High Court hands down important judgment on section 37A of the Landlord and Tenant Act 1954

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Today Edwin Johnson J has handed down judgment in the case of McDonalds Restaurants v Shirayama Shokusan [2024] EWHC 1133 (Ch).

The Defendant owns the former County Hall opposite the Houses of Parliament on the South Bank. Until March 2019, the Claimant, the well-known “quick service” restaurant chain, ran a restaurant from part of the ground floor and basement of the building pursuant to a lease which had the protection of the 1954 Act. The restaurant was one of the Claimants highest profile sites. At the end of the contractual term, the Defendant landlord served a notice pursuit to section 25 indicating that it would oppose the grant of any new tenancy on the “own occupation” ground in section 30(1)(g). That lead to proceedings in the County Court at Central London in late 2018. The Defendant called two witnesses who attested that the landlord intended to run its own restaurant from the premises serving Japanese food under the trading name “Zen Bento”. It produced a business plan to that effect. The landlord’s principal offered an undertaking to that effect. Despite extensive cross-examination of the landlord’s witnesses, the County Court Judge accepted the landlord’s case, and indeed its undertaking, that it had a firm and settled intention to open a “Zen Bento” restaurant and made an order terminating the tenancy in March 2019. However, the landlord failed to open a restaurant at the site when it said it was going to (by November 2019). It opened a restaurant on the ground floor in March 2020 and, having opened the same restaurant briefly in September 2020 and closed it due to COVID restrictions, it opened a different restaurant, a coffee shop and bakery, in the basement in early 2021. The former tenants sued the Defendant in deceit and for damages under section 37A of the 1954 Act. The landlord accepted that the restaurants which it had in fact opened (and which were still trading) were different from the one it had told the County Court it intended to open and that there had been a delay in opening them but said it had genuinely changed its mind as to what it wanted to do and that the delay was largely down to COVID restrictions.

Section 37A provides:

1) Where the court–

(a) makes an order for the termination of the current tenancy but does not make an order for the grant of a new tenancy, or

(b) refuses an order for the grant of a new tenancy,

and it subsequently made to appear to the court that the order was obtained, or the court was induced to refuse the grant, by misrepresentation or the concealment of material facts, the court may order the landlord to pay to the tenant such sum as appears sufficient as compensation for damage or loss sustained by the tenant as the result of the order or refusal.

The issue of liability only was trued before Edwin Johnson J. In short, he found for the Claimant under section 37A and dismissed the claim in deceit. He held that, whilst the landlord did want to run a restaurant from the former McDonalds premises, neverhtless the County Court had been induced to refuse to grant a new tenancy by the landlord’s misrepresentation as to its true intentions at the time, which was not as stated to the Judge in the County Court.

This is one of the few decisions on section 37A and the judgment contains interesting discussions on various aspects of the jurisdiction.

David Holland KC represented the Defendant.

The judgement can be found here.

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