In a contested Lease Renewal what is the relevant date for the Landlord to establish its ground of opposition?

Could a Tenant achieve a tactical advantage by making an application for summary judgement in contested Lease Renewal proceedings where the Landlord was in administration? The decision in Somerfield Stores Limited v Spring (Sutton Coldfield) Limited gives a very clear answer - No!

The Facts

The Tenant applied to the Court for a renewal of its lease and the Landlord opposed the renewal on the basis of ground (f) - redevelopment. 
The Court had already ruled that the Landlord's administration did not prevent the Tenant from continuing its lease renewal proceedings and had issued directions with a view to holding a trial in March or April 2010. 

However, the Tenant tried to bring forward the timetable by applying for summary judgement to dismiss the Landlord's opposition. When the application first came before the Court it held that for Summary Judgment to be granted, the Tenant had to show that the Landlord would not be able to make out its ground of opposition either at the date of the summary judgement hearing or within a reasonable time thereafter. In this case it held that the Tenant had not been able to show that.

The Tenant appealed to the High Court where the opportunity was taken to consider whether summary judgment applications were an appropriate means of forcing the Landlord's hand on an opposed 1954 Act application for lease renewal.

The issue was of particular importance given the tactical advantage the Tenant could have secured if the relevant date for the Landlord's intention was brought forward to the date of the summary judgment hearing given that at that stage the Landlord was in administration and so was in no position to demonstrate its ability to fund the suggested development.

What did the Court decide?

The question for the Court was whether the Tenant could catch the Landlord out by applying for summary judgment, thereby bringing forward the "trial" date, in the hope that the Landlord may be unable, at that time, to demonstrate its intention to redevelop which would therefore mean that the ground (f) objection to the new lease would fail and a new lease would therefore be granted.

The Court held that the application for summary judgment did not bring forward the date on which the Landlord was required to prove its intention.
The Judge said the "much the preferable view is that the date of the hearing at which the necessary intention must be shown to exist is always the date of the substantive trial of the Landlord's ground of objection".

The appeal was therefore dismissed on the basis that to allow the application to bring forward the date for proof of intention "would introduce an unnecessary opportunity for the adoption of artificial tactics in an area of litigation which is, in my experience, already regarded by commercial parties as a costly tactical adjunct to their negotiations".

So where does this leave tactics in contested Lease Renewal proceedings?

This case puts the nail in the coffin of one tactic that a Tenant could seek to adopt in contested Lease Renewal proceedings where the Landlord is in administration or is otherwise in financial difficulties.

If the Tenant wishes to argue that the Landlord is unable to prove its intention to redevelop then it must push the proceedings to a full trial as quickly as possible in the hope that it can catch the Landlord cold.

Of course, where the Landlord is in administration this should enhance the Tenant's prospect of succeeding in its strategy albeit the Tenant may be frustrated insofar as a new owner enters the fray by the time of trial and can then prove its own intention to redevelop.

In short one strategy has been ruled out but there are many others which will no doubt spring up to take its place! 

Rob Nicholson is a partner at Michelmores and heads the Property Litigation Team. For further information on the issues raised in this article, please contact Rob at rob.nicholson@michelmores.com.