Maples Teesdale Solicitors – Litigation Deals

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	Deals – Litigation

	Maples Teesdale secure High Court victory

	Maples Teesdale acted for the successful Claimant, the Secretary of State for Communities and Local Government (“the Secretary of State”), in the recently reported High Court decision, The Secretary of State for Communities and Local Government v Standard Securities Limited [2007] EWHC 1808 (ch).

	The case concerned a high value rent review dispute. The Secretary of State occupied a large building in London and the landlord was seeking an uplift in the rent on review of around £200,000 per annum. However the Secretary of State sought declaratory relief to the effect that the landlord was not entitled to pursue the rent review because it had failed to appoint an independent expert to determine the rent by the review date and that the rent was therefore fixed at the passing rent for the next seven years of the term in accordance with the lease.

	The landlord resisted this claim alleging that the lease provisions were ambiguous. The landlord argued that the words used were only intended to ensure that the passing rent continued to be payable after the rent review date until the new rent was determined and that this interpretation should be preferred because of the strong presumption that time is not of the essence for rent review purposes.

	However the Judge rejected the landlord’s arguments and stated that in his view the terms of the lease were clear and unequivocal and constituted a sufficient “contra-indication” to rebut the normal presumption that time is not of the essence. Accordingly the Secretary of State was granted the declaration it sought that the passing rent should continue to be the rent payable for the next seven years.

•	Turnover Rents - Debenhams	•	Business Leases and 1954 Act Procedings
•	Vacant Possesion Proceedings	•	Employment Tribunals
•	Landlord and Tenant Issues

Turnover Rents – Debenhams Retail PLC and Debenhams Properties Ltd v Sun Alliance and London Assurance Company Ltd

This case, which has generated significant press attention and interest in the market, involved the interpretation of the word “turnover” for the purpose of calculating turnover rent in a lease of a Debenhams’ department store in Swindon owned by Sun Alliance and London Assurance Company Ltd. It considered the question: should VAT be included in the expression “the gross amount of the total sales including services from trade”? VAT did not exist when the lease was negotiated in 1965.

At first instance in the High Court Etherton J held that VAT should not be included. He considered that the words had to be construed in the commercial context of a turnover rent which is to share the risk of trading success between the landlord and tenant. He concluded that to include VAT in turnover was not consistent with that purpose because VAT (which has to be paid to Customs during an accounting period) does not “swell the tenant’s assets over the full duration of the annual trading or accounting period in respect of the rental accounting period”. His judgment had the effect that Debenhams’ rental bill would have been reduced (at today’s prices) by about £4.3 million over the remaining 59 years of the term.

Sun Alliance therefore appealed the first instance judgment to the Court of Appeal and their judgment was handed down earlier today. They unanimously reversed the first instance decision.

In interpreting the meaning of the lease in its commercial context in 1965, Jacob LJ, giving the leading judgment, was influenced by the fact that, at that time, another indirect tax, purchase tax, existed which did have a significant effect on the amount of the turnover rent because it was an inbuilt cost to Debenhams which commercially they were bound to pass on to their customers in their prices. Clearly this tax was included within the definition of turnover and the Judge considered that VAT, which superseded purchase tax and was analogous to it in that it also affected the ultimate prices, should also be included in the turnover for the purposes of calculating the rent.

Mance LJ, agreeing with Jacob LJ’s reasons and conclusion added that if Etherton J’s Judgment were correct, as purchase tax was clearly included in the definition of turnover, the replacement of purchase tax by VAT “would potentially have given [Debenhams] an uncovenanted bonus”.

Maples Teesdale acted for the successful Appellant, Sun Alliance and London Assurance Company Ltd (now Phoenix & London Assurance Limited).

Vacant Possession Proceedings

We act for City & West End in respect of a mixed use development scheme at Maddox Street, W1. We recently achieved vacant possession of the last occupied unit by obtaining what is likely to be the first ever default judgment on the landlord’s application for possession pursuant to new section 29(2) of the Landlord & Tenant Act 1954. This section entitles a landlord to take the initiative by issuing proceedings itself for possession on the basis of, for instance, redevelopment, rather than having to wait for the tenant to apply for a new tenancy and then oppose it.

We also act for another developer of a mixed use development in the same vicinity as the City & West End development scheme at Maddox Street, W1. The scheme recently suffered from occupation by squatters. We persuaded the Court to grant an urgent summary possession order in an unusual form covering all of the properties within the scheme on the basis that there was a substantial risk that, when evicted from one building within the scheme, the squatters would simply move into one of the others.

Landlord and Tenant Issues

We are currently acting on the termination and renewal of a large number of business leases, including an industrial estate for an institutional client, and at shopping centres in Swindon and Middlesborough.

Business Leases and 1954 Act Proceedings

Acting for a property developer in setting up a joint venture with a leading listed property company, to acquire a site in Barnes, London SW11 for redevelopment as a convenience foodstore and housing. The listed company agreed to provide any funding required for the project that was not obtained from banking sources or by the forward sale of the development. We set up a joint venture company, prepared the joint venture agreement and related documents and advised on the loan and security documents entered into between the joint venture company and the listed company.

Employment Tribunals

We acted for North West Kent College, the successful respondent in a case which reached the Employment Appeal Tribunal concerning inducements which were alleged to have been given to employees for giving up trade union rights.