The Supreme Court judgment last week in the dispute between high street giants Marks & Spencer (M&S) and their landlord BNP Paribas (BNP) is considered to be a key case for current land law in England and Wales.
To summarise the essence of the case: M&S exercised a right to bring to an end (or break) its lease of part of a building (their HQ at Paddington Basin) before it was due to end. The dispute itself centred on implied contract terms, and whether M&S was entitled to the repayment of rent paid to BNP for the period (up to the following quarter day) after the lease was brought to an end as a result of its break notice.
The Case has become rather notorious amongst commercial property lawyers as it has veered from one decision to the next as it has proceeded through the Court system. At one stage the High Court held that M&S were entitled to the money, then the Court of Appeal said that they were not.
M&S took the case to the Supreme Court where it was heard in October. The Supreme Court unanimously dismissed M&S’s appeal. The court held that there was no implied term because one was not necessary to make the contract workable. The litmus test came down to whether without the term, the contract would lack commercial or practical coherence. The court considered that it would not.
The result is that BNP ended up with a windfall payment of about £200,000 because, like most commercial property leases, the lease requires the rent to be paid quarterly in advance. Prospective tenants who get good legal advice can expect their solicitor to include express wording in a lease that will avoid a landlord getting such a windfall.
Why is this case so significant? Basically the application of this test has consequences for a wide range of contractual disputes involving implied terms. It is not simply a property case but has a wider application as regards what terms the Court may imply into a contract as a matter of necessity, and therefore the decision has far greater scope than simply dealing with the law relating to commercial property.
Brian Shacklady – Call or email
Nick Richardson – Call or email
