September 2022

In this series of articles, we aim to highlight 3 of the most interesting cases in our field decided in the past month. This month: payment of VAT when exercising a break clause, an award under the coronavirus rent arrears arbitration scheme, and an injunction against protestors.

Ventgrove Limited v Kuehne+Nagel Limited [2022] CSIH 40

Summary

The Scottish Court of Session determined that where a tenant sought to exercise a break clause in a lease of land which was conditional on the tenant paying a sum ‘together with any VAT properly due thereon’, and the landlord had elected to be taxed,?VAT was payable.

The tenant paid the sum itself but no additional amount in respect of VAT. The landlord argued that the break was ineffective for failure to pay the VAT.

Overturning the ruling of the judge below, the Court of Session held that the landlord did not have any legitimate expectation arising from previous HMRC guidance that stated that VAT would not be payable in those circumstances; and, on the true construction of the relevant statute, VAT was payable. It followed that as a matter of contract, the exercise of the break was ineffective.

Why it’s important

The reasoning will likely be applied in England too.?Tenants in similar circumstances must pay VAT if they want the break to be effective.?

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Stratford City Shopping Centre v Newspoint

Summary

An arbitrator made two awards under the Commercial Rent (Coronavirus) Act 2022, firstly resolving a preliminary issue and secondly the substantive award.

The applicant was the respondent’s landlord of two units in a shopping centre. The respondent’s evidence and submissions did not directly focus on the issue of the respondent’s viability, and instead referred to a number of matters including an alleged rent concession made by the applicant.

By way of an award on a preliminary issue, the arbitrator determined that the original letter relied on by the applicant as the basis of a rent concession was without prejudice, subject to contract and also subject to a number of conditions; further, no binding agreement had been entered into in the parties’ subsequent exchanges. Although it had not expressly been argued by the tenant, the arbitrator also considered that the tenant could not make out a case on the basis of estoppel.

Making his final award in the terms of the landlord’s revised formal proposal, the arbitrator stated that since the tenant’s accounts suggested that it had sufficient money in the bank to pay the protected rent arrears in full (notwithstanding the losses which the tenant had made during and as a result of the pandemic), it had not demonstrated that any relief was necessary in order to restore its viability; accordingly, its only proposal did not accord with the principles in section 15.???

The award required the tenant to pay in full, over a period of 9 months, and ordered that the tenant pay 75% of the costs, due to its having raised and lost the preliminary issue and its conduct regarding the matter of viability.

Why it’s important

This is the second substantive decision we have noted where the tenant’s formal proposal has not been consistent with the principles in section 15, with the result that the award is in the terms of the landlord’s formal proposal.?Parties to these arbitrations should note the importance of making formal proposals which are in accordance with the arbitrator’s principles: under the Act, if only one party makes a proposal in accordance with those principles, that is the award that the arbitrator must make.???

Although the deadline for referral to the statutory arbitration scheme passed on 23 September 2022, a significant number of referrals were made shortly before the deadline, so there will be a number of parties engaged in the formal proposals process over the coming weeks.??

The first award can be found here and the final award can be found here.

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High Speed Two (HS2) v Four Categories of Persons Unknown [2022] EWHC 2360 (KB) and [2022] EWHC 2364 (KB)

Summary

The High Court granted injunctions relating to protests against the construction of HS2.

Injunctions were sought, including anticipatory injunctions, preventing trespass on land of which the Claimants were entitled to possession under the statutory scheme, and nuisance by blocking access to such land. The injunctions were granted against four classes of persons unknown and also a number of named defendants. The geographical area affected by the injunctions is large, encompassing essentially the entirety of the land on which HS2 will be constructed, including areas where no works are yet ongoing. The judge was satisfied that, in view of the protestors’ conduct to date and stated intentions, a precautionary injunction in relation to those areas was justified.

In a second judgment on 23 September, the judge dismissed an application for permission to appeal and refused to make a number of alterations to the order, such as, for example, making separate orders in respect of named and unnamed defendants.

Why it’s important

This careful and detailed judgment considers many of the recent authorities in the fast-developing area of protest injunctions, and would be useful reading for any practitioner considering mounting a similar claim. In particular:

1)???It reiterates the requirement for the court to be satisfied that the claimants would be likely to obtain an injunction preventing future trespasses at trial;

2)???It contains a useful synthesis of the principles to be derived from London Borough of Barking and Dagenham v Persons Unknown [2022] 2 WLR 946;

3)???There is a discussion of the applicability of Article 1, Protocol 1 of the European Convention on Human Rights to quasi-public authorities (such as the first claimant in this case, the company responsible for constructing HS2), and how this interacts with the Article 10 and 11 rights;

4)???It records examples of how technology such as social media can be used to satisfy the requirements of service in cases of wide-ranging injunctions; and

5)???It provides an example of how to identify categories of persons unknown so that inadvertent or innocent trespassers should not be caught, and how to word the injunctions themselves, noting that here the Judge inserted the word ‘deliberately’ into the Claimants’ proposed draft.?

STEPHANIE TOZER K.C.

FERN SCHOFIELD