW and the Claim is QB-2020-002792. I believe that AEW is
High Court Final Judgment: Double-click to enter the short title

also the Superior Landlord but it is common-ground in any event that

the relevant Insurance is that to which I refer below as taken out by
AEW. SportsDirect appears by Ms Katharine Holland QC and with
her on the first two days Ms Kimberley Ziya and on the final two
days Mr Admas Habteslasie.

6. The Leases each contain provisions for the Rents (themselves subject to
review or increase) to be paid by quarterly instalments of annual figures
(with VAT) in advance on the usual quarter days; and with Interest to accrue
following default. The Claims were originally for all or part of the March
2020 quarter’s rent, and in some cases for the June 2020 quarter’s rent,
although I have given permissions which will enable Rents for other quarters
to be claimed.

7. The Tenants assert that they have a real prospect of defending the Claims
and/or there is a compelling reason(s) why the Claims should be disposed of
at a trial for a number of reasons, but where different Tenants (at least in
their pleaded Defences) rely on different reasons although counsel in their
submissions sought (albeit only as “fall-back” secondary cases) to adopt
each other’s submissions. These reasons divided up into:
a. The Rent Cesser clauses in the Leases should be construed to
provide that in the circumstances of the Regulations and of the
Landlords having (allegedly) insured against the event of the
Pandemic and/or the Regulations (“the Insurance”), the Rents ceased
to be payable, at least whilst the Premises were or had to be closed
b. If the Rent Cesser clauses were not to be construed so expressly,
then there should be implied into the Leases terms to such effect
c. If the Rent Cesser effect was not to be achieved by construction or
implication then the Leases should, by (i) construction or (ii)
implication, be read to provide that the Landlords were to be left to
recovery by their Insurance and where:
i.the Insurance covered the Rents and so that the Landlords could
have them paid by the Insurer and in consequence of which
the Landlords can only look to the Insurer for payment and
not the Tenants or
ii. if the Insurance did not so cover the Rents at all or in part then
that was the fault of the Landlords and who could not recover
from the Tenants what they should have been able to recover
from the Insurance
d. If the Rent Cesser effect was not to be achieved by construction or
implication then a similar effect flowed from (i) a suspensory
frustration (that is to say a short-term frustration following which the
Leases would continue as before) and/or (ii) an application of
principles of supervening event in terms of illegality and/or (iii) the
application of a doctrine of temporary failure of consideration
e. An application of relevant UK Government Guidance requiring
landlords and tenants to consult as to rent suspension and similar
measures, and the need for a full consideration of all the issues in the
light of the (allegedly) unprecedented circumstances of the Pandemic
and of the Regulations.
High Court Final Judgment: Double-click to enter the short title

8. The situation in relation to Mecca Bingo is slightly different in relation to

the March 2020 quarter’s rent which Mecca Bingo paid but which payment
it contends was made under a mistake entitling it to recover under the law of
restitution and unjust enrichment. The Landlord, AEW, does not contest
that that claim would have a reasonable prospect of success if, but only if,
the argument that the March 2020 quarter’s Rent had not fallen due itself
had a reasonable prospect of success.

9. There is also a further specific and distinct point relating to an element of

the Rent claimed against Sports Direct where AEW had originally brought
proceedings in the County Court Business Centre under Claim No.
G8QZ85H4 (“the County Court Claim”) for a sum of “Rent” for the March
2020 quarter and for which it obtained default judgment (“the County Court
Judgment”) and which sum (“the County Court Judgment Sum”) was then
paid. AEW contends that it had miscalculated the amount claimed and has
included a claim for what it says is the balance (“the Balance”) in Claim
QB-2020-002792 which it contends (now) is previously unclaimed VAT.
Sports Direct contends that this claim for the Balance cannot be made at all,
and in any event not by separate High Court proceedings where the County
Court Judgment still stands, as a result of the doctrines of merger (and cause
of action and issue estoppel) or abuse of process.

The Procedural History and this Hearing

10. This hearing came about initially as follows. BNY had also issued
proceedings (“the Deltic Proceedings”) and sought summary judgment (“the
Deltic Summary Judgment Application”) against Deltic Group Limited
(“Deltic”) under Claim No. QB-2020-002071 in relation to two leases of
Night-Clubs (in Kingston-upon-Thames and Uxbridge). Deltic issued an
application for a stay of those proceedings (“the Deltic Stay Application”).
On 16 September 2020 I dismissed the Deltic Stay Application, but I
adjourned the summary judgment for timing reasons and where Deltic
wished to adduce additional arguments on law.

11. The Deltic Summary Judgment Application came back before me on 14

October 2020, and on which occasion Deltic applied to adduce further
arguments on law being at least some of those now raised by the Tenants. In
the meantime, I had learnt that there were other claims in the High Court,
Queen’s Bench Division from BNY and AEW and for which I was or was to
become the assigned Master. At that hearing BNY and AEW confirmed that
they either had issued or were in the process of issuing applications for
summary judgment in relation to each of the Claims. On an inspection of
the court’s electronic CE-File it was clear that the main underlying issues,
being whether commercial rents were still payable during the Pandemic in
the circumstances of the Regulations and the Insurance, arose in each of the
Claims although each of the Tenants, and Deltic, were raising particular
legal arguments as to why their desired consequences (Rents not being
payable in whole or in part) flowed from (relatively) common facts.
High Court Final Judgment: Double-click to enter the short title

12. In the absence of strong opposition from BNY and AEW, I came to the
provisional conclusion that it was much more consistent with the overriding
objective in Civil Procedure Rule (“CPR”) 1.1 for the various Applications
(including the Deltic Summary Judgment Application) to be listed together
to be dealt with at a single Hearing rather than to have a number of separate
hearings with the risk of inconsistent outcomes and substantial needless
expenditure of time, cost and court resource. I made provisional directions
to that effect on 14 October 2020 giving parties not there represented before
me opportunities to object (but none did object), and also other litigants
(there being a number of similar proceedings in various county court hearing
centres, including where landlord claimants are, again BNY and AEW)
opportunities to apply to join in (but none did so). I also provided that I
would consult with the Senior Master, as I then did, and she confirmed that I
could deal with the various applications together at the one Hearing and
adopt my provisional course, and which I have now done.

13. I do add that I had and have considered over the course of time as to whether
I should refer the various applications to the Judge to decide (under
paragraph 1 of the Practice Direction (“PD”) A to CPR23), in view both of
the issues involved and the circumstance that (in the absence of any other
High Court judgment directed to the underlying issues) my judgment may be
seen as having a wide application including in terms of its potential effect
upon matters in the County Court. However, I have decided not to refer to
the Judge, and in particular as:
a. No party has asked me to do so;
b. These are applications for summary judgment for claims in debt. It
is usual for Masters to determine such applications;
c. There were dates open in my diary which enabled me to hear the
matter fully within a reasonably short time period from the initiation
of the various applications, enabling the matter to be dealt with, in
my view, expeditiously and fairly in accordance with CPR1.1(2)(d);
d. The matter has been fully argued using four hearing days of court
time and to refer now would involve a very substantial waste of
party and court resource.

14. The applications were first listed and heard on 24 and 25 November 2020.
At this point the Deltic Summary Judgment Application was still before me,
and it, uniquely (the other Tenants did not seek to allege this in relation to
their Leases), asserted that the Deltic Leases had been altogether frustrated
so that they had ceased to exist (“the Full Frustration Argument”).
However, Deltic itself had notified the Court that it had dis-instructed its
solicitors and was choosing not to appear either by itself or by legal
representatives although not (then) consenting to judgment against it.

15. There was insufficient time to hear all of the submissions on 24 and 25
November 2020 and I therefore adjourned the Hearing to 17 and 18
December 2020 (the dates having been held in reserve) and which proved
sufficient to conclude oral submissions. In the meantime, BNY and Deltic
had reached a settlement and which was embodied in a consent order which
I made on 17 December 2020. As a result, the Deltic Summary Judgment
High Court Final Judgment: Double-click to enter the short title

Application was resolved and is not a subject of this Judgment although I do

refer to the Deltic Proceedings at times below, and including as to the Full
Frustration Argument.

16. Further, the Hearing took place after the Commercial Divisional Court’s
judgment in the FCA v Arch litigation (“Arch”) relating to the construction
of standard-form terms in business interruption insurance (“BII”) policies. I
was, following the Hearing, provided with a copy of the eventual Supreme
Court judgment (“the Arch Judgment”) [2021] SC 1 and invited further
submissions (as desired) in relation to it and what I considered were certain
possibly relevant elements of the Insurance in this case. The last of those
was provided on 9 February 2021.

17. The Hearing has involved substantial Bundles, full Skeleton Arguments
(with some supplementary written submissions) from all parties, and full
oral submissions from each of the parties. If I do not refer to any particular
submissions or material in this Judgment, I have, nonetheless, borne and
weighed each such matter in mind.

18. Following my circulation of this judgment in draft, but prior to its

handingdown, there was delivered by Chief Master Marsh his judgment in
Commerz Real v TFS Stores [2021] EWHC 863 (16 April 2021). That
judgment considers various of the points and arguments which are the
subject-matter of this judgment, although I think that I have received a
greater citation of authority and much more extensive argument (and I have
also had to deal with the particular wordings of the documents before me).
In any event, to the extent that that judgment (which, in terms of precedent,
is persuasive rather than binding upon me) overlaps with mine, I regard it as
being fully consistent with my analysis and conclusions. Therefore, while,
when I saw that judgment in a case-law update, I drew the attention of the
parties to it, I have not required any further submissions upon but rather
merely noted it at relevant points below.

The Applications
19. The Applications are made by Notices of Application dated: in the case of
the First Claim (Cine-UK) 4 September 2020, the Second Claim (Mecca) 15
October 2020 and the Third Claim (SportsDirect) 4 November 2020 (after
amendment).

20. The Applications are all made under CPR24.2 which provides that: “The
court may give summary judgment against a defendant...on the whole of a
claim or on a particular issue if –(a) it considers that –(ii) that defendant has
no real prospect of successfully defending the claim or issue... and (b) there
is no other compelling reason why the case or issue should be disposed of at
a trial”

21. It is common ground that the Court’s general approach to this is as set out in
Mellor v Partridge [2013] EWCA 477 at paragraph 3:
“3. John and Frank applied for summary judgment on all the claims made
against them. That application came before Beatson J (as he was then) who
High Court Final Judgment: Double-click to enter the short title

summarily dismissed some of the claims, but refused to dismiss others on

the summary basis. Both sides now appeal. Our task is not to decide whether
the claimants are right. Our task is to decide which parts of the case (if any)
are fit to go to trial. If I may repeat something I have said before (Easyair
Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), approved by this court in
AC Ward & Son v Catlin (Five) Ltd [2009] EWCA Civ 1098):
“The correct approach on applications by defendants is, in my judgment,
as follows:
i) The court must consider whether the claimant has a "realistic" as opposed
to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91; ii)
A "realistic" claim is one that carries some degree of conviction. This means
a claim that is more than merely arguable: ED & F Man Liquid Products v
Patel [2003] EWCA Civ 472 at [8] iii) In reaching its conclusion the court
must not conduct a "mini-trial": Swain v Hillman iv) This does not mean
that the court must take at face value and without analysis everything that a
claimant says in his statements before the court. In some cases it may be
clear that there is no real substance in factual assertions made, particularly if
contradicted by contemporaneous documents: ED & F Man Liquid Products
v Patel at [10]
v) However, in reaching its conclusion the court must take into account not
only the evidence actually placed before it on the application for summary
judgment, but also the evidence that can reasonably be expected to be
available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)
[2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does
not follow that it should be decided without the fuller investigation into the
facts at trial than is possible or permissible on summary judgment. Thus the
court should hesitate about making a final decision without a trial, even
where there is no obvious conflict of fact at the time of the application,
where reasonable grounds exist for believing that a fuller investigation into
the facts of the case would add to or alter the evidence available to a trial
judge and so affect the outcome of the case: Doncaster Pharmaceuticals
Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63; vii) On the
other hand it is not uncommon for an application under Part 24 to give rise
to a short point of law or construction and, if the court is satisfied that it has
before it all the evidence necessary for the proper determination of the
question and that the parties have had an adequate opportunity to address it
in argument, it should grasp the nettle and decide it. The reason is quite
simple: if the respondent's case is bad in law, he will in truth have no real
prospect of succeeding on his claim or successfully defending the claim
against him, as the case may be. Similarly, if the applicant's case is bad in
law, the sooner that is determined, the better. If it is possible to show by
evidence that although material in the form of documents or oral evidence
that would put the documents in another light is not currently before the
court, such material is likely to exist and can be expected to be available at
trial, it would be wrong to give summary judgment because there would be a
real, as opposed to a fanciful, prospect of success. However, it is not enough
simply to argue that the case should be allowed to go to trial because
something may turn up which would have a bearing on the question of
High Court Final Judgment: Double-click to enter the short title

construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007]
EWCA Civ 725.”

22. It is also common-ground that, in general, these Applications do not raise

questions of fact, and that I should proceed on the basis of what is factual
common-ground or general public knowledge (and of which I can take
judicial notice). The issues between the parties lie more in the true
meanings (by way of construction and of implication) of the Leases and the
Landlords’ Insurance Policy (and the County Court Claim Form), and the
application of various principles of law. However, there are possible
questions of fact regarding the impact and perceived future length of the
COVID pandemic and statutory regulations which I will need to and do
consider below.

23. There was, however, some difference between the parties as to whether it
was appropriate to decide on a summary judgment basis matters which
related to the construction and effects of standard-form documents, being
both the Leases (which are in standard commercial lease forms) and the
Landlord’s Insurance Policy.

24. Mr Fetherstonhaugh submitted for the Landlords that a suggestion in some

of the case-law as to a judicial reluctance to do this was rather unfounded
but, in any event, limited to specific circumstances.

25. He properly drew my attention to the decision in Ward v Catlin [2009]

EWCA Civ 1098 where an application for reverse summary judgment was
made based on a defence which relied upon standard-form clauses in
relevant commercial insurance policies.

26. At paragraph 16 reference was made to the consequences of the applying

defendants’ construction being said to be draconian and the claimants there
submitting that the factual matrix of the policies was important. The judge
below had determined some points (e.g. of the nature of policy provisions
being warranties) but had refused to construe them without what that judge
had thought was a trial necessary to determine the relevant factual matrix.
At paragraphs 25 onwards the Court of Appeal upheld that as being a
legitimate exercise of discretion. They referred to the burden being on those
defendants to in insurance law justify what would be a draconian
construction and outcome. At paragraphs 30 and 31, they held that the
wording of the relevant clauses lacked clarity.

27. At paragraphs 34 to 36, it was said:

“34. The Claimant has a real prospect of successfully contending that its
interpretation gives the Policy a more reasonable commercial meaning and
one more likely to be that intended by the parties, by limiting the
“protections provided for the safety of the insured property” to those in the
Original Proposal, and any burglar alarm system within the BAMW to a
burglar alarm stated in the Schedule and which was approved by the
Defendants, and by limiting the Warranties, as the Judge was inclined to do,
to defects within the knowledge or reasonably capable of being within the
High Court Final Judgment: Double-click to enter the short title

knowledge of the Claimant and its agents. So far as concerns the former
contentions, the Claimant may derive some support from the “General
Condition” that “the Proposal and/or the particulars in writing by which the
Insured has applied to the Insurers for an Insurance in the terms stated in
this Policy and which the Insured has agreed shall be the basis of this
Contract shall be held to be incorporated herein.”

35. I agree with the Defendants that neither the Claimant nor the Judge has
articulated clearly any evidence relevant to interpretation which is likely to
exist and, although not available on the hearing of the Application, can be
expected to be available at trial. Had this been the only ground for
dismissing the Application, it would not, in my judgment, have been
sufficient: ICI Chemicals & Polymers v TTE Training: [2007] EWCA Civ
725 at paragraph [14] (Moore-Bick LJ). Mr Stuart-Smith accepted, however,
as I have said that it is apparent from paragraph [46] of the Judgment that
the Judge’s decision included the arguability of the Claimant’s submissions
on interpretation. Furthermore, I bear in mind that the Warranties are
standard terms of the Defendants’ Multiline Commercial Combined Policy,
which may affect many other policyholders, and that provisions in the
Warranties such as “be in full and effective operation at all times” and “put
into full and effective operation at all times” are said to have even wider
currency in the insurance market. In those particular circumstances,
combined with the arguability of the Claimant’s points on interpretation, I
can understand why the Judge considered it would also be appropriate to
give the Claimant the opportunity to seek and adduce any relevant and
admissible factual material available by the date of the trial.

36. For all those reasons I would dismiss this appeal. I would make no
order on the Respondent’s Notice.”

28. Mr Fetherstonhaugh submits that while the asserted need for evidence
regarding the factual matrix was not of itself sufficient for that reverse
summary judgment application to be refused, it was the fact of the existence
of both the standard-form nature of the clauses and the arguability of the
interpretation issues which justified the refusal on the basis that there should
be an opportunity to obtain such factual material . In this case, he submits
that the interpretation (and other) issues are not arguable, and rather that the
answers are clear, and also that there is no factual material which could
usefully be obtained.

29. Mr Fetherstonhaugh then took me to the recent decision relating to the

construction of a business interruption insurance policy in COVID
circumstances in TKC v Allianz 2020 EWHC 2710 where at paragraphs
95100 (after holding that there was no real prospect of a factual dispute) the
deputy judge held:
“95. There is, nevertheless, a second limb to Mr Marland’s argument that
this case is unsuitable for summary determination, which is that it
potentially has wider significance. In Mr Marland’s submission, the fact that
this is a standard form policy wording in widespread use provides a
compelling reason why the issue of whether it provides cover in the
High Court Final Judgment: Double-click to enter the short title

circumstances of the present COVID-19 pandemic is unsuitable for

determination without a full consideration of the underlying facts and full
exploration of the issues at trial.

96. In support of this submission, Mr Marland relied upon the observations

of Etherton LJ in AC Ward & Son v Catlin (Five) Ltd. That case, like the
present, involved an application by an insurer for summary judgment against
a claiming policyholder. At first instance, HHJ David Mackie QC had
dismissed the defendant insurer’s application. The Court of Appeal
dismissed the insurers’ appeal from that decision, holding that the claimant
policyholder “has a real prospect of successfully contending that its
interpretation gives the Policy a more reasonable commercial meaning and
one more likely to be that intended by the parties” [and paragraph 35 is then
cited]

97. As Lewison J recorded in his EasyAir principle (vi), the court will
always be conscious of the practical limitations of the summary judgment
procedure. As Mummery LJ observed in Doncaster Pharmaceuticals Group
Ltd v The Bolton Pharmaceutical Co 100 Ltd (a case cited by Lewison J):

.. there can be more difficulties in applying the “no real prospect of success”
test on an application for summary judgment... than in trying the case in its
entirety .. The decision-maker at trial will usually have a better grasp of the
case as a whole, because of the added benefits of hearing the evidence
tested, of receiving more developed submissions and of having more time in
which to digest and reflect on the materials.
The outcome of a summary judgment application is more unpredictable
than a trial. The result of the application can be influenced more than that of
the trial by the degree of professional skill with which it is presented to the
court and by the instinctive reaction of the tribunal to the pressured
circumstances in which such applications are often made...

98. However, this is not a case of the type which Mummery LJ was there
considering. The Skeleton Arguments lodged on both sides for this
application were lengthy, well-reasoned, and contained a full citation of
authority. The hearing by video-link before me was largely free of technical
problems and lasted a full day. I am therefore satisfied that both parties have
had an adequate opportunity to address the relevant issues in argument.

99. Moreover, given the economic effects of the COVID-19 pandemic, it

seems to me that there is a public interest in having the issue of whether the
Business Interruption section of Allianz’s standard “Commercial Select”
policy provides cover determined (if it can fairly and justly be done) sooner
rather than later. That circumstance distinguishes the present case from the
situation considered by the Court of Appeal in the AC Ward & Son case,
where the issues being considered, while of some general significance, were
not of immediate and pressing importance to other policyholders, and where
the court’s decision was handed down less than two months before the date
fixed (subject to the outcome of the appeal) for the trial of the action.
High Court Final Judgment: Double-click to enter the short title

100. In my judgment, it would therefore be in accordance with the

overriding objective for me now to deal with and to decide, so far as I am
able, the issues of interpretation raised by Allianz’s application.”

30. Mr Fetherstonhaugh submitted that I should take the same course

here. He submits that the matters have been very fully argued
out, there are no material factual issues, and that it is of great
importance for commercial landlords (and their investors) and
tenants to know generally whether commercial rents are actually
payable.

31. The Tenants made limited submissions with regard to this, not
adducing any other authorities, but accepting (as indeed does Mr
Fetherstonhaugh) that similar issues to those raised in these
Applications may be arising with regard to very very many sets
of commercial premises and leases, and pressing upon me
contentions that in the light of the Court of Appeal’s approach I
should not be deciding matters at this point but leaving them over
to a full trial at some later date.

32. It does seem to me that the case-law makes it clear that I have a
discretion as to whether or not to proceed to summary judgment
although it is not entirely clear how it arises within the three
possible elements of (1) whether there is a real prospect of a
defence succeeding (2) whether there is, in any event, a
compelling reason for a trial or (3) it is more general (arising
from the use of the word “may”) in CPR24.2.

33. However, it does seem to me, in any event, that the discretion
(and each of the above elements) has to be considered in all the
circumstances of the case, and which could include other matters
of the public interest and in particular the Government Guidance
to which Ms Harrison has taken me (see below). Nevertheless,
arguments in favour of requiring a trial, and thus of refusing
summary judgment, have to be measured and balanced against
the policy of granting summary judgment as a means of
achieving the CPR1.1 overriding objective and including by
saving time and expense, avoiding waste of parties’ and court
resources, and ensuring that if a defence is clearly going to fail
then it should be disposed of at an early point and the claimant be
given the judgment to which it is entitled without further delay. I
bear in mind also that the question of the grant of summary
judgment is separate from any question as to what should happen
regarding enforcement of such a judgment.

34. I have applied these various principles and authorities in and in

making my determinations below.
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The Leases
35. The Leases are all in a standard commercial form and very much resemble
each other. There is attached at the end of this Judgment a Schedule setting
out certain of their material provisions and clauses.

36. Each Lease contains a demise for a defined term of years. As to this:
(1) The Cine-UK Lease is for 35 years from 1 May 1999 meaning that until
the COVID pandemic resulted in substantial regulations towards the end of
March 2020, it had run for some 20 years, and after, say, 18 months (as to
which see below) of pandemic restrictions it would have another 12.5
years to run. It does, however, have a break clause enabling determination
after 25 years (when after 19 months of pandemic restrictions only 2.5
years would be left to run);
(2) The Mecca Lease is for 15 years from 18 September 2017 meaning that
until the COVID pandemic resulted in substantial regulations towards the
end of March 2020, it had run for some 2.5 years, and after, say, 18
months (as to which see below) of pandemic restrictions it would have
another 11 years to run;
(3) The SportsDirect Lease is for 15 years from 5 October 2007 meaning that
until the COVID pandemic resulted in substantial regulations towards the
end of March 2020, it had run for some 13.5 years, and after, say, 18
months (as to which see below) of pandemic restrictions it would have another
1 year to run.

37. The Leases all have (subject to the relevant Premises being occupied for the
purposes of a relevant business by a relevant person) the protection to their
tenants afforded by Part II of the Landlord and Tenant Act 1954 (“the 1954
Act”) none being “contracted-out”. That protection extends, in the usual
course, to a right to continued renewals (at then market rents) with statutory
compensation if a renewal does not take place due to assertion by the
Landlord of a non-fault ground (e.g. redevelopment). However, 1954 Act
rights require the existence of a Lease and it is common-ground that they
would not exist if a Lease was frustrated or otherwise avoided.

38. Each Lease contains clauses for the payment of the annual rent on a
quarterly in advance basis on the usual quarter days being 25th March, 24th
June, 29th September and 25th December in each year. The rent is payable
together with VAT (and if not paid for certain periods of time then with
interest at set rates). Each Lease also contains provision for rent review or a
quantified rent increase, including for payment of any balancing figure for
the period between a review date and when a review eventually takes place.
The parties have been able to agree figures for what rents and amounts will
have fallen due assuming that the defences raised fail, and which are set out
in a Schedule attached. As I say above, a discrete point exists regarding
what is said to be an outstanding element of the March quarter’s rent (or
rather the VAT upon it) in relation to the SportsDirect Lease (and I set out
the relevant wording when I come to that below), and it is common-ground
High Court Final Judgment: Double-click to enter the short title

that if its defences do not fail at this point Mecca has an arguable claim to a
repayment.

39. Each Lease also contains provisions for a “Prescribed Use” for the Tenant as
follows:
a. In the Cine-UK Lease:
i.“the Permitted Use” is defined by clause 1.8 as “Use of the
Property as and for a multiplex cinema for the exhibition
therein of motion pictures television dramatic opera concert
lectures or theatrical performances or entertainment or for
receiving or transmitting and broadcasting by any method or
means any of the foregoing to viewers or listeners wherever
located or for any other lawful theatrical or related purpose
subject always to the constraints as to the use of the Property
contained in the Superior Lease together with as ancillary to
such use a games room and other uses ancillary to a
multiplex cinema”; and
ii. Clause 5.17.1.4 is a covenant not to use the whole or part of
the Property: “otherwise than for the Permitted Use or the
Permitted Sublet Use described in paragraph (a) of that
definition during the first five years of the Term in
accordance with the requirements and conditions of any
planning permission authorising such use from time to time
save that following the expiration of the first five years of the
Term the Tenant subject to the other constraints as to the use
of the Property in this clause 5.17 and as contained in the
Superior Lease shall be entitled to change the use of the
Property to any leisure use not being the then current primary
permitted use or the Permitted Sublet Use of any other
premises on the Estate or to any other use with the prior
written consent of the Landlord not to be unreasonably
withheld or delayed”
b. In the Mecca Lease:
i.“the Permitted Use” is defined as “Use of the Smoking Area as
a smoking shelter for patrons and staff only and for uses
ancillary to the Tenant’s use of the Property but not so as to
involve any gaming equipment other than the playing of
portable mechanised or video based bingo games. Use of the
Ground Floor and part first floor, Unit 6:- as a bingo Hall with
ancillary activities it being agreed that such activities may
include (without limitation to the generality of the foregoing)
the operation on any part or parts of the Property of
concessions in accordance with clause 4.11.8(b) relating to
the sale for consumption on or off the Property of food
beverages (alcoholic and/or non-alcoholic) and other edible
items and all merchandise related to bingo use and the
provision of gaming or amusement machines; and/or as a
casino with ancillary activities it being agreed that such
activities may include (without limitation to the generality of
the foregoing) the operation on any part or parts of the
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Property of concessions in accordance with clause 4.11.8(b)

relating to the sale for consumption on or off the Property of
food beverages (alcoholic and/or non-alcoholic) and other
edible items and all merchandise related to bingo use and the
provision of gaming or amusement machines; and/or For any
other use within Class D2 of the Town and Country Planning
(Use Classes) Order 1987; and/or with the Landlord’s written
consent (which consent shall not be unreasonably withheld or
delayed ) for any other leisure and/or entertainment use [with
a Proviso restricting cinema and certain other specific uses]
ii. Clause 4.18.1 is a covenant “Not to use the whole or any part
of the Property: …(d) otherwise than for the Permitted Use in
accordance with the requirements and conditions of any
planning permission authorising such use from time to time
…”
c. In the SportsDirect Lease:
i.“the Authorised Use” is defined at clause1.1 as “1(a) use as a
shop for the retail sale of sports and leisure goods ... and
related ancillary goods; and (b) use for an ancillary cafe or
such other non-food retail use within Class A1 …as
approved by the landlord (such approval not to be
unreasonably withheld or delayed)” and
ii. Clause 3.7 is a covenant “Not to use the premises other than
for the Authorised Use...”

40. Each Lease contains a qualified covenant against assignment or underletting.

41. Each Lease contains a definition of “Insured Risks”. These differ slightly
and are as follows:
a. In the Cine-UK Lease clause 2.10 provides that “Insured
Risks”… “Means the risk of fire lightning explosion aircraft
(save for damage caused by hostile aircraft following the
outbreak of war) and other aerial devices or articles dropped
therefrom riot civil commotion strikes and labour disturbances
or malicious persons storm or tempest flood bursting or
overflowing of water tanks apparatus or pipes earthquake impact
collapse resulting from subsidence ground heave or landslip and
accidental damage to Conduits weather under or above ground
fixed or plate glass and three years’ loss of Basic Rent payable
to the Landlord in the event that the whole or part of the
property becomes unusable due to the occurrence of the matters
listed in this definition other than the loss of Basic Rent and
such other insurable risks as may be reasonably required from
time to time during the term by the Superior Landlord under the
Superior Lease and notified to the Tenant but may from time to
time exclude at the discretion of the Tenant any risk in respect of
which cover is not available in the normal market in the United
Kingdom on reasonable commercial terms in relation to the risks
to be insured and subject to such exclusions terms and
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conditions as the insurers may reasonably require and are usual

in the marketplace from time to time”
b. In the Mecca Lease, “Insured Risks” is defined as “The risk of
terrorism, fire, lightning, explosion, aircraft (save for damage
caused by hostile aircraft following the outbreak of war) and
other aerial devices or articles dropped from them, riot, civil
commotion, strikes and labour disturbances or malicious
persons, storm or tempest,
flood bursting or overflowing of water tanks, apparatus or pipes,
earthquake, impact, collapse resulting from subsidence, ground
heave or landslip and accidental damage to Conduits weather under
or above ground fixed or plate glass and such other risks and perils
against which the Landlord, acting reasonably, may insure from time
to time but may exclude at the reasonable discretion of the landlord
any risk in respect of which cover is not available in the normal
market in the United Kingdom on reasonable commercial terms and
subject to such exclusions terms and conditions as the insurers may
reasonably require”
c. In the SportsDirect Lease, “Insured Risks” is defined by clause
1.1 as “The risks of loss or damage (other than war damage) by
fire, storm, tempest, flood, lightning, subsidence, landslip, heave
and terrorism, explosion, aircraft (other than hostile aircraft and
items dropped from such aircraft), riot or civil commotion,
malicious damage, impact, bursting and overflowing of pipes
and such other risks as are normally insured under a
comprehensive policy relating to property of a similar nature to
the Building and property owners’ third party liabilities and
machinery cover and such other risks as the Landlord or
Superior Landlord shall from time to time desire to insure”.

42. Each Lease contains a set of provisions regarding what is to happen

regarding Insurance and what is to happen in the circumstances of particular
Events occurring, being as follows.

43. In the Cine-UK Lease, within clause 7 there appear the following:

a. At clause 7.1 headed “Landlord to Insure” that “the Landlord

shall insure and keep insured with a reputable insurer or
underwriters with the interest of the Tenant noted thereon and
subject to such exclusions excesses and limitations as may be
imposed by the insurers and which are normal in the
marketplace:
7.1.1. the Property against loss or damage by the Insured Risks in
the Reinstatement Cost

7.1.2 the loss of Basic Rent and Service Charge from time to time
payable or reasonably estimated to be payable under this Lease
under any other leases of other parts of the Estate taking account in
the case of the Basic Rent of any review of the Basic Rent which
High Court Final Judgment: Double-click to enter the short title

may become due under this Lease or such other leases (together with
any applicable Value Added Tax) for a period of three years

7.1.3 property owner’s liability and such other insurance as the

Landlord may from time to turn reasonably deem necessary to effect

PROVIDED ALWAYS that the Landlord shall not be under any

obligation to insure any fixtures and fittings installed by the Tenant
which have become part of the Property or any alterations to the
Property unless the Tenant shall have complied fully with the
provisions of clause 5.14 and the Landlord has agreed with the Tenant
to effect the insurance thereof

b. At clause 7.2 headed “Evidence of Insurance”

“At the request of the Tenant (but not more than once in every year)
the Landlord shall produce to the Tenant reasonable evidence from its
insurers of the terms of the insurance policy together with evidence
that the premium has been paid”

c. At clause 7.3 headed “Destruction of the Property” “if the

Property or any part thereof is destroyed or damaged by any of
the Insured Risks then:

7.3.1 unless either the insurance shall have been vitiated or the
payment of the insurance monies shall be refused in whole or in part
by reason of any act or default of the Tenant and

7.3.2 subject to the Landlord being able to obtain the necessary

planning permission and all other necessary licences approvals and
consents (which the Landlord shall use all reasonable endeavours to
obtain without being obliged to institute any appeal) the Landlord
shall layout the proceeds of such insurance (other than in respect of
loss arising under sub clauses 7. 1.2 and 7. 1.3) as soon as reasonably
practicable in the rebuilding and reinstatement of the Property or any
part thereof so destroyed or damaged substantially as the same were
prior to any such destruction or damage with such variations as the
Landlord may reasonably require or as may be requisite in accordance
with the requirements of planning control and/or building and/or other
regulations”

[“Reinstatement Cost” is defined at 2.20 as “the costs (including the

cost of shoring up demolition and site clearance architect's surveyor's
and other professional fees) and Value Added Tax (if applicable)
which would be likely to be incurred in reinstating the Property in
accordance with the requirements of this Lease at the time when such
reinstatement is likely to take place having regard to all relevant
factors including any increases in building costs expected or
anticipated to take place at any time up to the date upon which the
Property shall be fully reinstated together with three years' loss of
Basic Rent as referred to in the definition of Insured Risks herein”]
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d. At Clause 7.4 headed “Cesser or Rent” that: “In case the

Property or any part thereof or access thereto or any other part of
the Estate shall at any time during the Term be destroyed or
damaged by any of the Insured Risks so as to render the
Property unfit for occupation or use and the insurance shall not
have been vitiated or payment of the policy monies refused in
whole or in part as a result of some act or default of the Tenant
then the Basic Rent or a fair proportion thereof and Service
Charge according to the nature and extent of the damage
sustained shall
from and after the date of such damage be suspended and cease to
be payable until the Property shall have been made fit for
occupation or use and in the event of dispute as to the amount or
duration of the abatement of the Basic Rent such dispute shall be
settled by a single arbitrator to be appointed in accordance with
clause 11

PROVIDED THAT If it is not possible for any reason for the

Landlord to rebuild or reinstate the Property within a period of three
years from the date of damage or destruction being caused by any of
the Insured Risks the Landlord and the Tenant shall be at liberty to
determine this demise by serving one calendar month’s notice in
writing to that effect upon the other and upon the expiry of such
notice these presents shall determine but without prejudice to the
right and remedies of either party against the other in respect of any
antecedent claims or breaches AND IN THE EVENT of this demise
being determined in such manner or if this Lease is determined by
frustration as a result of such damage or destruction the whole of the
insurance monies receivable under the policy of insurance shall
belong to the Landlord absolutely and the Tenant shall have no
claim or interest therein.”

e. Clause 7.5 headed “Tenant not to Vitiate Insurance” contains

various obligations on the Tenant including in clause 7.5.2 “Not
to insure the Property or any other part of the Estate against any
of the Insured Risks” and by clause 7.5.3 “To notify the
Landlord immediately in writing in the event of damage to the
Property or (where known to the
Tenant) or to any other part of the Estate by any of the Insured Risks”.

44. In the Mecca Lease:

a. Clause 7.5 provides that “the Landlord will effect the insurances
referred to in clause 8.1 in a reasonable and cost effective manner
subject to cover being available”
b. Clause 8.1 provides that “The Landlord shall insure and keep insured
with a reputable insurer or underwriters at a rate or rates not
substantially in excess of those generally available in the market and
subject to such exclusions excesses and limitations as may be
imposed by the insurers:
High Court Final Judgment: Double-click to enter the short title

8.1.1the Landlord’s Estate against loss or damage by the Insured

Risks in the Reinstatement Cost PROVIDED ALWAYS that the
Landlord shall not be under any obligation to and shall not insure (a)
any fixtures and fittings belonging to the Tenant or any alterations to
the Property unless the Tenant shall have complied fully with the
provisions of clause 4.15 and the Landlord has agreed with the
Tenant to effect the insurance thereof (b) any fixtures and fittings
belonging to the tenants of other Lettable Areas
8.1.2the loss of Basic Rent (including provision for rent review) and
Service Charge including VAT from time to time payable or
reasonably estimated to be payable to the Landlord under this Lease
and any other leases of other parts of the Landlord’s Estate for a
period of three years
8.1.3property owner’s liability and such other insurance as the
Landlord may from time to time reasonably deem necessary to effect

c. Clause 8.3 provides that “if the Property or any part of it is destroyed
or damaged by any of the Insured Risks then …the Landlord shall
layout the proceeds of such insurance …as soon as reasonably
practicable in the rebuilding and reinstatement of the Property …”

d. Clause 8.4 provides that “In case the Property or any part of it or
access to it or any other part of the Landlord’s Estate over which the
Tenant has rights shall at any time during the Term be destroyed or
damaged by any of the Insured Risks so as to render the Property or
part of it unfit for or incapable of lawful occupation or use for the
Permitted User and/or inaccessible and the insurance shall not have
been vitiated or payment of the policy monies refused in whole or in
part as a result of some act or default of the Tenant … then the Basic
Rent and the Service Charge or a fair proportion of them according
to the nature and extent of the damage or inaccessibility sustained
shall from and after the date of such damage be suspended and cease
to be payable until either:
8.4.1 the Property shall have been made fit for occupation or use or
8.4.2 the period, which will be not less than 3 years, for which the
Landlord insures loss of rent and service charge will have expired
whichever shall be the earlier …”

e. Clause 8.7 provides that “If the Property has not been reinstated so as
to be fit for occupation and use and accessible” by a particular time
then either party may serve a notice to determine the Lease.

45. In the SportsDirect Lease:

a. In clause 4.3 headed “Insurance” it is provided that: “4.3.1 In
relation to the insurance of the Building maintained by the Superior
Landlord, the Landlord shall: (a) use all reasonable endeavours to
procure that the interest of the Tenant is noted or endorsed on the
policy;…
4.3.2 In case of destruction to or damage to the Building or any part
or parts thereof by any of the Insured Risks the Landlord shall use all
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reasonable endeavours to enforce the covenant given by the Superior

Landlord in clause 4.2.5 of the Headlease …
4.3.3. If the Property is wholly or substantially damaged by any of
the Insured Risks the Landlord shall use reasonable endeavours to
procure that the Superior Landlord obtains deeds of collateral
warranty in favour of the Tenant from the building contractor
…engaged to carry out the works of rebuilding or reinstatement …”

b. In clause 5.3 headed “Rent suspension” it is provided that: “5.3.1 If

the Building or the Premises are damaged or destroyed by an
Insured Risk so that they are rendered unfit for occupation or use
or inaccessible, then provided that insurance of the Building has not
been vitiated or payment of the insurance money is not refused
wholly or in part through an act or default of the Tenant the rent
firstly reserved under clause 2.3.1 (or a fair proportion according to
the nature and extent of the damage )will not be payable until the
earliest of the date that:
(a) the Premises are again fit for occupation and use and are
accessible; or
(b) until three years from the date the damage occurred, whichever
is the earlier.” And
“5.3.2 If the Premises has not been rendered fit for such occupation
and use and accessible within the period of two years six months
from the date of damage or destruction then either the Landlord or
the Tenant may at anytime thereafter but before the Premises has
been rendered fit for such occupation and use and accessible by
notice in writing to the other party determine this Lease …”

46. While the SportsDirect Lease refers to the Superior Landlord taking out the
relevant Insurance, it is common-ground that AEW has acquired (I do not
know whether or not with the consequence of a merger) the Superior
Landlord’s interest and is thus both Landlord and Superior Landlord, and no
points have been taken in relation to the fact that the mesne lessor is not the
Insured as such.

47. Each Lease contains a provision that the Tenant is to pay a proper proportion
of the amount of the premiums incurred for the Insurance (in the case of the
SportsDirect Lease by way of contribution to service charge payable to the
Superior Landlord). There is no dispute but that the Tenants have paid the
amounts demanded from them.

48. The Leases contain certain other specific provisions to which I refer below.

49. Certain of the above clauses contain references to Arbitration but it is

common ground both that they are not relevant to what I have to decide and
that Defences have been filed and steps taken in the proceedings by the
Tenants without their having made any applications for stays under section 9
of the Arbitration Act 1996. I, therefore, say no more about them.
High Court Final Judgment: Double-click to enter the short title

The Insurance and the Insurance Policy

50. The Insurance effected by the Landlords (whether by themselves or as
Superior Landlords) is actually in the form of a single Insurance Policy,
although it has differing wordings over the relevant two annual policy
periods, the insurer being Allianz Insurance plc (“the Insurer”).

51. The essential provisions for the annual periods are as follows.

52. The Period of Insurance runs from 31st March to 30th March annually.

53. The following definitions apply to the cover:

“BUILDINGS means the BUILDINGS at the PREMISES and include

various items e.g. fixtures and fittings. The PREMISES is a reference to the
properties listed in the Schedule and which are used by the Insured for the
purposes of the BUSINESS.

BUSINESS means the BUSINESS of the INSURED shown in the Schedule

and including … “the provision of services to the TENANTS”.

DAMAGE means “Loss destruction or damage … i. the actual annual

RENT at the commencement of the PERIOD OF INSURANCE … in each
case the amount to be proportionately increased where the INDEMNITY
PERIOD exceeds one year.”

EVENT means “Any one occurrence or all occurrences of a series

consequent on or attributable to one source or original cause”

RENT means “the money paid or payable to or by the Insured for tenancies
and other charges and for services rendered in the course of the BUSINESS
at the PREMISES”

INDEMNITY PERIOD means “The period beginning with the occurrence

of the DAMAGE and ending not later than the maximum number of months
thereafter stated in the CERTIFICATE OF INSURANCE during which the
results of the BUSINESS shall be affected in consequence of the
DAMAGE.”

54. The Schedule contains the details of:

a. the Insured; which is named as the Landlords only (although in
relation to the Blackpool Shop there is a Certificate of Insurance on
which SportsDirect is noted as the Tenant)
b. the Insured’s Business: which is stated as “Property owners,
Developers and Occupiers/Managers of Commercial and/or
Residential property portfolios”.

55. There is a section 1 headed “Property Damage” and which states:

High Court Final Judgment: Double-click to enter the short title

“If any BUILDINGS suffer DAMAGE by any causes not excluded the
Insurer(s) will pay to the Insured the amount of loss in accordance with the
provisions of the insurance

Provided that the Insurer(s) liability in any one Period of Insurance shall not
exceed in respect of each item on BUILDINGS the Sum Insured and any
other stated Limit of Liability”

56. There are a number of “causes excluded” but none refer to disease although
they do seem to all be concerned with physical matters. It is provided that
the amount to be calculated is on the “Reinstatement Basis” which has the
definition “Reinstatement means the rebuilding replacement repair or
restoration of BUILDINGS suffering DAMAGE” with a cap of what would
have been payable had the BUILDINGS been wholly destroyed.

57. There is a section in respect of “Rent” which provides:

a. “If any BUILDINGS suffer DAMAGE by any causes not excluded
under Section 1 Property Damage and the BUSINESS is in
consequence thereof interrupted or interfered with the Insurer(s) will
pay the Insured the amount of loss arising as a result in accordance
with the following provisions provided that the Insurer(s) liability in
any one Period of Insurance shall not exceed in respect of each item
200% of the Sum Insured.” And then
b. Under the heading “Rent – The Basis of Settlement of Claims” that
“The Insurer(s) will pay in respect of BUILDINGS which have
suffered DAMAGE… a. the loss of Rent being the actual amount of
the reduction in the RENT receivable by the Insured during the
INDEMNITY PERIOD solely in consequence of the DAMAGE..
[and costs of reletting and mitigation expenditure]”

58. It is then provided that there are various extensions for causes not excluded
(see above). There extensions include:
a. where BUILDINGS are unoccupied but are not let or sold
b. a provision that “DAMAGE is extended to include any outbreak of
Legionellosis at the PREMISES causing restrictions on the use
thereof on the order or advice of the competent local authority…”
c. a provision headed “Prevention of Access” that “the insurance is
extended to include loss of RENT resulting from DAMAGE to
PROPERTY in the vicinity of the PREMISES insured by this Policy
whether the BUILDINGS insured by this Policy are damaged or not
excluding DAMAGE to PROPERTY of any supply undertaking
which shall prevent or hinder the supply of services by an electricity
gas water or telecommunications undertaking to the PREMISES.”

59. However, for each policy period there is also an extension of cover for
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“Murder Suicide or Disease” (in the 2020-2021 policy it appears in the

“Loss of Rent” extensions section and in the 2019-2020 Policy it forms part
of an Endorsements section) which reads:
a. “The Insurer(s) shall indemnify the Insured in respect of loss of
RENT or Alternative Residential Accommodation and RENT in
accordance with Condition 1 to Sections 1 and 2 (notwithstanding
any requirement for DAMAGE to BUILDINGS) resulting from
interruption of or interference with the BUSINESS during the
INDEMNITY PERIOD following
a… any human infectious or human contagious disease (excluding
Acquired Immune Deficiency Syndrome (AIDS) or an AIDS related
condition) an outbreak of which the local authority has stipulated
shall be notified to them manifested by any person whilst in the
PREMISES or within a 25 mile radius of it….
The Insurance by this Extension shall only apply for the period
beginning with the occurrence of the loss and ending not later than
three months thereafter during which the results of the BUSINESS
shall be affected in consequence of the interruption or interference”
b. And in the case of the 2019-2020 Policy with the additional words
“The liability of the Insurer(s) in respect of this Endorsement shall
not exceed £100,000 any one loss”

60. There is a provision in each Schedule for cover headed “Prevention of

Access (Non Damage)” which extends Loss of Rent cover to “loss to
insured caused by prevention or hindrance of access to the BUILDINGS or
prevention or use of the BUILDINGS” due to various events and which
include closures by or due to action (or advice) of police or statutory bodies
but which has an exception for “action taken as a result of drought or
diseases or other hazards to health” (2019-2020 Policy) or “where such
actions or advice are directly or indirectly caused by or arise from any
infectious or contagious disease” (2020-2021 Policy).

61. In the 2019-2020 Policy there is a Nil Excess in relation to claims for Loss
of Rent, but in the 2020-2021 Policy there is a £350 Excess.

Relevant COVID Events and Regulations

62. I take the relevant history of the Government’s statutory and regulatory
response to the COVID pandemic up to July 2020 from the Arch Judgment
as follows:
“The emergence of COVID-19 and initial Government response
7.On 12 January 2020, the World Health Organization (“WHO”) announced
that a novel coronavirus had been identified in samples obtained from cases
in China. This announcement was subsequently recorded by Public Health
England. The virus was named severe acute respiratory syndrome
coronavirus 2, or “SARS-Co V-2”, and the associated disease was named
“COVID-19”.
8.On 30 January 2020, the WHO declared the outbreak of COVID-19 a
“Public Health Emergency of International Concern”.
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9.On 31 January 2020, the Chief Medical Officer for England confirmed
that two patients had tested positive for COVID-19 in England. The first
case confirmed in Northern Ireland was on 27 February 2020, the first in
Wales on 28 February 2020 and the first in Scotland on 1 March 2020.
10.On 10 February 2020, the Health Protection (Coronavirus) Regulations
2020 (SI 2020/129) were made by the Secretary of State for Health and
Social Care, pursuant to powers under the Public Health (Control of
Disease) Act 1984 (“the 1984 Act”). In broad terms, these Regulations
provided for the detention and screening of persons reasonably suspected to
have been infected or contaminated with the new strain of coronavirus. The
Regulations were subsequently repealed on 25 March 2020 by the
Coronavirus Act 2020 (“the 2020 Act”).
11.On 2 March 2020, the first death of a person who had tested positive for
COVID-19 was recorded in the UK, although the first death from COVID19
was publicly announced by the Chief Medical Officer for England on 5
March 2020.
12.On 4 March 2020, the UK Government published guidance titled
“Coronavirus (COVID-19): What is social distancing?”. It referred to the
Government’s action plan from the previous day, which discussed four
phases of response: “contain”, “delay”, “research” and “mitigate”. It also
referred to the possibility of introducing social distancing measures and
asked people to think about how they could minimise contact with others.
13.On 5 March 2020, COVID-19 was made a “notifiable disease”, and
SARS-Co V-2 made a “causative agent”, in England by amendment to the
Health Protection (Notification) Regulations 2010 (SI 2010/659) (“the 2010
Regulations”). Under the 2010 Regulations, a registered medical practitioner
has a duty to notify the local authority where the practitioner has reasonable
grounds for suspecting that a patient has a “notifiable disease”, defined as a
disease listed in Schedule 1, or an infection which presents or could present
significant harm to human health. The local authority must report any such
notification which it receives to, amongst others, PHE. Schedule 1 to the
2010 Regulations contained a list of 31 notifiable diseases before the
addition of COVID-19. On 6 March 2020, similar amendments were made
to the Health Protection (Notification) (Wales) Regulations 2010 (SI
2010/1546). COVID-19 had been made a notifiable disease in Scotland on
22 February 2020 and in Northern Ireland on 29 February 2020.
14.On 11 March 2020, the WHO declared COVID-19 to be a pandemic.
15.On 12 March 2020, the UK Government announced that it was moving
from the “contain” phase to the “delay” phase of its action plan and raised
the risk level from “moderate” to “high”.
16.On 16 March 2020, the UK Government published guidance on social
distancing. The guidance advised vulnerable people to avoid social mixing
and to work from home where possible. The guidance included advice that
large gatherings should not take place.
17.Also on 16 March 2020, the Prime Minister, the Rt Hon Boris Johnson
MP, made a statement to the British public, the main text of which is set out
in Appendix 1 to this judgment. In the statement he said that “now is the
time for everyone to stop non-essential contact with others and to stop all
unnecessary travel. We need people to start working from home where they
possibly can. And you should avoid pubs, clubs, theatres and other such
High Court Final Judgment: Double-click to enter the short title

social venues.” He added that “as we advise against unnecessary social

contact of all kinds, it is right that we should extend this advice to mass
gatherings as well.”
18.On 18 March 2020, the Prime Minister made a further statement… The
principal purpose of the statement was to announce the closure of schools
from the end of Friday, 20 March 2020. In the statement he said: “I want to
repeat that everyone -everyone -must follow the advice to protect
themselves and their families, but also -more importantly-to protect the
wider public.”
19.On 20 March 2020, the Prime Minister made a further statement… In
this statement he thanked everyone for following the “guidance” issued on
16 March 2020 but said that further steps were now necessary. He said that
across the UK cafes, pubs, bars and restaurants were being told to close as
soon as they reasonably could and not open the following day. He added
that: “We’re also telling nightclubs, theatres, cinemas, gyms and leisure
centres to close on the same timescale.”
The 21 March Regulations
20.On 21 March 2020, the Health Protection (Coronavirus, Business
Closure) (England) Regulations 2020 (SI 2020/327) (“the 21 March
Regulations”) were made by the Secretary of State for Health and Social
Care pursuant to powers under the 1984 Act. Equivalent regulations for
Wales were introduced on the same day.
21.The 21 March Regulations provided for the closure of businesses set out
in the Schedule to the Regulations. Under regulation 2(1) the businesses
listed in Part 1 of the Schedule, which comprised restaurants, cafes, bars and
public houses, were required to close or cease carrying on the business of
selling food and drink other than for consumption off the premises.
Regulation 2(4) required the businesses listed in Part 2 of the Schedule to
close. These included cinemas, theatres, nightclubs, bingo halls, concert
halls, museums, galleries, betting shops, spas, gyms and other indoor leisure
centres…
22.Regulation 3 of the 21 March Regulations made contravention of
regulation 2 without reasonable excuse a criminal offence, punishable on
summary conviction by a fine. Regulation 4(1) provided that a person
designated by the Secretary of State may take action as necessary to enforce
a closure or restriction imposed by regulation 2.
Developments from 22 to 25 March
23.On 22 March 2020, the Prime Minister announced the next stage of the
UK Government’s plan, which included “shielding” measures for vulnerable
people and advising members of the public to stay two metres apart even
when outdoors.
24.On 23 March 2020, the Prime Minister made a further announcement….
He said that it was vital to slow the spread of the disease and “that’s why we
have been asking people to stay at home during this pandemic”. The time
had, however, come for “us all to do more”. From that evening he was
therefore giving “the British people a very simple instruction -you must stay
at home”. He said that people would only be “allowed to leave their home”
for very limited purposes such as shopping for basic necessities and
“travelling to and from work, but only where this is absolutely necessary
and cannot be done from home”. He added that “if you don’t follow the
High Court Final Judgment: Double-click to enter the short title

rules the police will have the powers to enforce them, including through
fines and dispersing gatherings.” In order to “ensure compliance with the
Government’s instruction to stay at home” he stated that “we will
immediately -close all shops selling non-essential goods ... stop all
gatherings of more than two people in public ... and we’ll stop all social
events, including weddings, baptisms and other ceremonies, but excluding
funerals.”
25.Also on 23 March 2020, the UK Government issued guidance to
businesses about closures. This included advice that it would be an offence
to operate in contravention of the 21 March Regulations and that businesses
in breach of the 21 March Regulations would be subject to prohibition
notices and potentially unlimited fines.
26.On the same day PHE issued a document called “Keeping away from
other people: new rules to follow from 23 March 2020.” It stated that there
were three “important new rules everyone must follow to stop coronavirus
spreading”. These were (i) “you must stay at home” and should only leave
home “if you really need to” for one of the reasons stated; (ii) most shops
should stay closed; and (iii) people must not meet in groups of more than
two in public places.27.On 24 March 2020, the UK Government issued
guidance to providers of holiday accommodation to the effect that they
should have taken steps to close for commercial use and should remain open
only for limited prescribed purposes, for example to support key workers or
homeless people.
28.On 25 March 2020, the 2020 Act was enacted. The 2020 Act applies
across the UK, although different provisions have come into force in
different nations at different times. In broad terms the 2020 Act established
emergency arrangements in relation to health workers, food supply, inquests
and other matters. The 26 March Regulations
29.On 26 March 2020, the Health Protection (Coronavirus, Restrictions)
(England) Regulations 2020 (SI 2020/350) (“the 26 March Regulations”)
were made by the Secretary of State for Health and Social Care exercising
powers under the 1984 Act. Similar regulations were introduced in Wales,
Scotland and Northern Ireland.
30.The 26 March Regulations revoked most of the 21 March Regulations
and replaced them with new rules which imposed more extensive
restrictions. Regulation 4(1) was in similar terms to regulation 2(1) of the 21
March Regulations and required the businesses listed in Part 1 of Schedule 2
-which again comprised restaurants, cafes, bars and public houses -to close
or cease selling any food or drink other than for consumption off its
premises.
31.Regulation 4(4) required businesses listed in Part 2 of Schedule 2 to
close. These included all the businesses that had already been required to
close by regulation 2(4) of the 21 March Regulations (see para 21 above)
and a number of others, including nail, beauty and hair salons and barbers,
tattoo and piercing parlours, playgrounds, outdoor markets and car
showrooms. Further restrictions and closures were imposed by regulation 5
for retail shops, holiday accommodation and places of worship -with the
exception of the businesses listed in Part 3 of Schedule 2.32…
33.Regulation 6 introduced a prohibition against people leaving the place
where they were living “without reasonable excuse”.(A non-exhaustive list
High Court Final Judgment: Double-click to enter the short title

of reasonable excuses was set out in regulation 6(2).) Regulation 7

prohibited gatherings in public places of more than two people other than in
limited circumstances. Regulation 9 made any contravention of the 26
March Regulations without reasonable excuse a criminal offence punishable
on summary conviction by a fine. There were several reports of enforcement
action being taken under these provisions in the months after 26 March
2020.
34.Regulation 3 of the 26 March Regulations required the Secretary of State
to review the need for the restrictions at least once every 21 days, with the
first review being carried out by 16 April 2020. The 26 March Regulations,
and the equivalent regulations in Wales, Scotland and Northern Ireland,
were amended on several occasions. For example, on 13 May 2020 garden
centres and outdoor sports courts were added to the list of businesses in Part
3 of Schedule 2 which were allowed to stay open, as were outdoor markets
and certain showrooms on 1 June 2020.
35.On 4 July 2020, the 26 March Regulations were revoked and replaced
with more limited restrictions in the Health Protection (Coronavirus,
Restrictions) (No 2) (England) Regulations 2020 (SI 2020/684) in England.
Since then, there have been further legislative changes; but they have
occurred since the trial and were therefore not considered by the court
below….”

63. It is common ground (or at least clearly reasonably arguable) that the
Tenants all had to close their Premises to the public (and to an extent at
least, their staff) and businesses from 22 or 23 March 2020 to July 2020.

64. The more limited July Regulations permitted the opening of the various
Premises. However, the operation of the Premises remained subject to the
need to comply with the Management of Health and Safety at Work
Regulations 1999 and other statutory and common-law safety requirements
which when taken with the continually evolving government regulation and
guidance involved very considerable constraints on public access (including
in terms of numbers and social distancing).

65. The Health Protection (Coronavirus, Wearing of Face Coverings in a

Relevant Place) (England) Regulations 2020 [2020 No. 791] imposed a
requirement for the wearing of face coverings indoors with various limited
exceptions.

66. The evidence, which is not challenged by the Claimants on this hearing, is
that this led to SportsDirect opening the Blackpool Shop, on a reduced basis,
but to Cine-UK and Mecca considering that while some limited opening
might be technically possible, it was not commercially feasible, especially
when a cost-benefit analysis was carried out which involved taking into
account that the government had introduced a “furlough” scheme enabling
certain staff costs to be paid (to an extent) provided that they did not actually
work.

67. As the pandemic continued various local regulations were introduced which
had the effect of requiring SportsDirect to again close the Blackpool Shop.
High Court Final Judgment: Double-click to enter the short title

68. Then, with effect from 14 October 2020, the Government introduced a
tiering system by the Health Protection (Coronavirus, Local COVID-19
Alert Level) Regulations [2020/1103-5], replaced from 4 November 2020 by
the Health Protection (Coronavirus, Restrictions) (England) (No. 4)
Regulations 2020 [2020/1200] which imposed different levels of restriction
depending upon in which “Tier” a particular area of the country fell from
time to time. Areas might move in or out of Tiers, and with the result that
on 18 November 2020 (a day of the hearing) the Bristol Cinema changed
from being unable to open to being, in theory, able to open on a distinctly
limited basis.

69. However, on 2 December 2020 there were enacted the Health Protection
(Coronavirus, Restrictions) (All Tiers) (England) Regulations 2020
[2020/1374] which had the effect of closing down to public access (with
limited ability for staff access) all of the Premises.

70. It is clear, and effectively common ground, for the purposes of this Hearing,
that:
a. From before the March quarter day (25 March 2020) all of the
Premises were required to close to the public (with limited staff
access);
b. From 4 July 2020 it was possible to open the Blackpool Shop to the
public for a limited period (until local restrictions caused it to have
to close) and which was done;
c. From 4 July 2020 it was possible to open the Bristol Cinema and the
Dagenham Bingo Hall to the public but only on a very limited basis
and which Cine-UK and Mecca did not regard as being
commercially economic and which they therefore did not do;
d. From 14 October 2020 it was for some (but only some) limited
periods possible in theory to open each of the Premises (although
there is nothing to suggest that they were in fact opened) but not
from 4 December 2020.

71. It further seems to me that it is reasonably arguable that the effect of those
government regulations and guidance (together with health and safety
legislation in the context of the pandemic) was to render it commercially
unfeasible to open the various Premises even if theoretically possible, except
that the Blackpool Shop could open for limited periods of time.

72. As at the date of this Judgment, the pandemic and the most restrictive
regulations are continuing. However, there have been substantial scientific
developments, in particular now resulting in the “roll-out” of vaccines, and
here the intention is to vaccinate the entire (adult at least) population by
summer (and if not then by autumn) 2021. The Prime Minister on 22
February 2021 announced a “Road-Map” of a phased lifting of lockdown
which would, if kept to, result in the lifting of all restrictions by mid-June
2021. In fact from 12 April 2021 it has become possible for the Blackpool
High Court Final Judgment: Double-click to enter the short title

Shop (but not the Bristol Cinema or the Dagenham Bingo Hall) to open and
trade.

73. I refer to the various restrictive and lock-down regulations from time to time
as “the COVID Regulations”).

74. However, the announcements are clear that the Road-Map and the lifting of
restrictions are dependent upon events occurring within and complying with
the present scientific forecasts and are liable to change in the event of
unforeseen developments. Moreover, it is not at all clear as to precisely
what social distancing etc. requirements might remain in place at least for
businesses such as those of Cine-UK and Mecca where substantial numbers
of people attend within (relatively) confined spaces. I bear in mind also that
the developing nature of the pandemic, including the emergence of new
variants of COVID-19, has led to something of a “creep” in terms of
postponements of lifting of restrictions and the imposition of new
lockdowns in the past even though the government is displaying a degree of
(cautious) optimism. I refer to what I consider are and would have been the
views of a reasonable commercial person with regard to the likely length of
COVID-19 and the restrictions imposed by the COVID Regulations below.

Summary of the Parties’ Positions and Cases

75. There is little factual dispute between the parties and, in any event, at
Summary Hearing, and on the basis of the witness evidence and what is
common knowledge (and of which judicial notice can, in my view, be taken)
I should accept, for the purposes of this Hearing, what the Tenants say as a
matter of fact (as opposed to what they assert as a matter of legal
consequence, which is a different matter) and as I have set out above.

76. It is in these circumstances that the Tenants say that they, and the Leases,
have been overtaken by wholly unforeseeable (including by the original
parties to the Leases) events which have rendered the commercial purpose
of the Leases temporarily (at least) impossible and unfulfillable and which
they assert should result in the burden of rent being lifted from them on one
or more legal grounds. They further assert that they have paid for the
Insurance, that it should cover the Rents, and in consequence the Rent
should be met by the Insurer or at least by the Landlords (whose recourse, if
any, should be to the Insurance and the Insurer, with its being the Landlords
own fault if that recourse is either not taken up or not available to them).

77. The Landlords’ case is that this is a matter of allocation of risk in relation to
events which were (at least to a degree) foreseeable and where it was for the
Tenants (or their predecessors) to negotiate provisions which would have
resulted in rent cessation in these events. The Landlords say that the
Insurance may provide some cover (in particular to the Landlords) in the
events of the pandemic but such does not extend to covering loss of Rent
where there are no relevant rent cessation provisions in the Leases and the
relevant Tenants can pay.
High Court Final Judgment: Double-click to enter the short title

Arch and the Insurance

78. The question of whether the Pandemic and the various Regulations and other
government and local authority conduct amounted to the occurrence of
relevant events for the purposes of various types of BII policies came before
the courts in composite litigation FCA v Arch Insurance (UK) Limited and
Others. Following the oral hearing of these Applications, the Supreme
Court delivered its judgement citation [2021] UKSC 1. I directed that the
parties should be able to adduce further written submissions in relation to
the resultant judgment, and the Landlords did so.

79. In the Arch case, the Supreme Court considered amongst other standardform
policy wordings, a version termed as “QBE 1” which is virtually identical to
the relevant words in the Insurance - at paragraph 83(a) as follows:
“loss resulting from] interruption of or interference with the business arising
from:(a) any human infectious or human contagious disease (excluding
Acquired Immune Deficiency Syndrome (AIDS) or an AIDS related
condition) an outbreak of which the local authority has stipulated shall be
notified to them manifested by any person whilst in the premises or within a
twenty-five (25) mile radius of it;..”

80. At paragraphs 85 and 86 it was held in relation to the general coverage of

QBE 1:
“85.The wording of QBE 1 is something of an outlier in that, unlike the
clauses we have considered so far, the clause has as its subject a disease,
rather than an occurrence of illness sustained by a person resulting from a
disease. Nevertheless, we think the wording makes it sufficiently clear that
the insured peril is not any notifiable disease occurring anywhere in the
world but only in so far as it is manifested by any person whilst in the
premises or within a 25 mile radius of the premises. The words “manifested
by any person” etc are indeed, as the court below described them
“adjectival”. But that does not detract from the fact that they are an integral
part of the description of the risk. They are adjectival but not conditional.
We do not agree that the clause is naturally or reasonably read as if it said:
“any human infectious or human contagious disease ... on condition that and
from the time when the disease is manifested by any person whilst in the
premises or within a 25 mile radius of it.

86.To read the clause as if it contained such words in our view involves
unjustifiable manipulation of the language. It also involves treating the
insured peril as subject to no geographical limit at all provided only that at
least one person manifests the disease within the specified area. That seems
to us an improbable form of cover for insurers to provide, as well as one
which would be out of line with all the other limbs of the clause. Each of the
other sub-clauses covers something happening at, or a consequence of
something happening at, the insured premises: for example, injury or illness
sustained by any person arising from food or drink provided in the premises;
or the presence of vermin or pests in the premises. Sub-clause (a) is
naturally understood as operating in a similar way. The only difference from
the other sub-clauses is that the risk covered is not confined solely to
High Court Final Judgment: Double-click to enter the short title

something happening at the insured premises but extends to something

happening within a specified distance away from the insured premises.
Thus, it is not only disease manifested by any person whilst in the premises
that is covered, but also disease manifested by any person whilst within a
25-mile radius of the premises.”

81. It is common ground that there have been cases of COVID-19 within 25
miles of each of the Premises.

82. It was held in relation to causation of insured loss that:

“212.We conclude that, on the proper interpretation of the disease clauses,
in order to show that loss from interruption of the insured business was
proximately caused by one or more occurrences of illness resulting from
COVID-19, it is sufficient to prove that the interruption was a result of
Government action taken in response to cases of disease which included at
least one case of COVID-19 within the geographical area covered by the
clause. The basis for this conclusion is the analysis of the court below,
which in our opinion is correct, that each of the individual cases of illness
resulting from COVID-19 which had occurred by the date of any
Government action was a separate and equally effective cause of that action
(and of the response of the public to it). Our conclusion does not depend on
the particular terminology used in the clause to describe the required causal
connection between the loss and the insured peril and applies equally
whether the term used is “following” or some other formula such as “arising
from” or “as a result of”. It is a conclusion about the legal effect of the
insurance contracts as they apply to the facts of this case.”

83. It is thus common ground, at least for the purposes of considerations of

summary judgment, that the effect of the Arch decision is that the Insurance
does afford cover against relevant loss to at least some extent. However, the
Landlords contend that this is irrelevant as the Tenants cannot show that any
“loss from interruption of the insured business” has occurred at all, and so
that there is no relevant loss which has been caused by the Government
action in response to the Pandemic. I deal with this later below.

84. I do also note the existence of the “Prevention of Access (Non Damage)”
extensions. I do not think that any party is seeking to rely upon these in any
particular way, although Cine-UK has suggested that an independent head of
claim by the Landlord against the Insurer might exist under it, but that this
should not affect the construction of the “Murder, Suicide or Disease”
provisions. I do not accept that any claim could be made under the
“Prevention of Access (Non Damage)” extensions as they contain specific
exclusions for closures due to “action taken as a result of drought or diseases
or other hazards to health” (2019-2020 Policy) or “where such actions or
advice are directly or indirectly caused by or arise from any infectious or
contagious disease” (2020-2021 Policy), and which would seem to cover
COVID measures. However, it does seem to me that the clause may have
some very limited weight as to construction of the Policy which I deal with
below.
High Court Final Judgment: Double-click to enter the short title

Parliament, the Government and Commercial Premises and Rents

85. The various Leases all create business tenancies which are protected by the
1954 Act and to which I have referred above.

86. Parliament has enacted the Coronavirus Act 2020 which by section 82 (and
subsequent regulations) provided, in effect, that business tenancies cannot be
brought to an end by forfeiture, including for non-payment of rent, for the
period from its inception until summer 2021, and the Corporate Insolvency
and Governance Act 2020 and regulations under it which have effectively
prevented the use of statutory demands and winding-up petitions based on
non-payment of rent until summer 2021.

87. However, the Government has issued various Guidance in relation to the
Pandemic and its consequences and which included a Code of Practice
published on 19 June 2020 (“the June Code”) with regard to commercial
premises and leases, and which is in the Bundles before me. The June Code
referred in detail to the effects of the Pandemic and the then lock-down
regulations and strongly encouraged landlords and tenants to communicate
and negotiate ameliorative measures for tenants including rent-free periods
and moratoria.

88. I drew attention to the fact that on 9 December 2020 the Ministry of
Housing, Communities and Local Government published a statement
referring to the above matters. It stated amongst other matters (and to which
I refer below) that there would be additional guidance published in early
2021 to sit alongside the June Code and “to encourage all parties to work
together to protect viable businesses and ensure a swift economic recovery.”
It stated that processes for Commercial Rent Arrears Recovery (i.e. the old
distress) in relation to rent would be suspended to 31 March 2021 (now to
summer 2021) and that all “This allows businesses sufficient breathing
space to pay rent owed.”

89. Ms Harrison for Cine-UK strongly pressed upon me submissions to the

effect that it was highly inconsistent with the June Code for the Landlords in
these cases to be insisting upon payment of full rents, and to be pressing for
summary judgment (with presumably consequent enforcement) at this point
in time. She took me to correspondence in May and June 2020 where
CineUK had raised the existence and contents of the Code but the Landlords
had simply stated that they were entitled to the outstanding rents, and
contended that this was not good practice and was not a case of Landlords
acting fairly and responsibly as provided for by the June Code but was
rather wholly inconsistent with it. She submitted that the turnover from
which it would have been expected that Tenants would pay their rents has
been destroyed by the Pandemic and the Government Regulations.
Accordingly, she submitted that there was a strong public policy in these
unprecedented circumstances in favour of there being negotiations between
the Landlords and Cine-UK and the other Tenants; that the Landlords had
simply refused to engage in any such; and that this was of important weight
in supporting the Tenants’ contention that the Landlords had not shown that
High Court Final Judgment: Double-click to enter the short title

there was “no other compelling reason for a trial” as required for them to
obtain summary judgment (CPR24.2(b)).

90. I had, as I informed the parties, previously rejected an application made by

Deltic to stay the Claim against Deltic under CPR3.1(2)(f) on somewhat
similar grounds. However, I have fully reconsidered the position in the light
of the arguments now advanced.

91. While I do bear in mind the June Code and the Ministerial Statement
generally in relation to my overall conclusions as to the appropriateness of
whether or not to grant summary judgment, it seems to me that I should
reject Ms Harrison’s specific arguments for three sets of reasons.

92. First, the June Code encourages negotiation, and it is about the absence of
negotiation that Ms Harrison complains. I do not see how that renders there
as being an “other compelling reason for a trial”. If a negotiation was
successful then there would be no trial. I cannot see any connection
between the complaint and that submission as to its relevance. However,
that does not prevent the matter being relevant to questions of whether the
court should either grant a stay at this point or refuse summary judgment
under its general discretion in the opening “may” of CPR24.2.
Nevertheless, I refuse to do either of those for the following reasons (and
which are also each a substantial reason for rejecting Ms Harrison’s “other
compelling reason for a trial” submission).

93. Second, the June Code is expressly stated to be “voluntary”. In Paragraph 1

it stated “This is a voluntary code and does not change the underlying legal
relationship or lease contracts between landlord and tenant and any
guarantor.”; and Paragraph 7 reiterates “Each relationship will need to
respond to these circumstances differently. Therefore, this code is voluntary
and presents options…”. Moreover, the June Code recites that various
industry bodies on both the landlord and tenant sides have signed up to the
June Code but the Landlords are not members of any relevant body. The
Ministerial Statement does not suggest that the Code is in any way binding.
I also note that Parliament (and the Government through it) has enacted
specific limitations upon various legal rights and remedies which are
otherwise generally available to Landlords but no such limitation in relation
to simply suing for rent (and even if that might lead to enforcement by Writ
of Control).

94. I also bear in mind that in general a party with a legal right is entitled to
bring legal proceedings to enforce it and that it is at first sight an
interference with its possessions (and thus an inroad into Article 1 of the
First Protocol to the European Convention of Human Rights) and an
invasion of its Article 6 rights to a hearing within a reasonable time for it to
be prevented from having its claim determined. While the Court has power
to stay claims for negotiation and to require even unwilling parties to attend
alternative dispute resolution hearings (see CPR3.1(2)(f) and (m) and
Lomax v Lomax 2019 1 WLR 6527), it would be very unusual to do so
where a party was seeking summary judgment on the basis that their claim
High Court Final Judgment: Double-click to enter the short title

was clear and all the more so if the court had actually concluded that that
was the case (and to which this Judgment is also directed) – and I note that
in a different COVID context I have reached a similar conclusion. See
Trinity House v Prescott [2021] EWHC 283 at paragraph 20.

95. I therefore do not see that the existence of a voluntary Code encouraging
negotiation should in any way obstruct a claimant who contends that they
have a clear case seeking summary judgment and, assuming that such a clear
case is made out, from obtaining it at this point.

96. Third, both the June Code and the Ministerial Statement are clear that they
do not restrict landlords from requiring tenants who can pay their rents to do
so. In the Foreword to the June Code is the phrase “Government has always
been clear that tenants who are able to pay their rent in full should continue
to do so…” and Paragraph 3 starts “The legal position is that tenants are
liable for covenants and payment obligations under the lease, unless this is
renegotiated by agreement with landlords. Tenants who are in a position to
pay in full should do so…” The Ministerial Statement contains the sentence
“The government is clear that where businesses can pay any or all of their
rent, they should do so.”

97. I asked Ms Harrison, and also Ms Holland and Mr Calland, whether they
were contending, or adducing any evidence to suggest, that any of the
Tenants could not pay the outstanding rents. They each declined to make
any such contention or to point to any such evidence. It is not, in my view,
for the Landlords to have to demonstrate the Tenants’ financial positions
when the Tenants (and not the Landlords) have all the material knowledge.
It does not seem to me that it is open to any of the Tenants in those
circumstances to contend that the June Code or the Ministerial Statement
places any obligation, even of a voluntary nature, upon the Landlords to
negotiate.

98. Ms Harrison submits that this should be considered in the context of rents
being paid out of turnover, and that there is none. However, that is not what
the June Code and the Ministerial Statement say. If that construction was
correct then the wording would be very different and refer to trading and/or
turnover.

99. While in the Commerz Real case a somewhat similar submission from the
tenant in that case was rejected on the basis that there had been significant
engagement from the relevant landlord under the provisions of the Code,
and the evidence is here that the Landlords have simply insisted upon full
payment of the various Rents; for the reasons given above, I regard the Code
both as being outside the litigation process and not applicable to these
Tenants who are not said to be unable to pay.

100. I therefore do not think that this gives rise to any “other compelling
reason” for there to have to be a trial within the meaning of CPR24.2(b).
High Court Final Judgment: Double-click to enter the short title

Construction of the Leases

101. It is common ground between the parties that, the Landlords having
decided to obtain the Insurance which extends in principle to loss arising
from the circumstances of the Pandemic and the Government Regulations
and consequent effects on the various Premises, such Insurance is against
an
“Insured Risk” for the purposes of that expression as used in each of the
Leases. It seems to me that that is correct, each Landlord (or Superior
Landlord) has “reasonably required” such Insurance.

102. The Tenants therefore contend that the Leases should be construed or the
common law applied in those events so that:
a. The Rent Cesser clauses result in the Rents being suspended, or
b. The Landlords are either unable to sue the Tenants for or have to
give credit to the Tenants (including in effect by off-setting against
the Rents) for:
i.all sums recoverable from the Insurer and which extend to the
amount of the rents; and
ii. any sums which are not recoverable from the Insurer owing to
failure to insure or underinsurance against the rents in the
circumstances which have happened.

103. The Landlords’ response is to say:

a. The Rent Cesser clause does not cover the event of loss due to
nonphysical effects on the Premises i.e. their being closed or having
access restricted to them otherwise than by reason of physical
damage or destruction;
b. The Insurance does not cover (and did not have to cover) “loss of
rent” unless rent has ceased to be payable by the Tenants under the
Rent Cesser clauses; and that the Rent Cesser clause and its meaning
has to be determined first.

104. It seems to me that the Landlords’ general approach to the analysis is

correct in that the first question is as to the construction of the Rent Cesser
clause, and without reference to the terms of the Insurance (except insofar
as it feeds into the definition of Insured Risks). This approach did not
seem to be contested by the Tenants, and I think it is right as:
(1) The Leases pre-date the Insurance (at least in its form before me) by
numbers of years;
(2) While the Leases are to be construed in the light of their respective
factual matrices; for a matter to be part of the relevant factual matrix it
must have existed (or at least been contemplated to be going to exist in a
particular form) as at the time of the grant of the relevant Lease.
Otherwise the parties could not have been making their agreement (to
the Lease) in the light and circumstances of the relevant matter. I have
no evidence of what insurance policies might have provided for, or been
known or contemplated to have provided for, at the times of the granting
of the various Leases; and, of course, the fact that the various definitions
High Court Final Judgment: Double-click to enter the short title

of “Insured Risks” do not expressly provide for infectious diseases and

their effects would at first sight suggest that they were not within the
parties’ then contemplation.

105. The general principles with regard to construction of the Leases (and any
other contract) were not in dispute. I was taken to Arnold v Britton [2015]
AC 1619 at paragraphs 14 to 23:

“Interpretation of contractual provisions

14. Over the past 45 years, the House of Lords and Supreme Court have
discussed the correct approach to be adopted to the interpretation, or
construction, of contracts in a number of cases starting with Prenn v
Simmonds [1971] 1 WLR 1381 and culminating in Rainy Sky SA v Kookmin
Bank [2011] 1 WLR 2900 .

15. When interpreting a written contract, the court is concerned to identify

the intention of the parties by reference to “what a reasonable person having
all the background knowledge which would have been available to the
parties would have understood them to be using the language in the contract
to mean”, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes
Ltd [2009] AC 1101, para 14. And it does so by focussing on the meaning of
the relevant words, in this case clause 3(2) of each of the 25 leases, in their
documentary, factual and commercial context. That meaning has to be
assessed in the light of (i) the natural and ordinary meaning of the clause,
(ii) any other relevant provisions of the lease, (iii) the overall purpose of the
clause and the lease, (iv) the facts and circumstances known or assumed by
the parties at the time that the document was executed, and (v) commercial
common sense, but (vi) disregarding subjective evidence of any party's
intentions. In this connection, see Prenn [1971] 1 WLR 1381 , 1384-1386;
Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE
HansenTangen) [1976] 1 WLR 989 , 995-997, per Lord Wilberforce; Bank
of Credit and Commerce International SA v Ali [2002] 1 AC 251 , para 8,
per Lord Bingham of Cornhill; and the survey of more recent authorities in
Rainy Sky [2011] 1 WLR 2900 , paras 21-30, per Lord Clarke of Stone-cum-
Ebony JSC.

16. For present purposes, I think it is important to emphasise seven factors.

17. First, the reliance placed in some cases on commercial common sense
and surrounding circumstances (eg in Chartbrook [2009] AC 1101, paras
16-26) should not be invoked to undervalue the importance of the language
of the provision which is to be construed. The exercise of interpreting a
provision involves identifying what the parties meant through the eyes of a
reasonable reader, and, save perhaps in a very unusual case, that meaning is
most obviously to be gleaned from the language of the provision. Unlike
commercial common sense and the surrounding circumstances, the parties
have control over the language they use in a contract. And, again save
perhaps in a very unusual case, the parties must have been specifically
focussing on the issue covered by the provision when agreeing the wording
of that provision.
High Court Final Judgment: Double-click to enter the short title

18. Secondly, when it comes to considering the centrally relevant words to

be interpreted, I accept that the less clear they are, or, to put it another way,
the worse their drafting, the more ready the court can properly be to depart
from their natural meaning. That is simply the obverse of the sensible
proposition that the clearer the natural meaning the more difficult it is to
justify departing from it. However, that does not justify the court embarking
on an exercise of searching for, let alone constructing, drafting infelicities in
order to facilitate a departure from the natural meaning. If there is a specific
error in the drafting, it may often have no relevance to the issue of
interpretation which the court has to resolve.

19. The third point I should mention is that commercial common sense is
not to be invoked retrospectively. The mere fact that a contractual
arrangement, if interpreted according to its natural language, has worked out
badly, or even disastrously, for one of the parties is not a reason for
departing from the natural language. Commercial common sense is only
relevant to the extent of how matters would or could have been perceived by
the parties, or by reasonable people in the position of the parties, as at the
date that the contract was made. Judicial observations such as those of Lord
Reid in Wickman Machine Tools Sales Ltd v L Schuler AG [1974] AC 235 ,
251 and Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB
(The Antaios) [1985] AC 191 , 201, quoted by Lord Carnwath JSC at para
110, have to be read and applied bearing that important point in mind.

20. Fourthly, while commercial common sense is a very important factor

to take into account when interpreting a contract, a court should be very
slow to reject the natural meaning of a provision as correct simply because it
appears to be a very imprudent term for one of the parties to have agreed,
even ignoring the benefit of wisdom of hindsight. The purpose of
interpretation is to identify what the parties have agreed, not what the court
thinks that they should have agreed. Experience shows that it is by no means
unknown for people to enter into arrangements which are ill-advised, even
ignoring the benefit of wisdom of hindsight, and it is not the function of a
court when interpreting an agreement to relieve a party from the
consequences of his imprudence or poor advice. Accordingly, when
interpreting a contract a judge should avoid re-writing it in an attempt to
assist an unwise party or to penalise an astute party.

21. The fifth point concerns the facts known to the parties. When
interpreting a contractual provision, one can only take into account facts or
circumstances which existed at the time that the contract was made, and
which were known or reasonably available to both parties. Given that a
contract is a bilateral, or synallagmatic, arrangement involving both parties,
it cannot be right, when interpreting a contractual provision, to take into
account a fact or circumstance known only to one of the parties.

22. Sixthly, in some cases, an event subsequently occurs which was plainly
not intended or contemplated by the parties, judging from the language of
their contract. In such a case, if it is clear what the parties would have
High Court Final Judgment: Double-click to enter the short title

intended, the court will give effect to that intention. An example of such a
case is Aberdeen City Council v Stewart Milne Group Ltd 2012 SC (UKSC)
240 , where the court concluded that “any … approach” other than that
which was adopted “would defeat the parties' clear objectives”, but the
conclusion was based on what the parties “had in mind when they entered
into” the contract: see paras 21 and 22.

23. Seventhly, reference was made in argument to service charge clauses

being construed “restrictively”. I am unconvinced by the notion that service
charge clauses are to be subject to any special rule of interpretation. Even if
(which it is unnecessary to decide) a landlord may have simpler remedies
than a tenant to enforce service charge provisions, that is not relevant to the
issue of how one interprets the contractual machinery for assessing the
tenant's contribution. The origin of the adverb was in a judgment of Rix LJ
in McHale v Earl Cadogan [2010] HLR 412 , para 17. What he was saying,
quite correctly, was that the court should not “bring within the general
words of a service charge clause anything which does not clearly belong
there”. However, that does not help resolve the sort of issue of interpretation
raised in this case.”

106. I was also taken to paragraphs 69 to 71 in the judgment of Lord Hodge:

“69. In Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2004]

1 AC 715 the mistaken omission of words in a clause was apparent because
the bill of lading had been modelled on a standard clause. The person who
had transposed the standard clause into the bill of lading had omitted a
phrase in the standard clause in which the same word had appeared at the
end of two consecutive phrases. The mistake was clear and it was apparent
what correction was called for (paras 22 and 23 per Lord Bingham).

70. In Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 a

definition, which contained a grammatical ambiguity, made no
commercial sense if interpreted in accordance with the ordinary rules of
syntax. The background to the deal and the internal context of the
contract showed that there was a linguistic mistake in the definition,
which the court was able to remove by means of construction. In his
speech Lord Hoffmann (at p 1114) referred with approval to the
judgment of Carnwath LJ in KPMG LLP v Network Rail Infrastructure
Ltd [2007] Bus LR 1336. In that case, which concerned a rent review
clause in a lease, it was clear from the terms of the clause that its
wording did not make sense. The court was assisted by an earlier
agreement which set out the then intended clause containing a
parenthesis, of which only part had remained in the final lease. It was
not clear whether the parties had mistakenly deleted words from the
parenthesis, which they had intended to include, or had failed to delete
the parenthesis in its entirety. But that uncertainty as to the nature of the
mistake, unusually, did not matter as the outcome was the same on either
basis.
High Court Final Judgment: Double-click to enter the short title

71. In Aberdeen City Council v Stewart Milne Group Ltd [2011] UKSC 56,
2012 SCLR 114 the internal context of the contract provided the answer.
The sale contract provided for the payment to the vendor of a further
sum on disposal of the land by the purchaser. Two of the methods of
disposal required the parties to ascertain the market value of the property
on disposal in calculating the additional payment and the other used the
"gross sales proceeds" in calculating that payment. The purchaser sold
the site at an under-value to an associated company, a circumstance
which on the face of the contract the parties had not contemplated. The
courts at each level interpreted the provision, which used the gross sales
proceeds in the calculation, as requiring a market valuation where there
was a sale which was not at arm's length. They inferred the intention of
the parties at the time of the agreement from the contract as a whole and
in particular from the fact that the other two methods of disposal
required such a valuation. While this line of reasoning was criticised by
Professor Martin Hogg ((2011) Edin LR 406) on the ground that it
protected a party from its commercial fecklessness, it seems to me to be
the correct approach in that case as the internal context of the contract
pointed towards the commercially sensible interpretation.”

107. I also bear in mind that as stated, for example, in the Rainy Sky decision
at paragraph 21, where there is more than one possible construction, the
Court is searching for the most appropriate of the various meanings. It
does this by considering them all as one holistic exercise, and testing them
together, rather than by simply considering each individually (with the
risk of going through them as a series and rejecting each possibility in turn
so as to leave the court with a last residual answer even though that
answer would not the most appropriate).

108. I have also been taken to the Aberdeen case (Aberdeen City Council v
Stewart Milne Group Ltd [2011] UKSC 56) itself where a contract had
provision for a payment calculated by reference to either an “open market
valuation” or a share of profit of “sale proceeds” and the question arose as
to what would happen on a sale to an associated entity at an undervalue,
and whether those proceeds were to be treated as the base amount for the
calculation.

109. Lord Hope said at paragraphs 20 and 22:

“20 The question then is whether there is anything in the definition of the
expression "Open Market Valuation" which shows that this method cannot
be used in the case of a sale. The definition directs attention to the open
market value of the subjects "or the relevant part thereof as specified in the
notice at the date of the notice served in accordance with clause 9.5". There
is no requirement for a notice in accordance with clause 9.5 in the case of a
sale. But the absence of a notice does not make the valuation exercise
directed by this definition unworkable. In the case of a sale the information
that a notice would provide is to be found in the contract, just as in the case
of lease it seems not to have been thought necessary to identify the date as at
which the subjects were to be valued in order to arrive at the Lease Value. It
High Court Final Judgment: Double-click to enter the short title

seems to me therefore that there would be no difficulty in implying a term to

the effect that, in the event of a sale which was not at arms length in the
open market, an open market valuation should be used to arrive at the base
figure for the calculation of the profit share. I see this as the product of the
way I would interpret this contract…

22… I would not, for my part, view the present case in that way. It seems to
me that the position here is quite straightforward. The context shows that the
intention of the parties must be taken to have been that the base figure for
the calculation of the uplift was to be the open market value of the subjects
at the date of the event that triggered the obligation. In other words, it can be
assumed that this is what the parties would have said if they had been asked
about it at the time when the missives were entered into. The fact that this
makes good commercial sense is simply a makeweight. The words of the
contract itself tell us that this must be taken to have been what they had in
mind when they entered into it. The only question is whether effect can be
given to this unspoken intention without undue violence to the words they
actually used in their agreement. For the reasons I have given, I would hold
that the words which they used do not prevent its being given effect in the
way I have indicated.”

110. Lord Clarke (with whom the others agreed) said at paragraphs 28 to 33:

“28. In the course of argument some reference was made to the recent
decision of the Supreme Court in Rainy Sky SA v Kookmin Bank [2011]
UKSC 50; [2011] 1 WLR 2900. That appeal was concerned with the role of
commercial good sense in the construction of a term in a contract which was
open to alternative interpretations. It was held that in such a case the court
should adopt the more, rather than the less, commercial construction. The
court applied the principle that the ultimate aim in construing a contract is to
determine what the parties meant by the language used, which involves
ascertaining what a reasonable person would have understood the parties to
have meant; the relevant reasonable person being one who has all the
background knowledge which would reasonably have been available to the
parties in the situation in which they were at the time of the contract.

29. This appeal is concerned with a somewhat different problem from that
which arose in Rainy Sky. Under the missives the respondent sellers were
entitled to "the Profit Share" arising out of the on sale of the subjects by the
appellant buyers. The expression "Profit Share" was defined as "the Gross
Sale Proceeds", which were in turn defined as "the aggregate of the sale
proceeds of the Subjects received by the Purchasers for the Subjects".

30. Lord Hope has drawn attention in para 9 to certain infelicities of

drafting. However, the critical language in clause 9.4 is the promise on the
part of the appellants to pay 40% of 80% of the gross sale proceeds "within
14 days after receipt of the gross sale proceeds". On the face of it the
reference to the gross sale proceeds is a reference to the "actual sale
proceeds" received by the appellants.
High Court Final Judgment: Double-click to enter the short title

31. It is not easy to conclude, as a matter of language, that the parties

meant, not the actual sale proceeds, but the amount the appellants would
have received if the on sale had been an arm's length sale at the market value
of the property. Nor is it easy to conclude that the parties must have
intended the language to have that meaning. As Baroness Hale observed in
the course of the argument, unlike Rainy Sky, this is not a case in where
there are two alternative available constructions of the language used. It is
rather a case in which, notwithstanding the language used, the parties must
have intended that, in the event of an on sale, the appellants would pay the
respondents the appropriate share of the proceeds of sale on the assumption
that the on sale was at a market price.

32. In this regard I entirely agree with Lord Hope's conclusions at para 22
above. As he puts it, the context shows that the parties must be taken to have
intended that the base figure for the calculation of the uplift was to be the
open market value of the subjects at the date of the event that triggered the
obligation. In other words, it can be assumed that this is what the parties
would have said if they had been asked about it at the time when the
missives were entered into. The parties expressly agreed that in the case of a
buy out or lease the profit would be arrived at by reference to market value.
Rather like counsel for the respondent bank in Rainy Sky, Mr Craig Connal
QC was not able to advance any commercially sensible argument as to why
the parties would have agreed a different approach in the event of an on sale.
I have no doubt that he would have done so if he had been able to think of
one. As Lord Hope says at para 17, on the appellants' approach, it would be
open to them to avoid the provisions relating to the open market value of a
lease by selling the subjects to an associate company at an undervalue and
arranging for the lease to be entered into by that company. The parties could
not sensibly have intended such a result.

33. Lord Hope says at para 20 that there would be no difficulty in implying
a term to the effect that, in the event of a sale which was not at arm's length
in the open market, an open market valuation should be used to arrive at the
base figure for the calculation of the profit share. I agree. If the officious
bystander had been asked whether such a term should be implied, he or she
would have said "of course". Put another way, such a term is necessary to
make the contract work or to give it business efficacy. I would prefer to
resolve this appeal by holding that such a term should be implied rather than
by a process of interpretation. The result is of course the same.”

111. While the panel all agreed in the result, Lord Hope resolved the matter by
way of construction (and rejected implication as not being the appropriate
route) while the majority resolved the matter by way of implication (as
opposed to construction). This renders paragraph 22 of the decision in
Arnold v Britton, a little difficult as it appears to regard Aberdeen as being
a construction/interpretation case and approves of Lord
Hope’s approach and not simply his conclusion. I note that paragraph 71 of
Arnold v Britton and the judgment of Lord Hodge also seems to express
some difficulty with Aberdeen.
High Court Final Judgment: Double-click to enter the short title

112. I think that the best rationalisation and explanation is on the basis that:
Lord Hope was proceeding on the basis that the wording used in the
contract allowed him to construe it to achieve what he thought was, in the
particular circumstances, obviously intended; while the majority thought
that the wording itself could not be so construed but was not such as to
prevent a necessary implication occurring. Arnold is therefore affirming
the appropriateness of Lord Hope’s initial construction approach even if
the majority in Aberdeen were to hold that it did not work on the
particular facts of the wording of that contract and that the court had,
instead, to look to implication.

113. However, all of the decisions are authority for the propositions that where
the court concludes that an event has occurred which the parties either did
not contemplate or could not have contemplated, then it is proper to search
(from the admissible factors as to construction i.e. wording and factual
matrix of the contract etc. but not negotiations or subsequent subjective
declarations) for their objective contractual intention being as to what they
intended, by the words used in the contract, to happen in that situation. If
the intention is sufficiently clear then the relevant contents (i.e. the words)
of the contract can be construed as expressing it. However, if the words
used simply cannot justify that construction (e.g. there is nothing in the
contract which could be said to deal with the relevant event at all), there is
nothing which can be interpreted to achieve the “intended” result by the
process of construction; and matters have to be left to the rules of
implication (if at all). On the other hand, the situation where it can be said
that (i) the actual objective intention of the parties as to what would
happen is clear from the content of the contract etc. but (ii) no words
within the contract can be construed on any basis to be expressing it (“the
Gap Scenario”), must be a very rare one. What happens more often is
where there is an absence of any relevant wording but it is obvious what is
needed for the contract to work or obvious what would have been intended
in a relevant circumstance, in which case the law of implication applies.
Moreover, even in the Gap Scenario, implication will usually (as was the
majority decision in Aberdeen) be available.

114. It may also be (as intimated by Lord Hodge at paragraphs 69-70 of

Arnold) that the “obvious error” doctrine might assist not only where it was
obvious that the “wrong words” had been used by way of a drafting error
but also where it was obvious that “no words” had been used where they
should have been again by way of a drafting error. However, that doctrine
requires, in effect, a drafting error and not a mere failure to deal with an
uncontemplated future scenario.

The Rent Cesser Clauses Construction of the Rent Cesser Clauses

115. The individual Rent Cesser clauses are (repeated from above) as follows:
a. Cine-UK Lease
“7.4 In case the Property or any part thereof or access thereto or any
other part of the Estate shall at any time during the Term be destroyed
or damaged by any of the Insured Risks so as to render the Property
High Court Final Judgment: Double-click to enter the short title

unfit for occupation or use and the insurance shall not have been
vitiated or payment of the policy monies refused in whole or in part as
a result of some act or default of the Tenant then the Basic Rent or a
fair proportion thereof and Service Charge according to the nature and
extent of the damage sustained shall from and after the date of such
damage be suspended and cease to be payable until the Property shall
have been made fit for occupation or use and in the event of dispute as
to the amount or duration of the abatement of the Basic Rent such
dispute shall be settled by a single arbitrator to be appointed in
accordance with clause 11

PROVIDED THAT If it is not possible for any reason for the Landlord
to rebuild or reinstate the Property within a period of three years from
the date of damage or destruction being caused by any of the Insured
Risks the Landlord and the Tenant shall be at liberty to determine this
demise by serving one calendar month’s notice in writing to that effect
upon the other and upon the expiry of such notice these presents shall
determine but without prejudice to the right and remedies of either
party against the other in respect of any antecedent claims or breaches
AND IN THE EVENT of this demise being determined in such
manner or if this Lease is determined by frustration as a result of such
damage or destruction the whole of the insurance monies receivable
under the policy of insurance shall belong to the Landlord absolutely
and the Tenant shall have no claim or interest therein.”

b. Mecca Lease
“8.4 In case the Property or any part of it or access to it or any other
part of the Landlord’s Estate over which the Tenant has rights shall
at any time during the Term be destroyed or damaged by any of the
Insured Risks so as to render the Property or part of it unfit for or
incapable of lawful occupation or use for the Permitted User and/or
inaccessible and the insurance shall not have been vitiated or
payment of the policy monies refused in whole or in part as a result
of some act or default of the Tenant … then the Basic Rent and the
Service Charge or a fair proportion of them according to the nature
and extent of the damage or inaccessibility sustained shall from and
after the date of such damage be suspended and cease to be payable
until either:
8.4.1 the Property shall have been made fit for occupation or use or
8.4.2 the period, which will be not less than 3 years, for which the
Landlord insures loss of rent and service charge will have expired
whichever shall be the earlier …”

c. SportsDirect Lease
“5.3.1 If the Building or the Premises are damaged or destroyed by
an Insured Risk so that they are rendered unfit for occupation or use
or inaccessible, then provided that insurance of the Building has not
been vitiated or payment of the insurance money is not refused
wholly or in part through an act or default of the Tenant the rent
firstly reserved under clause 2.3.1 (or a fair proportion according to
High Court Final Judgment: Double-click to enter the short title

the nature and extent of the damage) will not be payable until the
earliest of the date that:
(a) the Premises are again fit for occupation and use and are
accessible; or
(b) until three years from the date the damage occurred, whichever
is the earlier.”

116. The Landlords’ essential submission is that the various Rent Cesser
clauses all only operate to suspend the Rent in circumstances where the
Premises (or the surrounding Estate, or even merely the access to them)
has been physically destroyed or damaged by an Insured Risk so as to
prevent or render them unfit for occupation. They, therefore, focus on the
need for physical damage and say that there is (as is common ground)
simply no physical damage (or destruction). They say that this is the
plain meaning of the contractual wordings, and their true interpretation
and construction.

117. The Tenants say that the word “physical” is not used and that what has
happened is, in effect, damage or destruction even if not of a physical
nature. They contend that (elements in the following in [square brackets]
being from me):
a. The clauses operate in the context of an Insured Risk which has
prevented occupation, and where the Insurance provisions of each
Lease provide that it is to extend to cover 3 years’ Rent. The
underlying intention is, therefore, in the event of an Insured Risk to
throw the liability to pay the Rent onto the Insurer where as a result
of the Insured Risk event the Tenant has been unable to enjoy the
occupation of the Premises which is the basis of the relevant Lease;

b. The Insurance has been taken out for the benefit of the Tenant, who
is funding its premium and whose interest is to be noted on the
Policy. For an Insured Risk event to occur with consequent closure
of the Premises but for the Tenant not to be protected against the
resultant loss (i.e. having to pay Rent for Premises which cannot be
enjoyed) could not have been intended. There should be a symmetry
here which there is not on the Landlords’ case;

c. Although the COVID regulations do and did not actually prevent

access to the Premises altogether, they do prevent use for the
purposes contemplated by the Leases as set out in their various
Permitted Uses (or any alteration to uses which might be consented
to under the various user covenants); thus they render the Premises
unfit for use and the Tenants truly unable to “enjoy” occupation
similar to what would have happened if there had been a fire but the
Tenant could still “occupy” a burnt out shell of a building;

d. The words “damage and destruction” do not have to import of

themselves “physical” deterioration. Even if destruction has to be
physical, “damage”, which is an alternative to “destruction”, does
not. For example, it is possible to say that premises have been
High Court Final Judgment: Double-click to enter the short title

damaged by a local road closure or road scheme which has restricted

access to them;

e. Some of the Insured Risks, or at least one being insurance against

“strikes or labour disturbances” do not suggest any real likelihood
(or perhaps even possibility) of physical damage. A classic result of
a strike is an inability to “enjoy” premises for various reasons
including (i) a picket line dissuading people from attending (ii) a
withdrawal of supplies necessary for a business to function (iii) a
withdrawal of key staff (e.g. security or key health and safety
personnel) necessitating a closure;

f.Adopting a matter raised by me; it would be very odd if an Insured

Risk which caused physical damage to the electrical installations
within the Premises (or even the Estate) resulting in an inability to
occupy triggered the Rent Cesser but a strike (e.g. of power
workers), itself an Insured Risk, which resulted in no electricity
being available (and the Premises having to be closed) did not trigger
the Rent Cesser;

g. The Tenants’ construction produces a perfectly “fair allocation of

risk” where the Landlord, which is obtaining the relevant insurance,
can negotiate an appropriate policy. The Landlords’ construction
leaves the Tenants having to insure for themselves against the same
Insured Risks [albeit for different consequences] as the Landlord is
already insuring and at the Tenants’ own expense, and which is
obviously not reasonable and could not have been contemplated.
Moreover, the Leases contain clauses preventing the Tenants
insuring the Property themselves (at least against Insured Risks) and
it would be unreal to think that the parties had intended the Tenants
to be incapable of being insured against their liability to pay Rent in
non-physical damage circumstances where the Premises could not be
enjoyed;

h. COVID and the COVID Regulations are “unprecedented” events

which could not have been contemplated by the original parties to
the Leases. This is an Aberdeen case and the wording can and
should be construed to apply the Rent Cesser where the event falls
within an Insured Risk and has had such effect on the ability to
occupy and enjoy the Premises;

i. There is no authority to guide me [this was common ground, although

it now turns out that the Commerz Real decision is, but only in a
very shortly stated paragraph, against them] and so that this is
effectively “new law”;

j. This is all inappropriate for CPR Part 24 where very full consideration
should be given to matters, the ramifications of which are potentially
very extensive (not merely in a COVID scenario but in other cases of
“non-physical damage”) and in the context of standard form terms
High Court Final Judgment: Double-click to enter the short title

[as these clearly are]. These are matters of very considerable public
importance with potentially vast economic effects and are deserving
of full scrutiny at a full trial, there, in the light of all of the foregoing,
being a compelling reason(s) for such a trial.
118. As against this, the Landlords submit that the Rent Cesser clauses simply
only apply where there has been physical damage (or destruction). They
submit that:
a. These are standard-form clauses which have existed for very many
years (and perhaps centuries) and it has never been suggested that
they should apply to instances of “non-physical damage”;

b. The surrounding wordings of the relevant clauses in each Lease

make clear that the “damage” (or “destruction”) must be physical;
and:
i. In the Cine-UK Lease:
1. Clause 7.3 is headed “Destruction of the Property”
and is introduced by the words “if the Property or any
part thereof is destroyed or damaged by any of the
Insured Risks and requires the insurance monies to be
laid out in “the rebuilding and reinstatement of the
Property” – and which cannot apply to non-physical
matters;
2. Clause 7.4 talks of a suspension “until the Property
shall have been made fit for occupation or use” and
which appears to relate to physical remedial works,
not the lifting of a government Regulation on access;
3. The Proviso to Clause 7.4 provides for a
determination of the Lease “If it is not possible for
any reason for the Landlord to rebuild or reinstate the
Property” which wording is one about physicality and
not suitable for a non-physical problem. ii. In the
Mecca Lease:
1. Clause 8.3 provides that “if the Property or any part
of it is destroyed or damaged by any of the Insured
Risks then …the Landlord shall lay out the proceeds
of such insurance …as soon as reasonably practicable
in the rebuilding and reinstatement of the Property” –
and which is contended shows that the “damaged”
must be physical;
2. Clause 8.4 provides that where the Property is
“damaged” then there is a suspension “until either…
8.4.1 the Property shall have been made fit for
occupation or use…” - and the words “made fit”
imply physical works;
3. Clause 8.7 provides for an option to determine the
Lease “If the Property has not been reinstated” which
again suggests that there must have been a physical
deterioration.
iii. In the SportsDirect Lease, Clause 4.3.3. provides “If the
High Court Final Judgment: Double-click to enter the short title

Property is wholly or substantially damaged by any of the

Insured Risks the Landlord shall use reasonable endeavours
to procure that the Superior Landlord obtains deeds of
collateral warranty in favour of the Tenant from the building
contractor …engaged to carry out the works of rebuilding or
reinstatement …” – which indicates that the damage must be
physical.

c. There is a general principle that expressions used in carefully drafted

contracts are used consistently and so as to have the same meaning
(absent a reason for giving them different meanings), and as stated
as being the “consistency principle” in Lewison: On the
Interpretation of Contracts at paragraph 7.15 (and citing Lord Hodge
in Barnados v Buckinghamshire [2016] UKSC 55 at paragraph 23).

119. I have considered this carefully, and especially as, although I view the
Tenants’ arguments as to construction of the Rent Cesser as being
somewhat novel, that does not, of itself, render them incorrect.

120. With regard to the natural meanings of the words used:

i. The usual meaning of the words “damage” or “damaged” is a
physical one;
ii. The Tenants did take me to Halsbury’s Laws Volume 29
“Damages” where at paragraph 303 is said that “The concept
of “damage” by contrast, is wider; it, simply, means any
disadvantage suffered by a person as the result of the act or
default of another which according to the circumstances may
or not be compensatable.” However, that quote is in the
specific context of the law of “damages” and not of a lease
dealing with a property interest;
iii. The words “damage” or “damaged” are being used in the
context of an alternative of “destruction” and which is clearly
a reference to a “physical” event. While, strictly, the word
“damage” or “damaged” could apply to anything less than
full physical destruction, and thus to non-physical matters,
the context is very much one of physicality;
iv. It is a considerable stretch to extend “damage” or “damaged”
to a non-physical disadvantage. While I have considered
Tenants’ point (d) above, it imports something of a modern
colloquialism into what are carefully drawn standard-form
formal documents
v. Further, elsewhere in the surrounding clauses, as submitted
by the Landlords, the words “damage” and “damaged” are
used in ways which are clearly physical (being in terms of
physical remedy and remedial and reinstatement works), and
including by reference to the situation where physical
remediation turns out to be impossible. This does seem to me
to be a situation where the “consistency principle” applies
both in terms of meaning of words and in terms of the
High Court Final Judgment: Double-click to enter the short title

subject-matter to which the relevant clauses are directed, all

being “physical” and not “non-physical”.

121. In terms of the factual matrix, which is to be considered as at the date of

the various grants of the individual leases, I do see it as relevant that
business interruption policies have been a standard feature of the
insurance market for many years. Those policies are generally taken out
by businesses to protect themselves against losses in turnover as it is
turnover (rather than profit) which is lost as a result of a trade being
suspended or limited due to a material event, including in particular
events affecting their trading premises (such as a fire but potentially also
disease in COVID and COVID
Regulations terms) albeit that further provisions can be included within a
BII policy to require any resultant savings in costs on the part of the insured
to be brought into account.

122. Thus, there is and always was (as at the dates of the relevant grants) a
well-known potential for tenants to protect themselves against the
inability to use their premises by way of insurance. Moreover, that
insurance would be an insurance of the relevant business (i.e. the trade)
rather than of the Premises themselves, and thus would not fall foul of the
Lease provisions against the tenant effecting insurance of the Premises.
Strictly speaking the liability to pay rent would be irrelevant as the
insurance is actually against the diminution in the insured tenant’s trade
(i.e. loss of turnover) which is not dependent upon whether or not the rent
remained payable. Rather, it would be up to the insurer as to whether or
not to include a “take account of savings in costs” clause so that if the
rent ceased to be payable under the relevant Lease the tenant did not gain
a double benefit.

123. With regard to the commercial purpose of the Rent Cesser clauses:
a. It is correct as contended by the Tenants that:
i. Their aim appears to be to protect the Tenants (although also
indirectly the Landlords) against the consequence of an
Insured Risk Event preventing the use of the Premises by the
Tenant; and each Tenant’s interests are to be noted on the
Insurance. However, this is limited by the wording requiring
the consequence of inability to use to be as a result of the
relevant property being “damaged or destroyed” by the
Insured Risk event rather than simply for the Premises to be
unable to be used due to the occurrence of the relevant
Insured Risk Event, and which is a considerable answer to
the Tenants’ point (a) above
ii. They are to be seen in the context of a wider scheme under
each Lease whereby the Landlord obtains the Insurance at
the cost of the Tenant and so that the Tenant obtains
insurance protection, and thus presumably against the
consequences of the Insured Risk Events occurring.
However, this is limited by the fact that the Insurance is
primarily for the protection of the Landlord as the full owner
High Court Final Judgment: Double-click to enter the short title

of the “bricks and mortar”, and thus in relation to “bricks

and mortar” i.e. physical rather than “effects on trade”
consequences, and which is a considerable answer to the
Tenants’ point (b) above, even though the Tenant’s interest
is a very real one.
iii. Moreover, and in further answer to Tenants’ point (b) above,
the mere fact that the Landlords decide to insure against a
risk which would only lead to non-physical disadvantage, and so
render such risk an Insured Risk and such events Insured
Risk Events does not mean that the Rent Cesser clause
should be construed to apply to non-physical disadvantage.
Other possibilities (and I consider various of them below in
relation to the arguments addressed to me in relation to the
Insurance and the Insurance provisions) are that:
1. The Landlords are simply entitled to so insure on the
basis that the Leases say that they can, and the
insurance may protect their property in the form of
the “bricks and mortar” and freehold (or long
leasehold) interest in the Premises; or
2. The Landlords are entitled to so insure and if the
Insurance gives rise to a resultant benefit then they
must bring it into account but not if it does not; or 3.
If the Landlords so insure against the effects of
COVID and COVID Regulations then they must
insure against the rent generally for the periods of
resultant closures. However, this argument is a
matter of the construction of the Insurance provisions
not of the Rent Cesser clauses; or
4. The Landlords are not entitled to so insure and the
Tenants should not have to pay the relevant premium or part of
the premium iv. The Rent Cesser clauses are clearly designed to
operate in the context of closures of the Premises due to Insured
Risks. However, against that the closure has to be due to
“damage(d) or destruction”, and it is not sufficient for
something to have occurred which has simply resulted in the
consequence of there being a closure, and which is a
considerable answer to Tenants’ point (c) above
b. It is correct as contended by the Landlord that:
i. If they are to be seen in the context of the Insurance
provisions:
1. The Insurance as required by each Lease (although the
Landlord can choose to widen the categories of Insured
Risk) is primarily a “bricks and mortar” insurance in
terms of Insured Risk Events which would cause physical
damage to the relevant Premises; and
2. The Insurance, although it has to include the 3 years of
Basic Rent, is primarily directed towards the repair and
rebuilding of damaged Premises rather than freestanding
Rent. There is a potential difference here between the
wordings of the various leases but none of the Tenants
High Court Final Judgment: Double-click to enter the short title

have really advanced any separate points based upon their

individual wordings ii. The Insurance provisions
themselves tend to include a requirement to insure against
“loss of Basic Rent” which requires the Basic Rent
actually to be a “loss” and which gives support to the
Landlord’s approach that each Rent Cesser clause has to
be construed first on its own terms to see whether or not it
has been triggered
iii. And the Rent Cesser clauses and their surrounding provisions
look on their own terms to be concerned with physical damage
or destruction (and its possible remediation or absence of it)
where the Tenant (as well as the Landlord) is to be protected,
whilst other interferences with each Tenant’s business can be
insured (or self-insured) by the Tenant separately
iv. The above are some considerable answer to Tenants’ point (g)
above, and, with the Tenants being able to take out their own
BII policies against loss of turnover, the mere fact that the
parties could have chosen the allocation of risk contended for
by the Tenants is counter-balanced by the Landlords’
contended for allocation of risk also being perfectly
commercially sensible.

124. However, I also need to consider the Tenants’ various other arguments.
Their point (e) above is that certain of the specified Insured Risks could only
give rise to non-physical disadvantage and in particular “labour disturbances
and strikes”. It is correct that those specified events are not immediately
suggestive of resultant physical damage. On the other hand, it is
conceivable that a labour disturbance or strike could result in physical
damage in some circumstances. For example, there is the possibility of
violence on a picket line leading to actual damage to premises, and the
words used are surrounded by others (riot, civil commotion and malicious
persons) which suggest that context. Alternatively, a refusal to carry out
maintenance or other protective operations could result in physical damage
occurring.

125. I also bear in mind the point which I raised (Tenants’ point (f) above)
that it might seem odd, on the Landlords’ contentions, that if an Insured
Risk Event caused a shutting off of an electricity supply to the Premises
without physically damaging or destroying them but rendering them
unusable then the Rent Cesser clause would not operate but if the Insured
Risk Event caused physical damage to the internal electricity cables with the
same consequence then the Rent Cesser clause would operate. I think that
has some force but, on the other hand, the occurrence of such physical
damage to the infrastructure can be seen as being qualitatively different in
the nature of the event.

126. With regard to Tenants’ point (h), it is correct that the COVID
Regulations are unprecedented in modern times. In the past the 1918
onwards outbreak of Spanish Flu caused more deaths, and, centuries before,
the 17th century Great Plague led to both many more deaths and to
High Court Final Judgment: Double-click to enter the short title

mandatory closures, but no authorities have been cited to me regarding rent

cessers and their operation (assuming they then existed) in those
circumstances. Lord Hope’s “construction” (as opposed to “implication”)
approach seems to have been a minority one, and it does seem to me that the
majority held that it could not be applied unless it was consistent with the
wording used, and I do not see it as being so for the reasons given above and
below. However, his approach also requires it to be clear as to what the
parties would have intended (as at the date of grant) to happen in the
particular unforeseen circumstances (had they known of them). I deal with
this further in relation to “implication” below, but in view of the facts that
(a) the Rent Cesser clause is seemingly directed towards a “bricks and
mortar” and physical damage scenario and (b) BII insurance policies were
available to protect the Tenants’ business turnover, I do not see it as clear
that the parties would have agreed that the Rent Cesser clause should
operate in these COVID and COVID Regulation circumstances even if the
Landlords decided to insure against such disease risks. That would require
the Landlords to have to obtain a particular type of Policy with particular
provisions which might not be available (as the Insurers would have to
decide whether to provide Rent cover in the event of non-physical
disadvantage, and at what price) and when a Tenants’ Policy might have
been much more easily available and appropriate.

127. Thus, in terms of the competing iterations of construction of the Rent

Cesser clauses and, in particular:
a. In relation to the Tenant’s construction that they are triggered by
non-physical disadvantage to the Premises (said to result in the
Premises being “damaged”):
i. That is not the natural meaning of the words either on their own
or in context, and involves a breach of the consistency
principle
ii. They are consistent with a possible commercial purpose but
do not represent the main thrust of the provisions
iii. They are not required to protect the Tenant in a commercial
sense, in that alternative protections by way of turnover BII
policies were always potentially available
iv. They are somewhat novel in that it has not been suggested
previously that these standard-form clauses can be triggered
by purely non-physical matters
b. In relation to the Landlord’s construction that they are only triggered
by physical damage to or destruction of the relevant Premises:
i. This is the ordinary meaning of the words used both on their
own and in context and accords with the consistency principle
ii. They are consistent with a possible commercial purpose.
Although it can be argued that there are possible anomalies it
is, at worst, unclear that they are really anomalies
iii. They are consistent with the general thrust of these provisions
which are to deal with the “bricks and mortar” and “property
owner” aspects of the matter where the Landlord and Tenant
interests combine and align.
High Court Final Judgment: Double-click to enter the short title

128. I have asked myself as to whether I should be resolving this

construction issue on a summary basis in the light of the above case-law and
the potential effects on very many other properties and landlord and tenant
relationships.
However:
a. This is a pure issue of construction
b. There are no relevant factual disputes which have been either
suggested or become apparent to me. There has been no suggestion
of any factual matrix matter upon which any evidence would be
deployed at trial
c. The matter has been argued out fully with full citation of authority
and preparation
d. The case-law is in favour of determining such issues with all the
savings of cost and resource which would follow.

129. I have considered the terms of each of the Leases individually, and in
each case considered my views, and which are set out above and below, as
to (i) the natural and ordinary meaning of the clause, (ii) the other relevant
provisions of the lease, (iii) the overall purpose of the clause and the lease,
(iv) the facts and circumstances known or assumed by the parties at the time
that the document was executed, and (v) commercial common sense, but (vi)
disregarding subjective evidence of any party's intentions. I have concluded
that the Landlords’ constructions are clearly correct and should be adopted
as against the Tenants’ constructions. I note that in Commerz Real, and on
the basis of a much shorter analysis (although where there was a ”keep
open” covenant which is not present in these Leases) Chief Master Marsh
came to the same conclusion.

130. The most important point (although I have considered construction

generally as set out above, and, in particular, those matters set out above
which also otherwise favour the Landlords’ constructions) is that the
Tenants’ constructions of the Rent Cesser clauses simply do not fit the
words used either taken alone or in their context or as otherwise used in the
Leases, whilst the Landlords’ constructions do fit the words used in all those
aspects. Notwithstanding the able arguments of the Tenants’ counsel, when
applying the iterative approach and considering which construction is that
which meets the test of “what a reasonable person having all the background
knowledge which would have been available to the parties would have
understood them to be using the language in the contract to mean” it seems
to me that it is the Landlords’ construction with its requirement that the
Insured Risk Event must have caused the relevant Premises to have been
physically damaged or destroyed, and which is not the case here; and the
Tenants do not have any real prospects of success on this issue. I would add
that while I have considered the Rent Cesser clauses above on their own, I
have borne in mind the rest of the Leases as the process of construction of a
single document is an holistic one.

Implication and the Rent Cesser Clauses

131. However, the Tenants contend, in the alternative to their construction
arguments, that it should be implied into each of the Leases that there should
High Court Final Judgment: Double-click to enter the short title

be an equivalent Rent Cesser in these circumstances, and, in particular,

where (i) COVID and the COVID Regulations are unprecedented, and
unforeseen, but have forced the closure of the Premises (ii) the Landlord has
chosen to insure so that the Insured Risks extend to such matters, and has
done so at the expense of the Tenants, and in the context where the Leases
(and the Insurance) provide for cover to include loss of Rent.

132. It is common-ground that the basic principles of the law of implication

are set out in Marks and Spencer v BNP Paribas [2016] AC 742 (itself a
commercial lease case) at paragraphs 16-31 as follows:
“16. There have, of course, been many judicial observations as to the nature
of the requirements which have to be satisfied before a term can be implied
into a detailed commercial contract. They include three classic statements,
which have been frequently quoted in law books and judgments. In The
Moorcock (1889) 14 PD 64, 68, Bowen LJ observed that in all the cases
where a term had been implied, "it will be found that ... the law is raising an
implication from the presumed intention of the parties with the object of
giving the transaction such efficacy as both parties must have intended that
at all events it should have". In Reigate v Union Manufacturing Co
(Ramsbottom) Ltd [1918] 1 KB 592, 605, Scrutton LJ said that "[a] term can
only be implied if it is necessary in the business sense to give efficacy to the
contract". He added that a term would only be implied if "it is such a term
that it can confidently be said that if at the time the contract was being
negotiated" the parties had been asked what would happen in a certain
event, they would both have replied "'Of course, so and so will happen; we
did not trouble to say that; it is too clear'". And in Shirlaw v Southern
Foundries (1926) Ltd [1939] 2 KB 206, 227, MacKinnon LJ observed that,
"[p]rima facie that which in any contract is left to be implied and need not
be expressed is something so obvious that it goes without saying".
Reflecting what Scrutton LJ had said 20 years earlier, MacKinnon LJ also
famously added that a term would only be implied "if, while the parties were
making their bargain, an officious bystander were to suggest some express
provision for it in their agreement, they would testily suppress him with a
common 'Oh, of course!'".

17. Support for the notion that a term will only be implied if it satisfies the
test of business necessity is to be found in a number of observations made in
the House of Lords. Notable examples included Lord Pearson (with whom
Lord Guest and Lord Diplock agreed) in Trollope & Colls Ltd v North West
Metropolitan Regional Hospital Board [1973] 1 WLR 601, 609, and Lord
Wilberforce, Lord Cross, Lord Salmon and Lord Edmund-Davies in
Liverpool City Council v Irwin [1977] AC 239, 254, 258, 262 and 266
respectively. More recently, the test of "necessary to give business efficacy"
to the contract in issue was mentioned by Lady Hale in Geys at para 55 and
by Lord Carnwath in Arnold v Britton [2015] 2 WLR 1593, para 112.

18. In the Privy Council case of BP Refinery (Westernport) Pty Ltd v

President, Councillors and Ratepayers of the Shire of Hastings (1977) 52
ALJR 20, [1977] UKPC 13, 26, Lord Simon (speaking for the majority,
which included Viscount Dilhorne and Lord Keith) said that:
High Court Final Judgment: Double-click to enter the short title

"[F]or a term to be implied, the following conditions (which may overlap)

must be satisfied: (1) it must be reasonable and equitable; (2) it must be
necessary to give business efficacy to the contract, so that no term will be
implied if the contract is effective without it; (3) it must be so obvious that
'it goes without saying'; (4) it must be capable of clear expression; (5) it
must not contradict any express term of the contract."

19. In Philips Electronique Grand Public SA v British Sky Broadcasting

Ltd [1995] EMLR 472, 481, Sir Thomas Bingham MR set out Lord Simon's
formulation, and described it as a summary which "distil[led] the essence of
much learning on implied terms" but whose "simplicity could be almost
misleading". Sir Thomas then explained that it was "difficult to infer with
confidence what the parties must have intended when they have entered into
a lengthy and carefully-drafted contract but have omitted to make provision
for the matter in issue", because "it may well be doubtful whether the
omission was the result of the parties' oversight or of their deliberate
decision", or indeed the parties might suspect that "they are unlikely to agree
on what is to happen in a certain ... eventuality" and "may well choose to
leave the matter uncovered in their contract in the hope that the eventuality
will not occur". Sir Thomas went on to say this at p 482:
"The question of whether a term should be implied, and if so what, almost
inevitably arises after a crisis has been reached in the performance of the
contract. So the court comes to the task of implication with the benefit of
hindsight, and it is tempting for the court then to fashion a term which will
reflect the merits of the situation as they then appear. Tempting, but wrong.
[He then quoted the observations of Scrutton LJ in Reigate, and continued]
[I]t is not enough to show that had the parties foreseen the eventuality which
in fact occurred they would have wished to make provision for it, unless it
can also be shown either that there was only one contractual solution or that
one of several possible solutions would without doubt have been preferred
..."

20. Sir Thomas's approach in Philips was consistent with his reasoning, as
Bingham LJ in the earlier case The APJ Priti [1987] 2 Lloyd's Rep 37, 42,
where he rejected the argument that a warranty, to the effect that the port
declared was prospectively safe, could be implied into a voyage
charterparty. His reasons for rejecting the implication were "because the
omission of an express warranty may well have been deliberate, because
such an implied term is not necessary for the business efficacy of the charter
and because such an implied term would at best lie uneasily beside the
express terms of the charter".

21. In my judgment, the judicial observations so far considered represent a

clear, consistent and principled approach. It could be dangerous to
reformulate the principles, but I would add six comments on the summary
given by Lord Simon in BP Refinery as extended by Sir Thomas Bingham in
Philips and exemplified in The APJ Priti. First, in Equitable Life Assurance
Society v Hyman [2002] 1 AC 408, 459, Lord Steyn rightly observed that the
implication of a term was "not critically dependent on proof of an actual
intention of the parties" when negotiating the contract. If one approaches the
High Court Final Judgment: Double-click to enter the short title

question by reference to what the parties would have agreed, one is not
strictly concerned with the hypothetical answer of the actual parties, but
with that of notional reasonable people in the position of the parties at the
time at which they were contracting. Secondly, a term should not be implied
into a detailed commercial contract merely because it appears fair or merely
because one considers that the parties would have agreed it if it had been
suggested to them. Those are necessary but not sufficient grounds for
including a term. However, and thirdly, it is questionable whether Lord
Simon's first requirement, reasonableness and equitableness, will usually, if
ever, add anything: if a term satisfies the other requirements, it is hard to
think that it would not be reasonable and equitable. Fourthly, as Lord
Hoffmann I think suggested in Attorney General of Belize v Belize Telecom
Ltd [2009] 1 WLR 1988, para 27, although Lord Simon's requirements are
otherwise cumulative, I would accept that business necessity and
obviousness, his second and third requirements, can be alternatives in the
sense that only one of them needs to be satisfied, although I suspect that in
practice it would be a rare case where only one of those two requirements
would be satisfied. Fifthly, if one approaches the issue by reference to the
officious bystander, it is "vital to formulate the question to be posed by
[him] with the utmost care", to quote from Lewison, The Interpretation of
Contracts 5th ed (2011), para 6.09. Sixthly, necessity for business efficacy
involves a value judgment. It is rightly common ground on this appeal that
the test is not one of "absolute necessity", not least because the necessity is
judged by reference to business efficacy. It may well be that a more helpful
way of putting Lord Simon's second requirement is, as suggested by Lord
Sumption in argument, that a term can only be implied if, without the term,
the contract would lack commercial or practical coherence.

22. Before leaving this issue of general principle, it is appropriate to refer a

little further to Belize Telecom, where Lord Hoffmann suggested that the
process of implying terms into a contract was part of the exercise of the
construction, or interpretation, of the contract. In summary, he said at para
21 that "[t]here is only one question: is that what the instrument, read as a
whole against the relevant background, would reasonably be understood to
mean?". There are two points to be made about that observation.

23. First, the notion that a term will be implied if a reasonable reader of the
contract, knowing all its provisions and the surrounding circumstances,
would understand it to be implied is quite acceptable, provided that (i) the
reasonable reader is treated as reading the contract at the time it was made
and (ii) he would consider the term to be so obvious as to go without saying
or to be necessary for business efficacy. (The difference between what the
reasonable reader would understand and what the parties, acting reasonably,
would agree, appears to me to be a notional distinction without a practical
difference.) The first proviso emphasises that the question whether a term is
implied is to be judged at the date the contract is made. The second proviso
is important because otherwise Lord Hoffmann's formulation may be
interpreted as suggesting that reasonableness is a sufficient ground for
implying a term. (For the same reason, it would be wrong to treat Lord
Steyn's statement in Equitable Life Assurance Society v Hyman [2002] 1 AC
High Court Final Judgment: Double-click to enter the short title

408, 459 that a term will be implied if it is "essential to give effect to the
reasonable expectations of the parties" as diluting the test of necessity. That
is clear from what Lord Steyn said earlier on the same page, namely that
"[t]he legal test for the implication of ... a term is ... strict necessity", which
he described as a "stringent test".)

24. It is necessary to emphasise that there has been no dilution of the

requirements which have to be satisfied before a term will be implied,
because it is apparent that Belize Telecom has been interpreted by both
academic lawyers and judges as having changed the law. Examples of
academic articles include C Peters The implication of terms in fact [2009]
CLJ 513, P Davies, Recent developments in the Law of Implied Terms
[2010] LMCLQ 140, J McCaughran Implied terms: the journey of the man
on the Clapham Omnibus [2011] CLJ 607, and JW Carter and W Courtney,
Belize Telecom: a reply to Professor McLauchlan [2015] LMCLQ 245).
And in Foo Jong Peng v Phua Kiah Mai [2012] 4 SLR 1267, paras 34-36,
the Singapore Court of Appeal refused to follow the reasoning in Belize at
least in so far as "it suggest[ed] that the traditional 'business efficacy' and
'officious bystander' tests are not central to the implication of terms"
(reasoning which was followed in Sembcorp Marine Ltd v PPL Holdings
Pte Ltd [2013] SGCA 43). The Singapore Court of Appeal were in my view
right to hold that the law governing the circumstances in which a term will
be implied into a contract remains unchanged following Belize Telecom.

25. The second point to be made about what was said in Belize Telecom
concerns the suggestion that the process of implying a term is part of the
exercise of interpretation. Although some support may arguably be found
for such a view in Trollope at p 609, the first clear expression of that view to
which we were referred was in Banque Bruxelles Lambert SA v Eagle Star
Insurance Co Ltd [1997] AC 191, 212, where Lord Hoffmann suggested that
the issue of whether to imply a term into a contract was "one of construction
of the agreement as a whole in its commercial setting". Lord Steyn quoted
this passage with approval in Equitable Life at p 459, and, as just mentioned,
Lord Hoffmann took this proposition further in Belize Telecom, paras 17-27.
Thus, at para 18, he said that "the implication of the term is not an addition
to the instrument. It only spells out what the instrument means"; and at para
23, he referred to "The danger ... in detaching the phrase 'necessary to give
business efficacy' from the basic process of construction". Whether or not
one agrees with that approach as a matter of principle must depend on what
precisely one understands by the word "construction".

26. I accept that both (i) construing the words which the parties have used
in their contract and (ii) implying terms into the contract, involve
determining the scope and meaning of the contract. However, Lord
Hoffmann's analysis in Belize Telecom could obscure the fact that
construing the words used and implying additional words are different
processes governed by different rules.

27. Of course, it is fair to say that the factors to be taken into account on an
issue of construction, namely the words used in the contract, the surrounding
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circumstances known to both parties at the time of the contract, commercial

common sense, and the reasonable reader or reasonable parties, are also
taken into account on an issue of implication. However, that does not mean
that the exercise of implication should be properly classified as part of the
exercise of interpretation, let alone that it should be carried out at the same
time as interpretation. When one is implying a term or a phrase, one is not
construing words, as the words to be implied are ex hypothesi not there to be
construed; and to speak of construing the contract as a whole, including the
implied terms, is not helpful, not least because it begs the question as to
what construction actually means in this context.

28. In most, possibly all, disputes about whether a term should be implied
into a contract, it is only after the process of construing the express words is
complete that the issue of an implied term falls to be considered. Until one
has decided what the parties have expressly agreed, it is difficult to see how
one can set about deciding whether a term should be implied and if so what
term. This appeal is just such a case. Further, given that it is a cardinal rule
that no term can be implied into a contract if it contradicts an express term,
it would seem logically to follow that, until the express terms of a contract
have been construed, it is, at least normally, not sensibly possible to decide
whether a further term should be implied. Having said that, I accept Lord
Carnwath's point in para 71 to the extent that in some cases it could
conceivably be appropriate to reconsider the interpretation of the express
terms of a contract once one has decided whether to imply a term, but, even
if that is right, it does not alter the fact that the express terms of a contract
must be interpreted before one can consider any question of implication. 29.
In any event, the process of implication involves a rather different exercise
from that of construction. As Sir Thomas Bingham trenchantly explained in
Philips at p 481:
"The courts' usual role in contractual interpretation is, by resolving
ambiguities or reconciling apparent inconsistencies, to attribute the true
meaning to the language in which the parties themselves have expressed
their contract. The implication of contract terms involves a different and
altogether more ambitious undertaking: the interpolation of terms to deal
with matters for which, ex hypothesi, the parties themselves have made no
provision. It is because the implication of terms is so potentially intrusive
that the law imposes strict constraints on the exercise of this extraordinary
power."

30. It is of some interest to see how implication was dealt with in the
recent case in this court of Aberdeen City Council v Stewart Milne Group
Ltd 2012 SLT 205. At para 20, Lord Hope described the implication of a
term into the contract in that case as "the product of the way I would
interpret this contract". And at para 33, Lord Clarke said that the point at
issue should be resolved "by holding that such a term should be implied
rather than by a process of interpretation". He added that "[t]he result is of
course the same".

31. It is true that Belize Telecom was a unanimous decision of the Judicial
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Committee of the Privy Council and that the judgment was given by Lord
Hoffmann, whose contributions in so many areas of law have been
outstanding. However, it is apparent that Lord Hoffmann's observations in
Belize Telecom, paras 17-27 are open to more than one interpretation on the
two points identified in paras 23-24 and 25-30 above, and that some of those
interpretations are wrong in law. In those circumstances, the right course for
us to take is to say that those observations should henceforth be treated as a
characteristically inspired discussion rather than authoritative guidance on
the law of implied terms.”

133. At paragraphs 50-51 Lord Neuberger stressed that it was not enough that
without the implication there might be a “somewhat curious effect” and
one which could “fairly be said to be capricious or anomalous”, and he
seemed to require a something more of the situation without the implied
term such as “commercially or otherwise absurd” and especially where
relevant
matters were (as in the case relating to payment dates) within the tenant’s
control.

134. While the various judgments described the Belize judgment in differing
terms, their Lordships all saw it as illuminating, but not as watering down
the traditional tests for implication. In paragraph 77 Lord Clarke said: “I
agree with Lord Neuberger and Lord Carnwath that the critical point is
that in Belize the Judicial Committee was not watering down the
traditional test of necessity. I adhere to the view I expressed at para 15 of
my judgment in the Mediterranean Salvage & Towage case (which is
quoted by Lord Carnwath at para 62) that in Belize, although Lord
Hoffmann emphasised that the process of implication was part of the
process of construction of the contract, he was not resiling from the often
stated proposition that it must be necessary to imply the term and that it is
not sufficient that it would be reasonable to do so. Another way of putting
the test of necessity is to ask whether it is necessary to do so in order to
make the contract work: see the detailed discussion by Lord Wilberforce
in Liverpool City Council v Irwin
[1977] AC 239, 253-254.”

135. Thus, although the proposed implied term must be clear, fair and
reasonable and not contradict any express term, it must be either (or both)
obvious (in the sense that if the officious bystander had asked the parties
at the date of grant of the Lease whether it would apply then they would
clearly (as reasonable persons in their particular situations) all have
answered on the lines of “of course, that is so obvious that it goes without
saying” rather than something less such as “yes, I think that I would be
prepared to agree that”) or necessary (this not being a test of absolute
necessity but still a matter of “necessary” rather than merely
“convenient”) to give the contract business efficacy in the circumstances
which have now occurred. However, these matters have to be considered
in all the circumstances at the relevant time and including those of (i)
whether the relevant contract is or is not an apparently carefully drafted
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formal commercial contract which purports to be a comprehensive

agreement allocating risks between the parties and without gaps requiring
to be filled by implication and (ii) the actual terms of the contract as they
have already been construed and (iii) whether the circumstances which
have arisen can be said to be wholly unforeseen (as in the Aberdeen case).

136. The Tenants submit with regard to an implied term that:

a. The term is fair and reasonable especially as the Tenants have paid
for the Insurance;
b. The fact that the COVID situation is unprecedented overcomes
points to be made as to the Leases being carefully drafted apparently
comprehensive documents as this situation was effectively
unforeseeable;
c. The actual construction of the Rent Cesser Clause to confine it to
cases of physical damage gives rise to an obvious hole or gap or
lacuna which has to be filled, and all the more so (see the Landlords’
arguments and my decisions below) if it was, and was only, the fact
of a cessation of Rent under the Lease which would trigger the
Insurer’s obligation to pay out equivalent sums under the Insurance
although the terms of the Insurance should not affect the
construction of the Lease:
i. to give business efficacy to the situation of where the Insured
Risk, paid for by and to benefit the Tenants, has resulted in
closure of the Premises, and so the Insurance should have to
pay for the consequence by way of an equivalent sum to the
Rent, and also ii. by the “obvious” answer to the officious
bystander’s question being that it would go without saying that
an Insured Risk
Event resulting in closure should lead to a cessation of Rent;
d. The fact that each Lease provides that the Landlord does not warrant
that the Premises can be used for the Permitted Use in planning law is
not relevant to this situation of COVID and especially where COVID is
an Insured Risk. The same applies to the common-law principle that
even if a building is burnt down the relevant lease and the liability to pay
rent continues unless there is an agreement to the contrary.

137. The Landlords submit that the tests for implication are simply not met in
this situation. They say that:
a. The Leases are carefully drawn, and the position as to Rent Cesser is
fully set out and carefully circumscribed;
b. The Tenants could always have insured their turnover under a BII
policy, and the express Rent Cesser clause represents an agreed
allocation of risk;
c. COVID could not be wholly unexpected. Fears of pandemics had
existed in the recent past, in particular there had been the fear of the
Asian SARS epidemic spreading to this country.

138. I note that in the “closure” commercial lease case of National Carriers v
Panalpina [1981] AC 675 (and see below) there was no mention in any of
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the judgments of any possibility of an implied term resulting in a rent

cesser.
However, I place little weight on that as:
a. The point does not seem to have been argued;
b. There was not the feature of the Insurance which exists in these
cases.

139. I have again considered whether this matter is appropriate for summary
judgment and determination, and where, again, the question of such an
implication is in a standard-form context, and could potentially affect very
many other properties and landlord and tenant relationships. However:
a. This is a pure issue of interpretation;
b. There are again no real relevant factual disputes which have been
either suggested or become apparent to me. There has been no
suggestion of any factual matrix matter upon which any evidence
would be deployed at trial. The only matter in this context which
might have been raised is the level of fear of something like SARS
occurring but that is really a matter of public and historical record
and the possibility of pandemics is and was at the time of grant of
the Leases one of common knowledge and speculation;
c. The matter has been argued out fully with full citation of authority
and preparation; and
d. The case-law is in favour of determining such issues with all the
savings of cost and resource which would follow.

140. I do consider that the implied term suggested by the Tenants would have
been fair and reasonable and equitable. While it could prejudice Insurers
who might find themselves with an insurance liability which they had not
contemplated, it is for them to obtain and consider the relevant Lease(s)
and their implied terms just as much as their express terms. One
consequence, and indeed point, of the tests for implication is that the
implications should be apparent to the reader, they being either obvious or
necessary for business efficacy.

141. However, the burden is on the Tenants to show either (or both of)
obviousness or necessity for business efficacy.

142. With regard to obviousness, this has to be seen in the context of the
Leases being lengthy, standard-form, professionally drafted documents
which appear to have been prepared with care and do not contain obvious
drafting errors. Further:
a. They go into great detail regarding all sorts of circumstances. Thus
they appear to be comprehensive and, but in conjunction with
accepted doctrines of landlord and tenant law (as with the doctrines
of apportionment which featured in the Marks & Spencer case),
intended to cover the entire legal relationship between the parties. I
bear in mind that implication still took place in the lease case of
Liverpool v Irwin but that was for reasons of need for business
efficacy and not obviousness
b. They include express provisions:
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i.as to Rent Cesser and which are limited to circumstances of

physical deterioration (see above) even where closure has
otherwise occurred as a result of an Insured Risk Event. Such
a limitation suggests that closures due to non-physical
deteriorations were not intended (or at least agreed) to result
in rent cesser
ii. as to the absence of a warranty that the Premises can be used
for the Permitted Use. While that is only in a planning
context, there is clearly no warranty that the Premises can
always be so used
c. This needs to be seen in the common-law context of rent still being
payable under a lease notwithstanding the relevant premises
becoming unusable (e.g. due to fire) without an agreement to the
contrary. If the Tenants wished to negotiate a blanket (as opposed to
the limited) term to the effect that rent would not be payable if any
Insured Risk Event resulted in a closure, rather than just one with
involved physical deterioration (damage or destruction) then they
could have done so.

143. It seems to me that the above matters all favour the Landlords. They lead
me to conclude that in the circumstances of the officious bystander’s
hypothetical question, the hypothetical landlord (at least) might well
answer that the Lease is intended to set out all the circumstances in which
a Rent Cesser would exist even where an Insured Risk Event had
occurred.

144. With regard to the Tenants’ other points on obviousness based on their
having paid the premium for the Insurance where this situation was an
Insured Risk Event, it seems to me that they can be countered by similar
points to those which I have set out on the construction arguments above,
being in summary that:
a. the Insurance provisions are directed towards “bricks and mortar”
and freehold (or long leasehold) interest matters regarding to the
Premises;
b. the Landlords are entitled to insure as they choose (at least in
relation to additional Insured Risks such as this one which is not
specified as such) and if the Insurance gives rise to a resultant
benefit then they must bring it into account but not if it does not;
c. questions as to what happens if the Landlords do extend the Insured
Risks are really questions for construction and implication of the
Insurance provisions not of the Rent Cesser clauses;
d. there is an alternative solution to the Tenants having paid the
relevant premium of the Lease being interpreted to the effect that the
Landlords are not entitled to so insure and the Tenants should not
have to pay (and can recover) the relevant premium or part of the
premium.

145. It also seems to me that where the Tenants could have chosen to insure
their business and its turnover under their own BII policy, and which
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would not have been prohibited by the Leases’ restrictions on not insuring
the Premises themselves, that:
a. There was a clear mechanism by which the Tenants could protect
themselves by insurance against adverse non-“bricks and mortar”
matters such as COVID; and
b. The Landlords’ interpretation of the Leases represents an allocation
of risk which is perfectly commercial and reasonable. While there is
a force in the Tenants saying that it would be inconvenient for them
to obtain a sort of “top-up” insurance which would only operate in
certain specific events, that does not make it unreasonable, and such
a BII policy could operate in numerous non-“bricks and mortar”
circumstances (e.g. failures or destruction of Tenants’ computers
etc.).

146. Taking all these matters together, I do not think that the “obviousness” test
is met. It is not clear to me that the response from the parties, or at least
the hypothetical landlord, to the officious bystander’s question would be
that the implied term sought by the Tenants would “go without saying”.

147. However, the Tenants also contend that the implied term is required to
give the Leases business efficacy. Again, I do not think that this is the
case. The Leases “work” (to cite Lord Clarke in Marks & Spencer)
without the implied term, and simply provide for a Rent Cesser in some
identified circumstances but not in others, and where the Tenants could
perfectly well
(and perhaps more appropriately) have insured themselves. The Tenants’
points as to their having paid the premium for an Insured Risk of which they
cannot take advantage in this instance are met by the points set out above in
the context of the “obviousness” argument. At most this is Lord Neuberger
(in Marks & Spencer)’s situation of a “curious” and possibly “capricious or
anomalous” effect rather than one which is “commercially or otherwise
absurd”. It does also seem to me that the Tenants’ arguments come close to
seeking to contradict the actual terms of the Leases where they introduce a
specific limitation (physical deterioration) on the existence of a Rent Cesser
in the context of a closure due to an Insured Risk Event.

148. The Tenants also contend that this is a situation for an Aberdeen
implication in circumstances of a wholly unforeseen and unforeseeable
event. I am not convinced that COVID and the COVID Regulations were
truly unforeseeable in the light of such matters as SARS and consequent
fears, although I accept that they can well be said to be “unprecedented”.
However, in any event, implication still requires the satisfaction of the
obviousness and/or business efficacy tests and I do not find either as being
satisfied. This is not, in my judgment, an Aberdeen case where it is clear
what both parties would have intended if the potential for these events had
been put to or considered by them. It is a classic case for a difference of
view (or at least a negotiation) for the potential agreed allocation of risk.

149. I, therefore, do not find the tests for implication of the Tenants’ proposed
implied Rent Cesser term as having been met, and I do find that the
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Tenants do not have any real prospects of success of this issue. I note
that in Commerz Real, and on the basis of a much shorter analysis
(although where there was a ”keep open” covenant which is not present in
these Leases) Chief Master Marsh came to the same conclusion. I do,
however, consider separately below, the Tenants’ arguments for
something with a somewhat similar effect being implied within the
Insurance provisions.

The Insurance and the Insurance Provisions Rights under or resulting from the Policy
150. The Tenants (adopting each other’s arguments) essentially seek to rely
upon the Insurance in two ways. First, they contend that the Insurance
actually operates to cover the relevant Rent and that they can take advantage
of this. Second, they contend that if the Insurance does not operate to cover
the relevant Rent, then it should have done so and their ultimate liabilities
should reflect only what should have been the situation.

151. In support of their contentions that they can rely on whatever

entitlements exist in favour of the insured under the Insurance, whether or
not the Landlords have made appropriate claims, they rely on a line of
authorities and principally starting with Mark Rowlands v Berni Inns [1986]
QB 211
(to which I drew counsels’ attention prior to the start of the hearings) and
the consideration of it and subsequent cases in Frasca-Judd v Golovina
[2016] 4 WLR 107.

152. The Mark Rowlands decision concerned a situation where the tenant
was paying an insurance rent of premiums to insure the demised premises
against various insured risks including fire, and where the relevant premises
were damaged by a fire caused by the tenant’s negligence. The insurer paid
the landlord and then brought a claim against the tenant in the name of the
landlord relying on its rights of subrogation, which the tenant resisted on the
basis that it should take the benefit of the insurance and which should bar
subrogation even though it was not a co-insured.

153. As set out in various paragraphs of Frasca-Judd, the Court of Appeal

held in Mark Rowlands that:

a. The relevant insurance was effected for the benefit of both the
landlord and the tenant (paragraph 25);
b. The real issue was whether the provisions in that lease that insurance
monies should be used to remedy the fire damage meant that the
landlord, and hence also the insurer by way of subrogation, was
precluded from suing the tenant for negligence in relation to the fire
(paragraph 27);
c. There was established a principle that the contractual bargain
between landlord and tenant was, in effect, that if the landlord
recovered from the insurer then in both contract and tort the landlord
could not sue the tenant. Paragraphs 33-36 of Frasca-Judd read: “33.
The Court of Appeal in England decided to follow "this impressive
series of North American authorities" (see page 232 E). It rejected
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the insurer's arguments that the purpose of the landlord's covenant to

insure and to apply the insurance monies for reinstatement, was
simply to relieve the tenant's liability under its repairing covenant,
but not a liability for fire caused through its negligence (in the
absence of an express exemption). The Court stated:
"An essential feature of insurance against fire is that it covers fires
caused by accident as well as by negligence. This was what the
plaintiff agreed to provide in consideration of, inter alia, the
insurance rent paid by the defendant. The intention of the parties,
sensibly construed, must therefore have been that in the event of
damage by fire, whether due to accident or negligence, the
landlord's loss was to be recouped from the insurance monies and
that in that event they were to have no further claim against the
tenant for damages in negligence. Another way of reaching the same
conclusion ... is that in situations such as the present the tenant is
entitled to say that the landlord has been fully indemnified in the
manner envisaged by the provisions of the lease and that he cannot
therefore recover damages from the tenant in addition, so as to
provide himself with what would in effect be a double indemnity."
In this judgment I refer to the words I have italicised in that passage
as the Rowlands principle (see also the headnote at [1986] QB 212
B-C).

34. The Court of Appeal also relied upon considerations of "justice,

reasonableness and public policy" as providing complementary
support for its conclusion (p 233C), which was based essentially
upon the proper construction and effect of the lease itself.

35. Mr Butler submitted that in applying the principle in Rowlands

in this case, for the word "fire" one should read "flood". Mr
Davis agreed with that proposition.

36. The defendant also submitted that the Rowlands principle

applies to the tenant's contractual liability under the tenancy just
as much as to negligence on her part. The claimant accepted this
proposition. Although the landlord and tenant cases referred to
by the parties concerned claims in negligence for damages, there
is clear authority to support the defendant's contention that the
Rowlands principle applies to contractual liabilities as well as to
negligence (see for example Guard Marine and Energy v China
National Chartering Company Limited (The Ocean Victory)
[2015] 1 Lloyds Reports 381 at paragraphs 74 to 75). In other
words, the legal issue in this case depends upon the proper
construction and effect of the tenancy agreement.”

154. In Frasca-Judd, Mr Justice Holgate (as he then was) then considered

further decisions and concluded that:
“48. In my judgment, the following principles may be derived from the
authorities:-
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(1) The court should construe the terms of the tenancy agreement in order
to determine how the parties have agreed to allocate risk between
themselves;
(2) A covenant by a landlord with his tenant to insure the demised
premises in return for mutual obligations by the tenant is an important
indicator that the parties intended that the tenant (a) need not take out
insurance for the risk covered by the landlord and, (b) would not be liable
for any loss or damage suffered by the landlord falling within the scope of
that which the landlord has agreed to cover;
(3) The strength of that indicator will depend upon the other terms of the
tenancy, including whether they provide some alternative explanation for
the covenant to insure;
(4) The strength of that indicator is greater where the tenant is
contractually obliged to pay for, or to contribute towards, the cost incurred
by the landlord of insuring the premises;
(5) Other relevant indicators include terms of the tenancy which relieve
the tenant from repairing or other contractual obligation in the event of
damage by an insured risk, or which require the landlord to lay out
insurance monies on remedying damage caused by an insured risk, or which
suspend the obligation to pay rent whilst damage from an insured risk
prevents use of the demised premises. But the application of the principle in
Rowlands does not depend upon the inclusion of all or any of these terms in
the tenancy agreement;
(6) Where applicable the principle in Rowlands will defeat a claim brought
against the tenant in negligence even in the absence of a clause expressly
exonerating the tenant from liability for negligence.

I would add that Woodfall's Law of Landlord and Tenant also treats the
covenants discussed in Rowlands as factors or indicators in deciding
whether the court should infer that the parties' common intention was that
the landlord would look to an insurance policy rather than the tenant for
indemnification, rather than as prerequisites for drawing that conclusion (see
paragraph 11-104).”

155. Frasca-Judd was itself a case where premises had suffered flood damage,
which was allegedly the fault of the tenant, but which was covered by an
insurance policy which the landlord had covenanted to take out but
where there was no provision for insurance rent i.e. the tenant was not
directly paying for it. Nevertheless, Holgate J held that on the
construction of that lease, the intention was that the relevant risk should
be allocated to the insurance, upon which the landlord was to rely, and
not a negligent tenant (see paragraphs 62, 64, 76 and 77-82).

156. Those decisions are not directly applicable to these cases before me as
they do not concern wrongs allegedly committed by the Tenants for
which the Tenants are being sued. Rather they concern contractual
obligations on the part of the Tenants to pay Rent which are said to be
(or ought to be) met by the Insurance in the circumstances that the
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Landlords have chosen to render COVID closures Insured Risk Events

and have caused the Tenant to reimburse the Landlords for the relevant
insurance premiums by way of the Leases’ provisions for insurance rent.

157. Nevertheless, at least for the purposes of summary judgment, Mr

Fetherstonhaugh did not seek to persuade me other than to proceed on
the basis that if the Insurance did cover the relevant Rent in the
circumstances which have happened then the Tenants would have real
prospects of succeeding on the issue that the Landlords should have to
recover it from the Insurer under the Insurance and not from the Tenants.

158. I think that he was correct to take that stance. I only have to decide
whether the Tenants have real prospects of success on the point and it
seems to me in principle that it is well arguable (and probably right,
although I do not have to decide this) that:
a. The Insurance is for the benefit of the Tenants in Mark Rowlands
terms;
b. Where a payment by the Insurers is (or would be) under the
Insurance, upon the occurrence of an Insured Risk Event and by way
of compensation for one of its consequences being closure of the
Premises, and especially if it was for payment of a sum equivalent
and calculated by reference to the whole or part of the passing Rent,
then the Tenants should ordinarily be able to take the benefit of such
payment so as to satisfy or reduce their liability for the passing Rent
(there would be potential for exceptions, for example if the Insurer
was only liable if the Tenant was insolvent and unable to pay). In
effect the Tenant would obtain the benefit of the Insurance, with the
Insurer paying for what had been insured and the Landlords not
being prejudiced (as they would still receive from the Insurer and/or
the Tenants the total of the Rent).

159. That conclusion seems to me to be entirely consistent with the

FrascaJudd and Mark Rowlands approach which is one based on the
relevant Insurance policy being for the benefit of both Landlords and
Tenants (as would seem to follow from the relevant Insurance and
insurance rent provisions etc.).

160. However, Mr Fetherstonhaugh’s main point for the Landlords is that the
Insurance does not cover the Rent (or any equivalent) in the
circumstances which have happened. He submits that it is only if the
Rent Cesser clause operates, expressly or by implication, and which I
have held above is not the case, that the Insurer is liable to pay the
Landlords the amount of all or some of the Rent (I deal with further
points regarding what would be the amounts if the Landlords are wrong
below).

161. The Tenants submit (see below) that, if this were correct, the Landlords
would then be in actionable breach of the Insurance provisions in the
Leases. However, on the assumption that the Landlords are not, this
raises a question of the interpretation of the Insurance Policy itself which
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is again to be considered in terms of both construction and implication

applying the same principles as above.

162. The Landlords rely upon the terms of the relevant Murder, Suicide
Disease etc. extensions in the Insurance Policy where the key wording is
“The Insurer(s) shall indemnify the Insured in respect of loss of RENT or
Alternative Residential Accommodation and RENT in accordance with
Condition 1 to Sections 1 and 2 (notwithstanding any requirement for
DAMAGE to BUILDINGS) resulting from interruption of or interference
with the BUSINESS during the INDEMNITY PERIOD following [COVID
events]”

163. Here “the Insured” is the Landlords. Mr Fetherstonhaugh contends that

there is no “loss of RENT” where the Rent Cesser clause does not
operate and the Tenants remain (in principle) liable for the Rent (and
while further questions might arise were the Tenants to be insolvent as a
result of what has happened, there is no suggestion before me that that is
the case in fact). He contends that the Insurance is not relevant and the
Tenants still have to pay the Rent.

164. The Tenants dispute this and say:

a. If the Insurance is against “loss of RENT” then it implies that the
Rent is actually lost;
b. There is an express provision that “DAMAGE to BUILDINGS” is
not required;
c. In any event:
i. The Insurance Policy defines “DAMAGE” in wide terms to
include “loss, destruction or damage” and which thus extends
to non-physical disadvantage;
ii. The Rent section provides that if any BUILDINGS suffer
such DAMAGE and the BUSINESS, which includes the
property manager business, is interrupted then the Insurer will
pay the amount of the loss. The Tenants contend that there is
interruption with such matters as provision of services and
other elements of the BUSINESS;
iii. The “Rent – The Basis of Settlement of Claims” states that
“The Insurer(s) will pay in respect of BUILDINGS which
have suffered DAMAGE… the loss of Rent being the actual
amount of the reduction in the RENT receivable by the
Insured during the INDEMNITY PERIOD solely in
consequence of the DAMAGE.. [and costs of reletting and
mitigation expenditure]”, which again seeks to cover Rent in
the context of the wide definition of DAMAGE, and which is
relation to the rent “receivable” and not the rent actually
“received”; iv. There is the “Prevention of Access”
extension which also covers “loss of Rent” resulting from
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DAMAGE and with what appears to be a specific provision that

physical damage is not required;
d. The Landlords’ approach involves circularity in that it is that the
Insurance only operates where the Tenant does not have to pay the
Rent but the Tenants say that they should not have to pay the Rent
because the Insurance operates.

165. Mr Fetherstonhaugh responds to say that:

a. There is no loss of Rent, and in fact no insurable loss at all, because
the Rent Cesser clause does not operate;
b. There is no reduction in the Rent Receivable because the Rent
Cesser clause does not operate;
c. The BUSINESS has not been interrupted. That business is the
Landlords’ business whilst the actual interruption has been to the
business of the Tenants;
d. In Lewison on Drafting Business Leases at section 7-16 it is stated
that a tenant does not escape liability for Rent during a period when
premises have been destroyed by fire unless there is a rent cesser
exclusion “because the landlord will have suffered no loss”; and that
the Leases should be seen in the context of that known approach. It
seems to me that, being (but only being) an academic authority, it is
of some persuasive weight, and I note Chief Master Marsh regarded
this citation as being of importance in Commerz Real.

166. I have had concerns as to whether I should be dealing with the

construction of the Insurance Policy without hearing from the Insurer,
but since I am not making any decision which would seem to be capable
of prejudicing the Insurer, I have put them to one side. I have again
considered whether this matter is appropriate for summary judgment and
determination, and where, again, the construction question is in a
standard-form context, and could potentially affect very many other
properties and landlord and tenant and insurer relationships. However:
a. This is a pure issue of interpretation;
b. There are again no real relevant factual disputes which have been
either suggested or become apparent to me. There has been no
suggestion of any factual matrix matter upon which any evidence
would be deployed at trial;
c. The matter has been argued out fully with full citation of authority
and preparation;
d. The case-law is in favour of determining such issues with all the
savings of cost and resource which would follow.

167. I have concluded that the Landlords are correct and the Insurance Policy
does not operate to compel the Insurer to pay the Landlord sums
equivalent to all or part of the Rent in the circumstances before me (i.e.
where the Rent Cesser does not operate). In coming to this conclusion I
have considered (i) the natural and ordinary meaning of the clause, (ii)
the other relevant provisions of the Insurance Policy, (iii) the overall
purpose of the clause and the Insurance Policy, (iv) the facts and
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circumstances known or assumed by the parties at the time that the

document was executed, and (v) commercial common sense, but (vi)
disregarding subjective evidence of any party's intentions. I have
concluded that the Landlords’ constructions are clearly correct and
should be adopted as against the Tenants’ constructions and which do not
have any real prospects of success.

168. The most important points are:

a. At first sight the Landlords, who are the Insured, have suffered no
loss at all absent the operation of a Rent Cesser provision, and thus
there is nothing for them to be insured against;
b. In terms of the words used, they accord with the Landlords’
construction, in particular as:
i. It is the “Murder, Suicide or Disease” extensions which are
primarily in point. As to them:
1. The Insurance Policy provides for the Insurer to
“indemnify” “against loss of RENT”. That would
seem to require there actually to have been a loss of
Rent on the part of the Landlords and which has not
occurred in the absence of a Rent Cesser;
2. This has to be in consequence of an interruption to the
“BUSINESS” which is that of the Landlords, and not
the Tenants, and which has not occurred. It might be
different if the Premises were vacant and could not be
let due to COVID but that is not the situation before
me;
ii. In relation to the other (main) provisions of the Insurance
Policy and even assuming that DAMAGE can extend to
nonphysical disadvantage for these purposes, there still has to
be
1. either an interruption to the BUSINESS and which
has not occurred (see above), or
2. a reduction in the Rent “receivable” and which has
not occurred in the absence of a Rent Cesser. It
seems to me that it is the Tenants, and not the
Landlords, who are trying to create a circularity by
creating an assumption that their liability to pay rent
has been suspended in order to invoke the provisions
of the Policy in order to use them to then justify the
assumption and which is going the wrong way round;
c. The commercial purpose is to provide Insurance but it has to be
against “loss” of some form suffered by the Insured (i.e. the
Landlords). The standard way of doing this is by way of insuring
against the operation of a Rent Cesser (which is a loss to the
Landlords) and which is what, on the Landlords’ construction, is
happening here. This makes sense as it should be clear to the Insurer
(who should ordinarily be being provided with the Leases as part of
a fair presentation to it) what is in the Leases. The solution for the
Tenants is to negotiate a wider Rent Cesser, or, as they could
perfectly well have done, arrange their own appropriate BII policies;
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d. The Landlords’ approach receives some support from the authority

of Lewison, although I do not have sufficient evidence to regard it as
part of the factual matrix;
e. The Mark Rowlands and Frasca-Judd line of authority, although of
some relevance, is not directly in point. It is not concerned with
what is covered by the relevant Insurance but with whether such
cover as exists can be taken advantage of, and if so how, by the
Tenant. It is not concerned with liability for Rent at all (which is a
liquidated debt liability) but only the ultimate liability for the
remediation costs (and which is an unliquidated damages liability).

169. Notwithstanding the able arguments of the Tenants’ counsel, when

applying the iterative approach and considering which construction is
that which meets the test of “what a reasonable person having all the
background knowledge which would have been available to the parties
would have understood them to be using the language in the contract to
mean” it seems to me that it is the Landlords’ construction with its
requirement that the Insured Risk Event must have resulted in the Rent
not being payable (or receivable) and which in the absence of a Rent
Cesser is not the case here. I would add that I have considered the
Insurance Policy as a whole in coming to this conclusion.

170. I am not sure whether the Tenants were really seeking to argue that, in
the absence of their succeeding on construction, there should be implied
into the Insurance Policy a term to the effect that they wish that cover
would exist for the amount of Rent in the absence of a Rent Cesser.
However, in any event, I cannot see that such an argument would have
any real prospect of success. There is no real case for saying that such a
clause would either be
“obvious” or “necessary for business efficacy”. This is a carefully drawn
Insurance Policy with specific and well-drafted clauses and which contains
within it a set of specific allocations of risk. It is also, primarily, to protect
“the Insured” being the Landlords. To imply such a term against the Insurer
would go well beyond what is permitted under the restricted doctrines of
implication as explained in Marks & Spencer above.

171. Again, I note that this is consistent with Commerz Real, and, on the basis
of a much shorter analysis, Chief Master Marsh came to the same or
similar conclusions.

172. In the light of the above conclusions, I do not think that it is necessary
for me to seek to resolve a number of points raised as to extent and limits
of cover under the Insurance Policy in the event that Rent was covered
by it so as to exonerate the Tenants. Issues would exist as to the three
month period for cover and the maximum limit of £100,000 and the two
different years of the 2019-2020 and 2020-2021 Policies; and as to
whether the various occurrences of COVID and statutory impositions
and relaxations of “lockdowns” meant that there would be multiple
claims to be treated separately for these purposes or on one (or more)
continuous basis(es). While I had some considerable difficulties with Ms
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Holland’s arguments on these various points, they are academic in the

light of my other conclusions, and I might well have been concerned
anyway to resolve them against the Tenants (or the Insurer who could be
prejudiced by my opining on these matters without hearing from it)
without (at least) a greater citation of authority on the approach to such
“multiple incident” and limitation of liability questions.

Interpretation of the Insurance Provisions

173. The Tenants, however, have also raised arguments (adopting those raised
by each other) that the Landlords have acted in breach of the Insurance
provisions by insuring against COVID and the COVID Regulations (thus
rendering them an Insured Risk) but without insuring against sums being
or equivalent to the Rent in the circumstances of resultant closures of or
inabilities to use the Premises for the Permitted Uses. They contend both
that there is an actual breach of the Insurance Provisions and, if not, then
a breach of an implied term to such effect; and they also say that it
cannot be right for them to have been charged and paid for the premium
without obtaining the benefit, in effect, of Rent cover. Again I apply the
principles first of construction and then of implication as set out in the
case-law above.

174. Each of the Cine-UK and Mecca Leases provides that the Landlord shall
insure (i) the Premises (or the Landlords’ Estate including the Premises)
against the Insured Risks and (ii) against loss of three years Basic Rent
(and Service Charge). The SportsDirect Lease merely requires the
Landlord to ensure that various specific matters exist or occur in relation
to the Insurance maintained by the Superior Landlord, but no suggestion
or evidence has been advanced that that Landlord (or Superior Landlord)
has breached any such provision or any provision of the relevant Head
Lease.

175. The Cine-UK definition of “Insured Risks” also includes “loss of Basic
Rent” (although only in the context of the listed risks and which may
well not include the extra risks (which includes the COVID risk) against
which the Landlord may insure) but no point has been taken by Ms
Harrison based on that.

176. The Tenants contend that the terms of the Leases mean that the Landlord
having chosen to include COVID (and other disease) as an Insured Risk,
and to have the Tenants pay for it, must obtain insurance which provides
that in the event of resultant closures the Insurer will pay the Rent or its
equivalent. They say that this must be the purpose of the provision, and
that it simply flows from the choice of the Landlord to include this as an
Insured Risk, that the Landlord must insure against the consequences of
such occurring.

177. The Landlords dispute this. They say that the wording simply does not
say what the Tenants wish that it does, and that the position is governed
by the Rent Cesser which sets out whether or not rent is payable when an
Insured Risk occurs and thus when the Insurance need cover the rent.
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178. I have again considered whether this matter is appropriate for summary
judgment and determination, and where, again, the construction question
is in a standard-form context, and could potentially affect very many
other properties and landlord and tenant (and insurer) relationships.
However:
a. This is a pure issue of interpretation;
b. There are again no real relevant factual disputes which have been
either suggested or become apparent to me. There has been no
suggestion of any factual matrix matter upon which any evidence
would be deployed at trial;
c. The matter has been argued out fully with full citation of authority
and preparation;
d. The case-law is in favour of determining such issues with all the
savings of cost and resource which would follow.

179. I have concluded that the Landlords are correct and the mere fact that the
Landlord includes something as an Insured Risk does not operate to
compel the Landlord to include terms within the Insurance that the
Insurer will pay 3 years (or other) Rent if such a Risk results in closure
of or prevention of use for the Permitted Use of the Premises. In coming
to this conclusion I have considered (i) the natural and ordinary meaning
of the clause, (ii) the other relevant provisions of the Leases, (iii) the
overall purpose of the clause and the Leases, (iv) the facts and
circumstances known or assumed by the parties at the time that the
document was executed, and (v) commercial common sense, but (vi)
disregarding subjective evidence of any party's intentions. I have
concluded that the Landlords’ constructions are clearly
correct and should be adopted as against the Tenants’ constructions and
which do not have any real prospects of success.

180. The most important points are:

a. At first sight the Landlords, who are the Insured, have suffered no
loss at all absent the operation of a Rent Cesser provision, and thus
there is nothing for them to be insured against. Although there is a
degree of circularity here, as a breach by the Landlords might be said
to trigger a loss on their part, I do not think that the Insurance
provisions can be sensibly read to say that there should be insurance
against the consequence of such a breach;
b. In terms of the words used, they accord with the Landlords’
construction, in particular as:
i. The first element of the Cine-UK and Mecca Insurance
Provisions is for the Premises (or the Landlords’ Estate) to be
insured against the Insured Risks in “the Reinstatement Cost”
which is for physical repair etc. costs and three years’ loss of
Basic Rent; ii. The second element of the Cine-UK and
Mecca Insurance Provisions is simply to insure against “three
years’ loss of Basic Rent and Service Charge” without reference
to the Insured Risks; while the Cine-UK definition of Insured
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Risks provides that this is in relation to listed Insured Risks

(which do not include the COVID disease scenario), the Mecca
Lease is silent as to this; iii. The SportsDirect Lease simply
refers to specific matters in relation to whatever is the relevant
Superior Landlords’ Insurance Policy, and where I do not have
any evidence as to what are the Superior Landlords’ obligations
under that Head
Lease; iv. Accordingly, at most the wording is that the
Insurance has to be against “loss of Basic Rent and Service
Charge” but that is only relevant if such a “loss” occurs. Absent a
Rent Cesser there is no such “loss” on the part of the Landlord (or
Superior Landlord), and who is the insured, as the Tenant is still
bound to pay;
v. Further, the words “loss of Basic Rent and Service Charge” do
not really apply to the Tenants’ situations. The Tenants do
not “lose” such matters. It is only the Landlords who do so
and they only do so because of the existence of the Rent
Cesser;
c. In terms of commercial purpose (and factual matrix):
i. it is logical for the Landlord only to have to insure against the
consequence of the Rent Cesser (or, possibly, a Tenant
insolvency due to the occurrence of an Insured Risk);
ii. the Tenants are protected by the ability to insure their own
businesses and their turnover under their own BII policies;
iii. while it can be seen as potentially reasonable for the
Landlords to create an insurance contract which provides that
if an Insured Risk event occurs which results in the Premises
being closed then the Rent should be paid by insurers, that is
only one possible way of dealing with that scenario. For the
Tenants to insure by way of their own BII policies is also a
reasonable approach. This is a matter of negotiated allocation
of risk, and the Rent Cesser clause is at first sight the parties’
relevant agreement as to such risk allocation and which is
limited to cases of physical deterioration (see above).

181. Applying the iterative approach and considering which construction is

that which meets the test of “what a reasonable person having all the
background knowledge which would have been available to the parties
would have understood them to be using the language in the contract to
mean”, it seems to me that it is the Landlords’ construction which is
correct and that the Tenants’ construction, that the Landlords should
have to insure so as to obtain the equivalent to (3 years’) Basic Rent (and
Service Charge) in the event of closure of the Premises due to what the
Landlords had chosen (but did not have) to make an Insured Risk, has no
real prospect of success. I would add that I have considered each of the
Leases as a whole in coming to this conclusion.

182. However, I think that the Tenants also contend that such a term should be
implied and in particular where they have been required to and have paid
the premium for the policy which includes COVID disease etc. as an
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Insured Risk. They contend that it is obvious, and also necessary for
business efficacy, for the Landlords, if they choose to insure against such
a Risk, to obtain cover for (3 years) Rent (and Service Charge) in the
event that the Risk results in closure of the Premises.

183. I have again considered whether this matter is appropriate for summary
judgment and determination, and where, again, the question of such an
implication is in a standard-form context, and could potentially affect
very many other properties and landlord and tenant relationships.
However:
a. This is a pure issue of interpretation;
b. There are again no real relevant factual disputes which have been
either suggested or become apparent to me. There has been no
suggestion of any factual matrix matter upon which any evidence
would be deployed at trial. The only matter in this context which
might have been raised is the level of fear of something like SARS
occurring but that is really a matter of public and historical record
and the possibility of pandemics is and was at the time of grant of
the Leases one of common knowledge and speculation;
c. The matter has been argued out fully with full citation of authority
and preparation;
d. The case-law is in favour of determining such issues with all the
savings of cost and resource which would follow.

184. I do again consider that the implied term suggested by the Tenants would
have been fair and reasonable and equitable. While it could prejudice
Insurers who might find themselves with an insurance liability which
they
had not contemplated, it is for them to obtain and consider the relevant
Lease(s) and their implied terms just as much as their express terms. One
consequence, and indeed point, of the tests for implication is that the
implications should be apparent to the reader, they being either obvious or
necessary for business efficacy.

185. However, the burden is on the Tenants to show either (or both of)
obviousness or necessary for business efficacy.

186. With regard to obviousness, this has to be seen again in the context of the
Leases being lengthy, standard-form, professionally drafted documents
which appear to have been prepared with care and do not contain obvious
drafting errors. Further:
a. They go into great detail regarding Insurance. Thus they appear to
be comprehensive and, in conjunction with accepted doctrines of
landlord and tenant law (as with the doctrines of apportionment
which featured in the Marks & Spencer case), intended to cover the
entire legal relationship between the parties. I bear in mind that
implication still took place in the lease case of Liverpool v Irwin but
that was for reasons of need for business efficacy and not
obviousness;
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b. They include express provisions, as to Rent Cesser and which are

limited to circumstances of physical deterioration (see above) even
where closure has otherwise occurred as a result of an Insured Risk
Event, and to obtaining cover for “loss of [Rent]”. Such a limitation
suggests that closures due to non-physical deteriorations were not
intended (or at least agreed) to result in “loss of [Rent]” requiring
cover;
c. This needs to be seen in the common-law context of rent still being
payable under a lease notwithstanding the relevant premises
becoming unusable (e.g. due to fire) without an agreement to the
contrary. If the Tenants wished to negotiate a blanket (as opposed to
the limited) term to the effect that Rent would be covered by
Insurance in the circumstances of such occurring due to any Insured
Risk, rather than just one with involved physical deterioration
(damage or destruction), then they could have done so;
d. Even on the Landlords’ construction, and as Mr Fetherstonhaugh
submitted, there is still potential for a benefit for the Tenants from
the Insurance of COVID disease etc. as an Insured Risk; as if another
part of the relevant Building or Estate cannot be let so as to generate
income for the Landlord due to COVID etc. then the Insurance will
provide monies which can be used to finance general Building/Estate
costs (and which if not so financed might have resulted in an
increase in Service Charge or a lower standard of services etc.);
e. The Insurance Provisions are primarily for the benefit of the
Landlord (as the Insured). The fact that the Tenant is paying for the
Insurance is part of the price being paid by the Tenant for the grant
of the leasehold interest, and it does not follow that because the
Tenant is the indirect payee then the Insurance must be tailored to
the benefit of the Tenant as this implied term seeks to do;
f.If the Insured Risk is itself an inappropriate one, then the Tenants can
seek to dispute their liability to pay the (entire) premium;
g. The Tenants have their own ability to insure their businesses,
including against loss of turnover, by way of obtaining their own BII
policies.

187. It seems to me that the above matters all favour the Landlords. They
lead me to conclude that in the circumstances of the officious bystander’s
hypothetical question, the hypothetical landlord (at least) might well
answer that the only circumstances in which the Landlord has to ensure
that the Insurer, rather than the Tenant, will (ultimately) pay the Rent is
where the Rent Cesser applies whatever Insured Risk Event has
occurred.

188. Taking all these matters together, I do not think that the “obviousness”
test is met. It is not clear to me that the response from the parties, or at
least the hypothetical landlord, to the officious bystander’s question
would be that the implied term sought by the Tenants would “go without
saying”.
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189. However, the Tenants also contend that the implied term is required to
give the Leases business efficacy. Again, I do not think that the Tenants
have shown that there is any real prospect of establishing this to be the
case. The Leases “work” (to cite Lord Clarke in Marks & Spencer)
without the implied term, and simply provide for Insurance against “loss
of [Rent]” where a Rent Cesser exists in some identified circumstances
but not in others, and where the Tenants could perfectly well (and
perhaps more appropriately) could have insured themselves. The
Tenants’ points as to their having paid the premium for an Insured Risk
of which they cannot take advantage in this instance are met by the
points set out above in the context of the “obviousness” argument. At
most this is Lord Neuberger (in Marks & Spencer)’s situation of a
“curious” and possibly “capricious or anomalous” effect rather than one
which is “commercially or otherwise absurd”.

190. Again, I note that this is consistent with Commerz Real, and on the basis
of a much shorter analysis Chief Master Marsh came to the same
conclusion.

191. I have considered whether the Tenants would have any real prospects of
establishing some estoppel or equivalent defence on the basis that the
Landlords having required the Tenants to pay the entire premium, the
Landlords should not then be able to say that the Rent is not to be treated
as paid by the Insurer in the event of closure due to what the Landlords
have made an Insured Risk.

192. However, I do not think that the Tenants have any real prospects of
success on such an argument, and in particular as:
a. The juridical basis of such an argument is not clear to me;
b. It would flow from my construction of the various provisions of the
Leases that the Landlords were not in any way representing that Rent
would be simply covered and paid in these circumstances;
c. If the Tenants wish to complain about the terms of the Insurance and
to dispute paying the (entire) premium as a result, then they could do
so and that would seem to be the appropriate course and remedy.

Conclusion on the Interpretation of the Leases (and the Insurance Policy)

193. In the light of my conclusions above, I conclude that the Tenants have no
real prospects of disputing their liabilities to pay the Rent under the terms of
the Leases (or the Insurance Policy). However, they have a number of
further arguments to which I now turn.

Frustration
194. In the Deltic litigation, Deltic raised an argument that the Deltic Lease
had been frustrated altogether due to COVID and the COVID Regulations. I
do not think that any of the Tenants have sought to advance that argument as
such; but rather that SportsDirect (adopted by Cine-UK and Mecca) have
argued that there has been a “temporary frustration” over the periods of
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lock-down and enforced closures of the Premises, resulting in Rent not

being payable for such periods. The Landlords contend that (a) there has
been no frustration at all and (b) there is no such thing as a “temporary
frustration” in law.

195. Frustration is a doctrine which generally provides that where an wholly

unexpected event, for which the parties had not made an agreement,
occurred which sufficiently affects the contract so as to in some way negate
(i.e. frustrate) its purpose, then the contract will be discharged and end.

196. I was taken to various paragraphs in Treitel on Frustration and Force

Majeure (2nd Edn) where:
a. At paragraph 5-049 cases were discussed where “ If the temporary
impossibility lasts, or is likely to last, for so long that no part of the
agreed performance can be rendered, the contract will be
discharged.” including where the advent of war had made it clear
that chartered ship voyages would not be going to take place within
the relevant contract period;
b. At paragraph 5-050 there was discussed the position where some
performance was likely to remain possible during the remainder of
the contract period:
“Where performance for some balance of the contract period remains
(or is likely to remain) possible, and a claim is made in respect of
that balance, the tests which have so far been discussed in relation to
temporary impossibility obviously cannot apply… The test, in cases
of the present kind, appears to turn rather on the ratio which the part
remaining possible bears, or is likely to bear, to the whole of the
specified performance; the lower that ratio, the more likely it is that
the contract will be discharged. It will be convenient to refer to this
test as “the proportionality test””;
c. In the specific context of frustration of purpose, paragraph 9-002
states:
“The general rule is that the question whether the contract is
discharged is to be determined by reference to the time of the
occurrence of the allegedly frustrating event. The contract will be
discharged if at that time a reasonable person would have taken the
view that the event would lead to a sufficiently serious interference
with performance to bring about discharge. It is not necessary to wait
and see whether such interference actually takes place or would have
taken place if attempts to perform had not been abandoned; indeed,
the contract will be discharged even though subsequent events show
that there would have been no such interference.” References are
then made to Embriacos v Sydney Reid [1914] 3 KB 45 where a war
event appeared to have disrupted a charterparty permanently but
where peace was unexpectedly declared so that the interruption was
actually distinctly limited; but frustration had still occurred, Mr
Justice Scrutton having said that “Commercial men must not be
asked to wait till the end of a long delay to find out from what in fact
happens whether they are bound by the contract or not. They must
be entitled to act on reasonable commercial probabilities at the time
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when they are called upon to make up their minds.” In paragraph

9003 there is then cited Bank Line v Arthur Capital [1919] AC 435
as authority for the same proposition.

197. I was also taken in detail to National Carriers v Panalpina [1981] AC

675. There a road closure had prevented commercial premises which had
been let for 15 years (at an initial beneficial rent) being used after 10 years
for some 18-20 months after which the lease would still have another 3
years to run. The tenant contended that the lease had been frustrated but this
contention was rejected by way of summary judgment by a Master and the
Master’s summary conclusion was eventually upheld by the House of Lords.

198. Lord Hailsham referred to the effect of frustration at page 689B-D as

follows:

“Apart from the Law Reform (Frustrated Contracts) Act 1943 , the doctrine
of frustration brings the whole contract to an end, and in the present case,
apart from any adjustment under that Act and any statutory right to
compensation under the closure order, the effect of frustration, had it been
applicable, would have been to throw the whole burden of interruption for
20 months on the landlord, deprived as he would be of all his rent and
imposed as he would have upon his shoulders the whole danger of
destruction by fire and the burden of reletting after the interruption. As it is,
with the same qualification as to possible compensation, the tenant has to
pay the entire rent during the period of interruption without any part of the
premises being usable at all, together with the burden (such as it may be) of
the performance of the other tenant's covenants which include covenants to
insure and repair. These are no light matters.”

199. Lord Simon described the doctrine and the effect of frustration at page
700F-G as follows:
“1. Frustration of a contract takes place when there supervenes an event
(without default of either party and for which the contract makes no
sufficient provision) which so significantly changes the nature (not merely
the expense or onerousness) of the outstanding contractual rights and/or
obligations from what the parties could reasonably have contemplated at the
time of its execution that it would be unjust to hold them to the literal sense
of its stipulations in the new circumstances; in such case the law declares
both parties to be discharged from further performance.” And
then said at p707G:
“I would, however, presume to suggest that consideration should be given to
whether the English doctrine of frustration could be made more flexible in
relation to leases. The Act of 1943 seems unlikely to vouchsafe justice in all
cases. As often as not there will be an all-or-nothing situation, the entire loss
caused by the frustrating event falling exclusively on one party, whereas
justice might require the burden to be shared. Nor is this situation confined
to leases.”
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200. Their Lordships did conclude that the doctrine of frustration applied to
leases but that it would a rare occasion when a lease would be frustrated,
see:
a. Lord Hailsham at p692B-E
“In the result, I come down on the side of the "hardly ever" school of
thought. No doubt the circumstances in which the doctrine can apply
to leases are, to quote Viscount Simon L.C. in the Cricklewood case,
at p. 231, "exceedingly rare." Lord Wright appears to have thought
the same, whilst adhering to the view that there are cases in which
frustration can apply, at p. 241. But, as he said in the same passage:
"... the doctrine of frustration is modern and flexible and is not
subject to being constricted by an arbitrary formula." To this school
of thought I respectfully adhere. Like Lord Wright, I am struck by
the fact that there appears to be no reported English case where a
lease has ever been held to have been frustrated. I hope this fact will
act as a suitable deterrent to the litigious, eager to make legal history
by being first in this field. But I am comforted by the implications of
the well known passage in the Compleat Angler (pt. i, ch. 5) on the
subject of strawberries: "Doubtless God could have made a better
berry, but doubtless God never did." I only append to this
observation of nature the comment that it does not follow from these
premises that He never will, and if it does not follow, an assumption
that He never will becomes exceedingly rash.”
b. Lord Wilberforce at 697 A-B
“The present may be an example. In my opinion, therefore, though
such cases may be rare, the doctrine of frustration is capable of
application to leases of land. It must be so applied with proper regard
to the fact that a lease, that is, a grant of a legal estate, is involved.
The court must consider whether any term is to be implied which
would determine the lease in the event which has happened and/or
ascertain the foundation of the agreement and decide whether this
still exists in the light of the terms of the lease, the surrounding
circumstances and any special rules which apply to leases or to the
particular lease in question.”
c. Lord Simon at page 706C held that the doctrine of frustration was
applicable in principle to leases and at 706C-G that a commercial
lease of the type in that case (and in the cases before me) “is very
much the sort that might be frustrated in the circumstances that have
occurred”
d. Lord Russell was (see page 709) less inclined to agree that the
doctrine could apply to leases but held that on the views of the
majority the “hardly ever” approach would apply
e. Lord Roskill concluded that the doctrine was applicable to leases but
again unlikely to be applicable, saying:
[p715B] “I respectfully agree with Viscount Simon L.C. and Lord
Wright in the Cricklewood case that the cases in which the doctrine
will be able to be successfully invoked are likely to be rare, most
frequently though not necessarily exclusively where the alleged
frustrating event is of a catastrophic character.” And
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[pp717H-718A] “But to hold that the doctrine is capable of applying

to leases does not mean that it should be readily applied. Viscount
Simon L.C. and Lord Wright both indicated in the Cricklewood case
some of the limitations to which the invocation of the doctrine would
be subject. I respectfully agree with what was there said but I do not
think any useful purpose would presently be served by attempting to
categorise those cases where the doctrine might be successfully
invoked and those where it might not. Circumstances must always
vary infinitely.”

201. Nevertheless, notwithstanding that the road closures had rendered the
relevant premises unusable for a substantial period of time, the House of
Lords unanimously upheld the Master’s decision that summary judgment
should be given against the tenant on the basis that the facts could not
possibly justify a conclusion that that lease had been frustrated.

202. Lord Hailsham simply adopted the opinions of the others as to this
(p684D).

203. Lord Wilberforce after analysing the periods of time involved said at
697H-698B:
“My Lords, no doubt, even with this limited interruption the appellant's
business will have been severely dislocated. It will have had to move goods
from the warehouse before the closure and to acquire alternative
accommodation. After reopening the reverse process must take place. But
this does not approach the gravity of a frustrating event. Out of 10 years it
will have lost under two years of use: there will be nearly three years left
after the interruption has ceased. This is a case, similar to others, where the
likely continuance of the term after the interruption makes it impossible for
the lessee to contend that the lease has been brought to an end. The
obligation to pay rent under the lease is unconditional, with a sole exception
for the case of fire, as to which the lease provides for a suspension of the
obligation. No provision is made for suspension in any other case: the
obligation remains. I am of opinion therefore that the lessee has no defence
to the action for rent, that leave to defend should not be given and that the
appeal must be dismissed.”
Lord Roskill simply adopted this reasoning (p717A-B).

204. Lord Simon at 706E-G made clear that the length of the unexpired
terms and restrictions on user were relevant factors:
“In a lease, as in a licence or a demise charter, the length of the unexpired
term will be a potent factor. So too, as the American cases show, will be any
stipulations about, particularly restrictions on, user. In the instant case the
lease was for a short term, and had only about four and a half years to run at
the time of the alleged frustrating event - the closure of Kingston Street. The
demised premises were a purpose-built warehouse, and both parties
contemplated its use as a warehouse throughout the term. This use, in
Corbin's words ( Corbin, Contracts , vol. 6, p. 391), "played a large part in
fixing rental value," as the rent review clause shows. After the closure of
Kingston Street it could no longer be used as a warehouse. No "other
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substantial uses, permitted by the lease and in the contemplation of the

parties, remained possible to the lessee."

205. However, Lord Simon then held that the circumstances of that case
clearly did not go far enough for there to have been frustration; saying at
p707B-F: “The appellants were undoubtedly put to considerable expense
and inconvenience. But that is not enough. Whenever the performance of a
contract is interrupted by a supervening event, the initial judgment is
quantitative - what relation does the likely period of interruption bear to the
outstanding period for performance? But this must ultimately be translated
into qualitative terms: in the light of the quantitative computation and of all
other relevant factors (from which I would not entirely exclude executed
performance) would outstanding performance in accordance with the literal
terms of the contract differ so significantly from what the parties reasonably
contemplated at the time of execution that it would be unjust to insist on
compliance with those literal terms? In the instant case, at the most
favourable to the appellants' contention, they could, at the time when the
road was closed, look forward to pristine enjoyment of the warehouse for
about two thirds of the remaining currency of the lease. The interruption
would be only one sixth of the total term. Judging by the drastic increase in
rent under the rent review clause (more than doubled), it seems likely that
the appellants' occupation towards the end of the first quinquennium must
have been on terms very favourable to them. The parties can hardly have
contemplated that the expressly-provided-for fire risk was the only possible
source of interruption of the business of the warehouse - some possible
interruption from some cause or other cannot have been beyond the
reasonable contemplation of the parties. Weighing all the relevant factors, I
do not think that the appellants have demonstrated a triable issue that the
closure of the road so significantly changed the nature of the outstanding
rights and obligations under the lease from what the parties could reasonably
have contemplated at the time of its execution that it would be unjust to hold
them to the literal sense of its stipulations.”

206. Lord Russell simply agreed that the facts did not justify the application
of the frustration doctrine even assuming that it did apply to leases (p709F-
G).

207. I have also had cited to me Canary Wharf v European Medicines

Agency [2019] L&TR 14 where the effect of Brexit on the particular tenant
European Medicines Agency (an European Union entity) meant that it could
no longer operate from the premises. However, this was not held to be
sufficient to engender frustration, Marcus Smith J saying at paragraph 27
“Whether a contract is frustrated depends upon a consideration of the nature
of the bargain of the parties when considered in the light of the supervening
event said to frustrate that bargain. Only if the supervening event renders the
performance of the bargain “radically different” when compared to the
considerations in play at the conclusion of the contract will the contract be
frustrated.”
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208. This followed, amongst other authorities, The Sea Angel [2007]
EWCA Civ 547 where the “radically different” test has been considered and
explained as follows:
“111. In my judgment, the application of the doctrine of frustration requires
a multi-factorial approach. Among the factors which have to be considered
are the terms of the contract itself, its matrix or context, the parties'
knowledge, expectations, assumptions and contemplations, in particular as
to risk, as at the time of contract, at any rate so far as these can be ascribed
mutually and objectively, and then the nature of the supervening event, and
the parties' reasonable and objectively ascertainable calculations as to the
possibilities of future performance in the new circumstances. Since the
subject matter of the doctrine of frustration is contract, and contracts are
about the allocation of risk, and since the allocation and assumption of risk
is not simply a matter of express or implied provision but may also depend
on less easily defined matters such as “the contemplation of the parties”, the
application of the doctrine can often be a difficult one. In such
circumstances, the test of “radically different” is important: it tells us that
the doctrine is not to be lightly invoked; that mere incidence of expense or
delay or onerousness is not sufficient; and that there has to be as it were a
break in identity between the contract as provided for and contemplated and
its performance in the new circumstances.

112. What the “radically different” test, however, does not in itself tell us is
that the doctrine is one of justice, as has been repeatedly affirmed on the
highest authority. Ultimately the application of the test cannot safely be
performed without the consequences of the decision, one way or the other,
being measured against the demands of justice. Part of that calculation is the
consideration that the frustration of a contract may well mean that the
contractual allocation of risk is reversed. A time charter is a good example.
Under such a charter, the risk of delay, subject to express provision for the
cessation of hire under an off-hire clause, is absolutely on the charterer. If,
however, a charter is frustrated by delay, then the risk of delay is wholly
reversed: the delay now falls on the owner. If the provisions of a contract in
their literal sense are to make way for the absolving effect of frustration,
then that must, in my judgment, be in the interests of justice and not against
those interests. Since the purpose of the doctrine is to do justice, then its
application cannot be divorced from considerations of justice. Those
considerations are among the most important of the factors which a tribunal
has to bear in mind.

113. Mr Hamblen submitted that whereas the demands of justice play an

underlying role, they should not be overstated. He referred the court to
Chitty at para 23–008 (“But this appeal to the demands of justice should not
be taken to suggest that the court has a broad absolving power whenever a
change of circumstances causes hardship to one of the contracting parties …
Such a test is too wide, and gives too much discretion to the court”). I
respectfully agree. Mr Hamblen also referred to Treitel at para 16–009
(“The “theory” does not, in other words, supersede the rules which
determine the circumstances in which the doctrine of frustration operates”).
I would again respectfully agree, as long as it is not sought to apply those
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rules as though they are expected to lead one automatically, and without an
exercise of judgment, to a determined answer without consideration of the
demands of justice.”

209. Although I think that no-one is now (Deltic have compromised the Claims
against it) seeking to contend that any of these Leases have been frustrated
altogether, I am not wholly sure as to what was SportsDirect’s final position
as to this and in any event it seems to me to be useful to state shortly my
reasons as to why it is clear that none of them have been frustrated
altogether, as follows:
a. In principle, the doctrine of frustration applies to leases – see the
majority in Panalpina;
b. An enforced closure of the premises arising from matters outside the
control of the parties is such a supervening event as is capable in
principle as giving rise to the frustration of commercial leases such
as these and especially where, as here, the user clauses only permit
in practice what have become impossible uses – see Panalpina itself;
c. However, it is only in a “rare” or “very rare” case that such a
supervening event will have such a consequence (see Panalpina and
the Sea Angel above). As to this:
i. Has the situation become so “radically different” that the
present situation is so outside what was the reasonable
contemplation of the parties as to render it “unjust” for the
contract to continue (see Panalpina per Lord Wilberforce,
The Sea Angel and Canary Wharf); ii. There are relevant to
this: the original term of each Lease, the likely period of the
disruption and the likely remaining term of the Lease once the
disruption has ended (Panalpina per Lord Wilberforce and Lord
Roskill), and:
1. This should be considered at each relevant point in
time looking prospectively forward as to what
reasonable commercial people would conclude was
the likely length of the disruption (see Embriacos and
the other cases cited by Treitel);
2. The court must consider this first quantitatively but
then qualitatively as to whether there is such a
“radical difference” (see Lord Wilberforce in
Panalpina);
3. The court must also consider all this in terms of
whether this new situation justifies a departure from
the agreed allocations of risk, and where in the
context of a lease the essential agreement is that the
Tenant has agreed to pay the rent except in defined
circumstances. This is where the parties have
allocated the risks of disruption e.g. by reason of fire,
generally to the Tenant (Lord Wilberforce in
Panalpina); to which may be added that the parties
have also given thought to closures due to Insured
Risks but only allocated the risk (in relation to
whether or not Rent should be paid) to the Landlord
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where there has been a closure due to physical

damage arising from an Insured Risk (see above); iii.
In Panalpina it was held that summary judgment
should be given against the tenant where there were
1.6 years of closure over the remaining 5 years of a
15 year lease leaving some 3 years in place. While
Lord Simon regarded it as also relevant that the initial
rent had been at a beneficial rate, Lord Wilberforce
(and Lord Roskill) did not seem to regard this as
important, but simply that there was not a sufficient
qualitative difference to make it unjust not to continue
with the originally agreed allocation of risk;
d. It seems to me the factual analysis and application in this case is no
different to that in Panalpina, and which was also dealt with on a
summary basis:
i. I am prepared to accept that COVID and the COVID
Regulations would, or at least could, qualify as a supervening
event. While, in the light of SARS etc., they could have been
foreseen they are, in modern terms at least, properly termed
“unprecedented”; ii. However, I cannot see the reasonably
expected period of closures as ever having been any greater than
18 months. The original lock-downs in March 2020 were
projected to be only a matter of months in order to deal with the
immediate resourcing needs of public health bodies. There were
after some 4-5 months then periods of something approaching
reopening, which, while it was limited in the cases of
entertainment venues (such as the Bristol Cinema and the
Dagenham Bingo Hall), was real and thought to be the precursor
for full liftings of the lock-downs. There was then the further
lock-down commencing from late 2020 but this was very much
in the context of a limited period of time being required to
“flatten a further wave [of COVID hospitalisations etc.]” and to
enable vaccines to be finally tested and their administration
rolled-out. The position now
is that it has been announced that all restrictions are likely to
be lifted by the end of June 2021. However, it also seems to
me that it would always have been perceived, as has been
announced to be the case (with reopening allowed in April
2021), that the closure periods would be significantly shorter
for shops such as the Blackpool Shop than for the
entertainment venues;
iii. That means, as stated above, that the likely perceived periods
in relation to each Lease were:
1. for the Cine-UK Lease, original term 20 years (or 10
years if the break clause were to be exercised), and
after 18 months of closures it would have another
12.5 years to run, or 2.5 years if the break-clause were
to be exercised;
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2. for the Mecca Lease, original term 15 years, and after

18 months of closures it would have another 11 years
to run;
3. for the SportsDirect Lease original term 15 years, and
after less than 18 months (being a shop) of closures it
would have more than another 1 year to run. iv.
However, there is to also to be borne in mind that
each of these Leases attracts the protection of the
business tenancy provisions and protections of Part II
of the Landlord and Tenant Act 1954. As long as
they continue, they have rights of renewal or, if the
Landlord was to rely on a mandatory ground to
prevent renewal (such as redevelopment or
occupation for own use) compensation. Those rights
are valuable but if a Lease was frustrated then they
would be lost. It seems to me that their effect on the
practical terms of the Leases, and also the prejudice to
the Tenants if there were full frustration, are such as
to strengthen the degree of disruption which would be
required in order to make it unjust for the Leases to
continue. This point (assuming it was applicable)
does not seem to have been advanced in
Panalpina;
v. Here the practical effects of the closures are in reality not
much different from those in Panalpina in terms of enforced
closures although the Panalpina closure was more continuous
making it a stronger case. In relation to Cine-UK and Mecca,
the mathematical effects regarding the proportion of the
contractual terms which were “lost” due to the closures and
remaining after the closures are, in my view, less than in
Panalpina (I do not think that the possible exercise of the
break clause in Cine-UK is really relevant where it has not
been invoked, is at the choice only of the Tenant and would
still leave 2.5 years). The mathematical effect in
SportsDirect is proportionately greater than in Panalpina, but
a whole year is still a significant period to run, and the
Blackpool Shop (a) has been able to open for some period
since June 2020; (b) was always likely to be able to reopen at
an early stage, and (c) has in fact been able to reopen in April
2021, leaving 1.5 years of the SportsDirect Lease; vi.
Applying the qualitative approach, significant periods of time
will remain in relation to each Lease after what will have been
only a limited period of enforced closure. I do not see this as
being sufficiently different from Panalpina where the matter was
determined summarily against the Tenant. I do not see any real
prospects of there being sufficient for any “radical difference” or
to make it “unjust” for any the Leases to continue bearing in
mind their terms and their actual allocations of risk.
e. As Panalpina itself was dealt with on a summary basis, I consider
that I can deal with these cases likewise. The relevant facts are clear
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and I think that I can take judicial notice of how COVID and the
Government’s pronouncements, regulations and intentions have been
announced, advertised and considered over its period and now. This
is not a situation where evidence from any specialist source would be
required as to what persons in the positions of the parties before me
would think and consider (as, for example, in past cases as to the
likelihood of foreign countries engaging in war or reaching peaceful
settlements including of actual conflicts). It is simply a matter of
what is and remains public knowledge and perceptions. No-one has
sought to adduce any evidence of anything else;
f.I do make clear that I am not considering a case where the contractual
Lease term (whether or not 1954 Act protected) ended during a or an
expected lock-down. That could be argued to be a different situation
but is not before me.

210. Therefore, and while no party was contending for such to be the case, I
do not regard there as being any real prospect of it being shown that any of
the Leases have been frustrated.

211. However, I do have to deal with SportsDirect’s arguments that there

has been a “temporary frustration”. It seems to me that, arising from the
matters above, there are two combined reasons why the Tenants have no real
prospects of establishing such to have been or be the case, being:
a. First, that there is no such thing as a “temporary frustration”,
effectively suspending the contract for a period of time, in law. Both
Treitel and the case-law, in particular my initial citations from
Panalpina, make clear that frustration has the effect of discharging
the contract and ending it. That is one reason why such a “radical
difference” has to exist. Frustration does not suspend the contract,
rather it terminates it and so that it does not subsequently revive.
What the Tenants are seeking to do is to introduce one possible
version of the flexibility that Lord Simon said would require statute.
There is no case-law as to general “temporary frustration” (I
consider the question of “supervening event” separately below);
b. Second, in order to have a “temporary frustration” there could not be
a “full frustration”. However, the doctrine of frustration is
dependent on a “radical difference” having occurred which renders it
unjust for the contract to continue. It is difficult to see how, where
as here (see above), such a sufficient “radical difference” does not
exist, there can be any frustration at all. If there could be such a
temporary frustration then Panalpina would have been a classic case
of it and would have been decided differently. The same applies in
these cases.

212. I therefore reject the “temporary frustration” (and any full frustration)
argument, and hold it (and they) have no real prospects of success.
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Supervening Event/Illegality and Temporary Suspension of Obligation

213. The Tenants have, however, also sought to argue that there is a principle
of contract and of law that a party can be released from an obligation
where it is becomes impossible for it to be performed legally. The
Landlords accept that there can be such a release or suspension but say
that it is of no assistance to the Tenants here as it remains perfectly legal
for them to continue to pay the Rent.

214. Two cases were cited to me on this. The first was Andrew Millar v Taylor
[1916] 1 KB 402 which related to a contract for the export of
confectionary where such export had been rendered illegal for a time due
to provisions preventing “trading with the enemy” during stages of the
First World War.

215. Swinden Eady LJ said at pp410-11:

“Now the argument on behalf of the plaintiffs is this: the effect of the
Proclamation was to render the export of the goods illegal, and the
exporter or shipper would be liable to a penalty of 100l., and therefore the
plaintiffs were released from further proceeding with the contract. The
general rule of law is that where the performance of a contract has been
rendered illegal and therefore impossible by Act of Parliament passed
after the contract was made, or by an act of State, which of course would
include the Proclamation, then the promisor is excused from performing
his promise. In Barker v. Hodgson 33 Lord Ellenborough said: “If indeed
the performance of this covenant had been rendered unlawful by the
Government of this country, the contract would have been dissolved on
both sides, and this defendant, inasmuch as he had been thus compelled to
abandon his contract, would have been excused for the non-performance
of it, and not liable to damages.” But in the application of this rule care
must be taken to consider whether an event which has happened has really
rendered the performance of the contract impossible, or merely operated
to suspend or delay its execution. If, for instance, the act of State consists
in placing an embargo upon ships leaving the kingdom for particular
places abroad, the Courts have held, even when the delay has been very
considerable, that the rights under charterparties have only been
suspended. Thus in Hadley v. Clarke 34 it was held that although the
period of suspense was in that case extreme - between two and three years
- yet if the effect of an act of State is not to render the completion of the
contract impossible but only to delay its execution temporarily and for a
reasonable period, and does not frustrate the object of the engagement
from a business point of view and as a mercantile adventure, the promisor
is not excused, but must perform the contract; that is to say, he must
perform it within a reasonable time after the difficulty has been removed.”

And concluded at pp414-5:

High Court Final Judgment: Double-click to enter the short title

“Now the plaintiffs relied upon cases such as Esposito v. Bowden 42 which
show that where a contract involves trading with an enemy it is illegal. No
doubt that is so: a contract involving trading with the enemy becomes at
once ipso facto illegal; and the ground of that is put by Lush J. in Geipel v.
Smith 43 as “a state of war must be presumed to be likely to continue so
long, and so to disturb the commerce of merchants, as to defeat and
destroy the object of a commercial adventure like this.” All trading with
the enemy is prohibited, and that condition of things must be presumed to
last for an indefinite time; it renders all contracts involving such trading
illegal and impossible of further performance, and therefore they become
void. In the present case if the interruption were such that the contract
could not be carried out in a reasonable time, then it would invalidate the
contract. If, on the other hand, the interruption is such that it does not
prevent the agreement being carried out within a reasonable time, having
regard to the terms of the contract itself, then a mere temporary
interruption does not annul the contract. In this case the agreement was to
manufacture and deliver goods within a reasonable time, no other time
being specified, and the course of business between the parties shows that
from six weeks to two months was the usual and reasonable time. If,
therefore, an event happens which does not prevent the contract being
carried out within that reasonable time and in accordance with the usual
course of business between the parties, there is no reason why the contract
should be thereby determined; and, having regard to the Proclamations
that were issued on August 5, 10, and 20, I am of opinion that it was the
duty of the plaintiffs to have waited a reasonable time for the purpose of
seeing whether it were possible to fulfil their contract. If they had waited,
the contract could have been carried out as usual without any difficulty; if
they had waited until August 20 - a short interruption for ten or at the
most fifteen days - the contract could have been carried out without
difficulty. The suspension caused by the embargo on exportation was a
temporary suspension for a short period and did not prevent the contract
being carried out in the manner in which the parties had contemplated that
it would be carried out. For these reasons I am of opinion that under the
circumstances the plaintiffs were not entitled to repudiate the contract and
refuse to perform it. It is a breach by them of that contract, and the
defendants are entitled to recover against the plaintiffs, giving credit for
the agreed sum which the defendants owed to the plaintiffs. In my opinion
the appeal ought to be allowed in respect of the counter-claim, the
judgment reversed, and judgment entered for the defendants.”

216. The other judgments are to similar effect although also in the express
context of a contract and set of contractual obligations which had to be
performed under the contract within a reasonable time of its inception, and
where the analysis was again as to whether the statutory regulations had
altogether prevented that occurring as at the point of the attempted
repudiation and declaration that there would not be performance.
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217. The second authority was John Lewis v Viscount Chelsea (1994) 67
P&CR 120 where the defendant to the counterclaim (i.e. the plaintiff) was
a tenant under a building lease which contained an obligation to build
premises in a particular form but where subsequent statutes had imposed a
requirement for listed building consent to be obtained and which could not
be done. At page 132 the Judge held:

“On the high authority of these dicta and as a matter of principle I hold that
there may exist lawful excuses for non performance of a building covenant
in a long lease and such excuses would provide a defence to an action for
forfeiture for breach of covenant even though they would not provide the
defence to a claim for rent.”

And then at page 193:

“The result is that John Lewis is not in breach of its obligations in clause III.
I should add this, however; my finding does not discharge John Lewis from
its obligations. The leases continue for over 930 years. Circumstances will
change. There may come a time when John Lewis no longer has a lawful
excuse for non-performance of the obligation to demolish and rebuild.”

218. I cannot see any real prospects of the Tenants succeeding in a contention
that the COVID and COVID Regulations etc. are supervening events
which temporarily suspend their obligations to pay Rent, and whether as a
result of these authorities or otherwise, and in particular as:
a. Both cases proceed on the basis that an obligation the performance
of which is made illegal is suspended for the period during which it
is illegal and which may have the effect of frustrating (or in any
event discharging) the contract if it is going to last long enough;
b. However, neither case suggests that, while the performance of the
relevant obligation is excused, the performance of any other
obligation (at least if the two obligations are not interdependent or
conditional one upon the other) is excused. That can only depend
upon ordinary contractual principles (such as Rent Cesser
agreements, frustration etc.) but the Tenants have (so far) failed in
their attempts to invoke any of these;
c. Moreover, the John Lewis case makes clear that illegality amounting
to an excuse of one obligation does not itself relieve liability to pay
Rent.

I note that this also seems to have been view of Chief Master Marsh in the
Commerz Real case (and which perhaps was a stronger case than these as
there was actually a “keep open” covenant).
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Partial Failure of Consideration

219. The Tenants do, however, finally assert that the effect of their being
unable to operate from the Premises in accordance with the Permitted Uses
results in a partial failure of consideration such as to relieve them from their
liabilities to pay rent.

220. SportsDirect, in particular, relies upon clause 2.1 of the Blackpool

Lease which provides that the Landlords let the Blackpool Premises “In
consideration of the rents reserved and the Tenant’s covenants” and
contends that since this only permits (at least in practice as to which actual
evidence was adduced) use for the Permitted Use, and which is temporarily
impossible, there is such a partial failure of consideration.

221. As stated above, I regard the Tenants as having real prospects of

success in contending that in practice they cannot trade from the Premises in
ways permitted by the Leases. However, I do not see that they have any real
prospects of that in itself relieving them from their liabilities to pay rent
under the asserted doctrine, and in particular because:
a. I do not consider that “partial failure of consideration” is a
freestanding doctrine of contract law. No case-law has been cited to
me to say that it is. A partial failure of consideration can be a way of
categorising a particular event which has meant that a party has not
received an agreed benefit under a contract, but it is then a matter of
contract law (e.g. that of construction of the contract including as to
interdependent obligations, the law of breach of contract or the law
of frustration) as to what is the consequence (if any) of that in terms
of that party’s rights and obligations. Here I have construed the
contract (i.e. each Lease) so as not to provide for that consequence
and likewise applied the law of frustration and supervening
events/illegality to the same conclusion. The Tenants have failed in
showing the applicability of any relevant principle of contract law;
b. I do not consider that the Tenants being unable to trade in
accordance with the Permitted Uses is really a “partial failure of
consideration”, but rather simply an unexpected occurrence which
means that the Leases are not (as) beneficial as the Tenants expected.
It is no fault of the Landlords, and there is no suggestion that the
Landlords have breached any obligation. Even more importantly,
the Leases do not provide that the Rent is in any relevant way
dependent upon the Tenants being able to enjoy such use in practice
except in the limited circumstances of the Rent Cesser Clauses (and
which I have held do not apply here);
c. In any event, the contractual allocation of risk is that the Rent is
payable in these circumstances for all the reasons set out above.

Conclusion regarding COVID matters

222. For all the reasons set out above, I conclude that the Tenants have not
shown any real prospects of success in defending the claims brought against
them for Rent due to COVID or the COVID Regulations etc.
High Court Final Judgment: Double-click to enter the short title

223. I have also asked myself again whether the Landlords have shown that
there is no other compelling reason for there to be a Trial of these matters. I
have concluded that they have demonstrated that also. The Tenants contend
that COVID is unprecedented and that it has had unprecedented effects
which deserve a full investigation and trial, and especially in view of the
very great number of commercial (and perhaps other) leases which have
been affected. However, this is not a matter where any evidence is going to
be adduced to better inform the Court. The Tenants have already been able
to explain their individual situations fully in witness evidence. The matter
has been fully argued out by highly experienced and competent counsel with
full citation of authority and ample time for preparation. There is a strong
public interest (as well as an interest of each of the parties) in a summary
determination where that is (as here) capable of being achieved without any
prejudice to justice. Moreover, the same approach was taken in TKC v
Allianz (and, also, now, in Commerz Real).

The SportsDirect Rent Claims Point

224. There does, however, remain SportsDirect’s contention that AEW
having brought the County Court Claim for a sum of “Rent” for the March
2020 quarter, obtained the County Court Judgment (albeit by default) and
then been paid the County Court Judgment Sum”, should not now be able to
claim the Balance which it had omitted in error in a separate High Court
Claim (being QB-2020-002792).

225. The relevant clauses of the SportsDirect Lease (apart from the general
reservation of rent) provide that:

“The Tenant will pay to the Landlord yearly during the Term (and
proportionately for any part of a year) the following sums, each by way of
rent.
2.3.1 Firstly, from and including 31 August 2007 to and including 15
February 2008 a peppercorn (if demanded) and from and including 16
February 2008 a yearly rent of THREE HUNDRED AND FIVE
THOUSAND POUNDS (£305,000). This rent shall be paid clear of all
deductions, counterclaims set off whatsoever (except as may be required by
statute) by equal quarterly payments in advance on or before the usual
quarter days in every year. The first payment of this rent for the period from
31 August 2007 to 24 December 2007 (both dates being inclusive) shall be
made on the date of this Lease. The rent shall increase on every fifth
anniversary of 31 August 2007 by two per cent per annum compounded
over the previous five year period. The increased rent in each case shall
become payable from and including the fifth anniversary of 31 August 2007.
2.3.2 Secondly, from and including the Service Charge Commencement
Date, a service charge calculated and payable in the manner specified in
Schedule 4 (provided that the Landlord shall not be entitled to exercise the
remedy of distress in the case of a bona fide dispute of balancing service
charge payments made pursuant to paragraph 6 of Schedule 4 of this Lease).
2.3.3 Thirdly, the sums specified in clause 3.29 (interest).
2.3.4 Fourthly, any VAT chargeable on the yearly rents and Service
High Court Final Judgment: Double-click to enter the short title

Charge.”

226. Thus, the rent (to which VAT and any interest was to be added) was
originally £305,000 per annum but had been increased at intervals, most
recently in 2017, on a compounded percentage basis.

227. The main facts are clear from the documents and seem to be
uncontroversial:

(1) SportsDirect had paid the rent with vat under the Blackpool Lease up to
and including the December 2019 quarter. However, SportsDirect did
not pay any of the rent with vat for the March 2020 quarter

(2) The County Court Proceedings were issued by Claim Form out of the
County Court Business Centre, using the online issue procedure, under
Claim No. G8QZ85H4 by AEW against SportsDirect. The Particulars
of Claim section was completed as follows:
“The Defendant is the tenant of premises known as part of the
Woolworth Building, Bank Hey Street, Blackpool, Lancashire pursuant
to a lease dated 28 March 2008 made between (1) Development
Securities (Blackpool Developments) Limited and (2) Sports World
International Limited. The Claimant is the Landlord. Pursuant to Clause
3.1.1 of the Lease, the Defendant agreed to pay the rent of £305,000 plus
VAT per annum (equating to £76,250 plus VAT per quarter). The
Defendant has failed to make payments of rent in the sum of £92,948.75.
The claimant claims interest under section 69 of the County Courts Act
1984 at the rate of 8% a year from 25/03/2020 to 16/06/2020 on
£92,948.75 and also interest at the same rate up to the date of judgment
or earlier payment at a daily rate of £20.31.”

(3) The Claim Form was served but no Acknowledgement of Service or

Defence was filed or served. AEW then made a Request for Judgment
in Default dated 23 July 2020 for the amount previously claimed with
further interest and thus for £94,655.35 which together with costs
totalled £99,014.84. Judgment in Default was entered under CPR12 on
24 July 2020

(4) However, the solicitors or others preparing the Claim Form had failed to
properly understand or calculate the amount due. The rent had
previously been subject to compounded percentage increases and was no
longer the original rent of an annual £305,000 and thus quarterly
£76,250 (“the Original Rent”) plus vat, making a total of £91,500 per
quarter but was now a quarterly figure of £92,948.75 (“the Increased
Rent”) plus vat, making a total of £111,538.50, per quarter

(5) Thus, what had happened is that AEW, instead of simply quoting and
seeking the Increased Rent figure plus vat, had (i) quoted the Original
Rent quarterly figure as being the passing rent to which vat was to be
added and (ii) claimed that SportsDirect had “failed to make payment of
High Court Final Judgment: Double-click to enter the short title

rent in the sum of” what was actually the Increased Rent figure but
without adding vat. The result was that AEW had claimed £18,589.75
(being “the Balance”) less than that to which it was entitled

(6) I also note that AEW had claimed interest at the Judgments Act rate and
which was greater than the contractual rate provided for in the Blackpool
Lease.

228. I further note that:

a. At first sight it can look as if the claim in the County Court
Proceedings was actually for what was stated to be a quarter’s rent
plus vat, as £76,500 plus vat is close to £92,948.75. However, the
true figure for £76,500 plus vat would be £91,800 (and, if vat, at a
rate of 20%, was simply being applied to a full quarter’s rent of that
amount or any other round figure (i.e. a figure with a zero in the
pounds column), the resultant total inclusive of vat could not be one
ending in a number of pence)

b. AEW seems itself to have misunderstood the matter (at least as far as
its present case is concerned) even when the High Court claim was
brought and subsequently; and as:
i. The original High Court Particulars of Claim sought the
Balance figure by way of stating it was a claim for “Rent
inclusive of VAT in respect of the March quarter rent in the
amount of £18,589.75”, that is to say on the basis that it was
simply an apportioned element of the overall “rent inclusive
of vat” figure, part of which had been paid and part of which
had not
ii. The Particulars of Claim were then Amended to say instead
“Rent inclusive of VAT in respect of the March quarter rent
in the amount of £18,589.75 (£15,491.46 plus VAT of
£3,098.29)”; thus making even more clear that this was
simply a claim that not all of the entire inclusive figure had
been paid but only an element of it part of which had been
apportioned to rent and part to vat on that rent, leaving
outstanding an element of the rent and the vat which was
chargeable upon that element
iii. The Particulars of Claim were then Re-Amended to say
“VAT in respect of the March quarter rent in the amount of
£18,589.75” i.e. a claim for the VAT element alone, which is
how AEW now (at least) puts its claim for the Balance.

229. Sports Direct contends that this claim for the Balance cannot be made at
all, and in any event not by separate High Court proceedings where the
County Court Judgment still stands, as a result of the doctrines of merger
(and cause of action and issue estoppel) or abuse of process.
High Court Final Judgment: Double-click to enter the short title

230. Ms Holland relies upon Moorjani v Durban Estates 2019 EWHC 1229,
which concerned a residential long lease landlord and tenant dispute
where the judge held that the claimant tenant had sued the defendant to
judgment in the County Court for a claim for damages in respect of
breaches of covenant to repair, and had then brought a claim in the High
Court for further damages for breaches of the same covenants but in
relation to different heads of loss. The Judge held that the High Court
claim was barred by cause of action estoppel and the doctrine of merger
although he would also have struck it out as an abuse of process.

231. In Moorjani, the Judge identified the basic relevant principles in a citation
from the Supreme Court as follows:
“ 3. In Virgin Atlantic Airways Ltd v. Zodiac Seats Ltd [2014] A.C. 160 ,
Lord Sumption analysed the defence of res judicata. He said, at [17]: "Res
judicata is a portmanteau term which is used to describe a number of
different legal principles with different juridical origins. As with other
such expressions, the label tends to distract attention from the contents of
the bottle.
The first principle is that once a cause of action has been held to exist or not
to exist, that outcome may not be challenged by either party in subsequent
proceedings. This is 'cause of action estoppel'. It is properly described as a
form of estoppel precluding a party from challenging the same cause of
action in subsequent proceedings.
Secondly, there is the principle, which is not easily described as a species of
estoppel, that where the claimant succeeded in the first action and does not
challenge the outcome, he may not bring a second action on the same cause
of action, for example to recover further damages: see Conquer v. Boot
[1928] 2 K.B. 336 .
Third, there is the doctrine of merger, which treats a cause of action as
extinguished once judgment has been given on it, and the claimant's sole
right as being a right on the judgment. Although this produces the same
effect as the second principle, it is in reality a substantive rule about the
legal effect of an English judgment, which is regarded as 'of higher nature'
and therefore as superseding the underlying cause of action: see King v.
Hoare (1844) 13 M & W 494 , 504 (Parke B) …
Fourth, there is the principle that even where the cause of action is not the
same in the later action as it was in the earlier one, some issue which is
necessarily common to both was decided on the earlier occasion and is
binding on the parties: Duchess of Kingston's Case (1776) 20 State Tr 355 .
'Issue estoppel' was the expression devised to describe this principle by
Higgins J in Hoysted v. Federal Commissioner of Taxation (1921) 29 CLR
537 , 561 and adopted by Diplock LJ in Thoday v. Thoday [1964] P 181 ,
197-198.
Fifth, there is the principle first formulated by Wigram V-C in Henderson v.
Henderson (1843) 3 Hare 100 , 115, which precludes a party from raising in
subsequent proceedings matters which were not, but could and should have
been raised in the earlier ones.
High Court Final Judgment: Double-click to enter the short title

Finally, there is the more general procedural rule against abusive

proceedings, which may be regarded as the policy underlying all of the
above principles with the possible exception of the doctrine of merger."

232. The Judge’s section on the law of merger was as follows:

“13. In King v. Hoare (1844) 13 M & W 494 , Parke B said at page 504: "If
there be a breach of contract, or wrong done, or any other cause of action by
one against another, and judgment be recovered in a court of record, the
judgment is a bar to the original cause of action, because it is thereby
reduced to a certainty, and the object of the suit attained, so far as it can be
at that stage; and it would be useless and vexatious to subject the defendant
to another suit for the purpose of obtaining the same result. Hence the legal
maxim, 'transit in rem judicatam,' – the cause of action is changed into
matter of record, which is of a higher nature, and the inferior remedy is
merged in the higher."

14. As Lord Sumption observed, the principle of merger produces the same
effect as cause of action estoppel but is a discrete rule of law in its own
right.”

233. The Judge having reviewed the authorities stated his “Conclusions” as to
the law as follows:

“17. Accordingly, the proper approach to this case is as follows:

17.1 The starting point is to consider whether the second claim is brought
upon the same cause of action as the first.

17.2 The focus is upon comparing the causes of action relied upon in each
case and not the particulars of breach or loss and damage. New particulars
are not particulars of a new cause of action if they seek to plead further
particulars of breach of the same promise or tort or further particulars of loss
and damage.

17.3 Both cause of action estoppel and merger operate to prevent a second
action based on the same cause of action. Such bar is absolute and applies
even if the claimant was not aware of the grounds for seeking further relief,
unless the judgment in the first case can be set aside.

17.4 Even if the cause of action is different, the second action may
nevertheless be struck out as an abuse under the rule in Henderson v.
Henderson where the claim in the second action should have been raised in
the earlier proceedings if it was to be raised at all. In considering such an
application:
a) The onus is upon the applicant to establish abuse.
b) The mere fact that the claimant could with reasonable diligence have
taken the new point in the first action does not necessarily mean that the
second action is abusive.
High Court Final Judgment: Double-click to enter the short title

c) The court is required to undertake a broad, merits-based assessment

taking account of the public and private interests involved and all of the
facts of the case.
d) The court's focus must be on whether, in all the circumstances, the
claimant is misusing or abusing the process of the court by seeking to raise
before it the issue which could have been raised before.
e) The court will rarely find abuse unless the second action involves
"unjust harassment" of the defendant.”

234. Ms Holland contends that this case involves cause of action estoppel and
merger because the same cause (or causes) of action that is to say failure
to pay the March quarter rent and its vat and to comply with the covenants
to pay such rent was (or were) being sued upon the County Court
proceedings and is (or are) now being sued upon in these proceedings.
She submits that (i) it is impermissible by reason of cause of action
estoppel to sue upon the same cause(s) of action twice and (ii) there was a
single cause (or sets of causes) of action for rent and vat which have
merged in a single judgment. She submits that there was claim for the
sums due for the March quarter where rent and vat cannot be seen or
claimed separately and were actually claimed together and that is the end
of it (unless, perhaps, the County Court Judgment were itself set aside or
varied, which might be difficult generally and particularly following the
County Court Payment).

235. Mr Fetherstonhaugh contends that this does not apply in a case of what he
says:
a. was a simple and obvious mistake as to what was the overall amount

b. there was also a simple and obvious mistake in that the Claim Form stated
the original rent and failed to state that the rent had been
increased to what was now the Increased Rent

c. the actual claim in the County Court Proceedings was simply for the pure
Increased Rent and not for the vat upon it which is now (see below)
claimed as a separate distinct amount and which arises under a different
sub-clause (2.3.4) of the Blackpool Lease than that
(clause 2.3.1) which applies to the pure rent itself

d. and, thus, that the causes of action should be seen as distinct as

i.it was only part of the rent (and its vat) which was being sued
for in the County Court Proceedings and the right to the
remainder (being the Balance) should be viewed as a
sufficiently separate cause of action to avoid the doctrines of
merger or cause of action estoppel; and/or
ii. the VAT element should be seen as a separate cause of action
from the rent; and it was the rent (only) which was being
claimed in the County Court Proceedings, and not the VAT
the cause of action for which was not determined and has
remained unmerged.
High Court Final Judgment: Double-click to enter the short title

236. I am only considering an application by AEW for summary judgment for

this sum, and there is no application before me from SportsDirect for
reverse summary judgment. I do consider that SportsDirect has real
prospects of success on this issue, and indeed (at least) the better of the
argument, for the following reasons.

237. The essential question in relation to both cause of action estoppel and
merger is as to whether there is only one cause of action involved or
whether the cause of action in the County Court Claim can be seen as
distinct from that now sought to be sued to judgment upon in the High
Court,

238. I have sought to construe the County Court Claim Form on the basis of the
standard principles of construction of documents outlined above, with the
essence being what it would mean to a reasonable reader with knowledge
of the surrounding factual matrix and bearing in mind the apparent
commercial purpose.

239. In relation to this:

a. The words used would seem of themselves to indicate a claim for:
i.What was said to be the then outstanding financial sum of or in
the nature of Rent. There is no suggestion that only a part of
whatever due was being claimed, and no suggestion that only
a part of whatever was due in relation to a particular quarter
was being claimed
ii. Both “rent” (in its simplest pure form) and VAT on that
“rent”, and which clause 2.3 of the Blackpool Lease in its
opening words provided were both payable as “rent”. The
Claim Form stated that the relevant agreement on the part of
the Defendant was to pay a specific annual figure of “Rent
(plus VAT…)” and the quarterly rent was identified on the
basis that it was a specific quarterly sum plus VAT. Although
it is possible as seeing the allegation that “The Defendant has
failed to make payments of rent…” as only referring to the
pure rent element and not also to VAT, that would seem the
less natural reading as:
1. There would be no need for the references to VAT
and which would be otiose
2. The sum claimed was not simply the specified pure
rent figure of one quarter £76,500. Although it is
possible in theory that the Defendant was being said
to have failed to pay the specified rent element (but
not vat) of the latest quarter and some of the specified
rent element (but not vat) from a previous quarter, the
more obvious apparent derivation of the sum
(especially bearing in mind the apparent correlation
between the rent plus vat amounts, even though on
close examination it must be a mismatch – see above)
was that this was a quarter’s rent inclusive of vat
(possibly with a little more)
High Court Final Judgment: Double-click to enter the short title

b. The ordinary commercial purpose of the Claim Form would be to

recover whatever was apparently due and unpaid, not merely to
recover part of it. Further, the ordinary commercial purpose of the
Claim Form would be to recover both the specified rent and the vat
chargeable upon it as:
i.That is effectively what the Claim Form says (with its
references to vat which otherwise lack relevance or point)
ii. Where, as here, vat is actually chargeable on rent (which is
common-ground and known to the parties), as a matter of law
rent cannot be paid (and thus cannot be claimed) without vat.
If any payment is made in relation to rent then as a matter of
law it is vat inclusive; the landlord must provide a vat invoice,
the landlord must provide a vat return and account for vat to
HMRC, and the commercial tenant is entitled to reclaim the
vat from HMRC. Thus, as a matter of law, the claim had to
be vat inclusive

c. As to the factual matrix; it is correct that it includes the Blackpool

Lease itself (and which is referred to in the Claim Form) which on
construction of the above clauses provides for the Increased Rent
and which could be simply calculated from it (this is not a situation
of a true rent review which might or might not have resulted in
revisions from the Original Rent). On the other hand:
i.the clauses of the Blackpool Lease provide that the vat on the
pure rent is also recoverable as rent, and
ii. it would require some considerable thought and effort (as
demonstrated by the various points I have noted above as to
mathematical calculation and AEW’s own difficulties in
understanding and formulating what had and should have
happened) to appreciate that AEW had simply claimed a sum
equivalent to one quarter of the Increased Rent without vat.

240. Applying the iterative approach between the various competing

constructions in terms of which would be the reasonable reader’s
understanding of the Claim Form, I consider that the answer is that
SportsDirect has (at least) real prospects of succeeding on a construction
that AEW were claiming as the sums then outstanding under the
Blackpool Lease, and in particular but not limited to the sums outstanding
for the March 2020 quarter, as both rent and vat were the total of
£92,948.75, and that, in any event, the sum of £92,948.75 was made up of
pure rent and vat chargeable upon it rather than just pure rent. In coming
to such conclusion, I think that the first is the most likely construction, but
if not then the second, in particular for the reasons set out above and
because that it seems to me best fits with both the words used and the
commercial and legal context with the factual matrix being (at worst for
SportsDirect) neutral.

241. I turn then to the question of whether the County Court Claim was for the
same cause of action as the present High Court Claim. I find that
High Court Final Judgment: Double-click to enter the short title

SportsDirect has (at least) real prospects of success in contending that it

was, and indeed I think has the better of the argument, and in particular as:
a. My preferred construction of the County Court Claim Form is that it
contended that it was for:
i.All sums then outstanding under the Blackpool Lease (as pure
rent and vat on rent); but even if that was wrong then
ii. For rent and vat i.e. not just for specified rent
b. The cause of action for a quarter’s rent (and the vat upon it) or the
entirety of whatever is the outstanding element of it (assuming there
has been part-payment) seems to me to be indivisible and a single
cause of action in principle. While there is an argument that there is
a claim for each individual pound:
i. The “promise” is to pay the quarter’s amount, and the entire
sum, and the liability to pay it, has accrued due on the quarter
day; and in any event
ii. The obligation to pay the sum is “vat inclusive” i.e. it is not
possible in vat law just to pay down the pure rent without
paying the vat element (e.g. if the rent was £10,000 with vat
on it of £2,000; a payment of £6,000 could not be made just
in relation to the rent so as to leave outstanding rent of £4,000
and vat of £2,000; the payment would have to be applied
£5,000 to rent and £1,000 to vat leaving outstanding rent of
£5,000 and vat of £1,000 – even if the first result could be
achieved such would require very express wording and which
is not present here)
iii. This is not a case where there was any suggestion (let alone
any fact) of an agreement only to pay part of the overall sums
or part of the March quarter’s amount. That could have
created a cause of action in itself (or varied what would
otherwise have been the cause of action) but was not, and
there was no suggestion that it was, the case here.

242. Therefore in my view, SportsDirect has (at least) real prospects of success
in contending (and indeed the better of the argument) that:
a. The County Court Claim’s cause of action was for (or included) the
cause of action for the entirety of the March’s quarter’s rent (both
the Increased Rent itself and the vat on it), and thus merged into the
County Court Judgment; and as a result
b. AEW cannot bring or succeed on a claim for the VAT chargeable on
the March quarter’s Increased Rent in its High Court claim and as it
seeks to do.

243. I would add that even if part of the above is wrong, I would still have held
that SportsDirect has (at least) real prospects of success in contending
(and indeed the better of the argument) that the County Court Claim Form
and the County Court Judgment included a VAT element in relation to the
March quarter (and that that simply follows from VAT law if nothing
else). On that basis the High Court Claim as now advanced i.e. for pure
VAT, would not be justified at least as to the majority of it.
High Court Final Judgment: Double-click to enter the short title

244. I have carefully considered the fact that it can be demonstrated on careful
analysis from the documents themselves both that AEW had made a
mistake and what it was. However:
a. The doctrine of merger (at least) is strict
b. It takes care not only to identify that there was a mistake but also as
to what it was (indeed AEW have had considerable difficulty in
doing this and expressing it in an intelligible and correct way)
c. At first sight, any solution would seem to be more likely (if it exists
at all) to lie in seeking to vary (or set aside) the County Court
Judgment but that would be a matter for the County Court within the
County Court Claim itself.

245. I add that Ms Holland advanced an alternative argument based on the

Henderson v Henderson principles and abuse of process. Mr
Fetherstonhaugh resisted that on various grounds including that it was not
“harassment by litigation” simply to claim an extra sum which had been
omitted by mistake. There seemed to me to be some potential force in those
arguments, but they do not arise at present where I have decided that real
prospects of success exist on the cause of action estoppel/merger grounds,
and so I do not need to and do not seek to resolve them.

246. As there is no application for reverse summary judgment, it is sufficient

for me in consequence simply to refuse summary judgment to AEW with
regard to the Balance, and further directions will be required. However, I
may be prepared to consider (if a party was to seek this) determining the
issue finally at this stage of the litigation (but that would involve my
having to consider any contention which was advanced as to there being
any potential relevant issue of fact).

Conclusion

247. The essential consequence of my various decisions above is that I will

grant summary judgment to BNY and AEW in relation to their claims for
rent, VAT and contractual interest except in relation to the claim for the
Balance (and interest upon it) and in relation to which issue I will consider
any further applications/submission along the lines mentioned above.

248. However, I feel that I should end this judgment in somewhat similar
terms to the end of the judgment in TKC v Allianz. The situation of COVID
and the COVID Regulations has (at least in modern times and as a matter of
degree) been unprecedented and in particular with regard to its effect upon
the Entertainment (and Hospitality) Sector but also the Non-Essential Retail
Sector who have been deprived of the turnover which is the life-blood of
their businesses (and especially where there is no on-line equivalent). It is
impossible not to feel sympathy for them.
High Court Final Judgment: Double-click to enter the short title

249. As stated by Mr Salter QC as the section 9 Judge in the TKC v Allianz

case (at paragraph 133) “Some may also argue that the common law should
therefore change its approach… and should adapt its principles of
contractual interpretation and implication to the present unprecedented
circumstances, so that they assist in transferring the burden of the present
emergency to those, such as insurance companies and other major financial
Institutions. who may perhaps better be able to bear it.”

250. On the other hand, the Landlords, BNY and AEW, will say that they
are trustees (actual or in effect) for others (for example, pensioners) who
have invested in their funds, and who may themselves be reliant upon their
returns from such funds (and thus the underlying properties) for their own
financial condition and well-being.

251. Mr Salter QC proceeded in his paragraph 134 to quote authors of a

note as having “wisely observed”:

“In times of uncertainty the law must provide a solid practical and
predictable foundation for the resolution of disputes and the confidence
necessary for an eventual recovery… Contractual rights are to be evaluated
by applying settled principles to the contract in question. Legal certainty
remains paramount and gives the surest basis for resolution.”

252. That has been the basis of my analysis and this judgment. Anything
else is a matter, in my view, for Parliament and not for the Courts.

Handing-Down and Consequential Matters

253. As stated in the draft judgment, I am handing down this judgment without
attendance from the parties but with an adjournment of the hearing and of
(with general extensions of time until further order) all questions of
permission to appeal and time to appeal, form of orders and costs to a
further date; with the parties to liaise and having until 4.30pm on 7 May
2021 to submit their proposed orders and any applications (including for
permission to appeal and time to appeal) and a statement of whether they
seek an oral hearing (and if so with dates to avoid until 9th July 2021).

22.4.2021