England and Wales Court of Appeal (Civil Division) Decisions

"5. From and after completion Arnold shall be at liberty to remain at the property as Licensee and to trade therefrom until 29th September 1973 without payment of rent or any other fee to Matlodge save that Arnold shall pay all outgoings so long as it is in occupation of the property from and after 29th September 1973 Arnold shall be entitled as Licensee to remain at the property and trade therefrom in the Like terms save that it can be required by Matlodge Limited to give possession on not less than one quarter's notice in writing upon Matlodge certifying that it is ready at the expiration of such notice forthwith to proceed with the development of the property and the neighbouring property involving inter alia the demolition of the property.

6. Matlodge hereby warrant that it intends either itself or its successor in title to redevelop the property and the neighbouring property by the erection inter alia of shops and hereby undertakes that in consideration of the disturbance to be suffered by-Arnold it or its successor in title will grant to Arnold on completion of the development a lease of a shop in a prime position at the development with an area available for trading of approximately 1000 square feet and with carpark facilities within development for a term of twenty one years and the rent in respect of such lease shall for the first seven years be 25 per cent less than the market rent and thereafter shall be at the market rent subject only to the rent being reviewed to the then market rate at the expiration of the seventh and fourteenth years from the date of its grant Arnold shall within fifty six days of being offered the grant of such lease elect in writing to Matlodge or its successor whether or not it will take up the lease and if it shall not so elect or if it shall elect not to take up the lease then the provisions of this clause shall lapse. In the event of Arnold taking up the lease then the lease shall be capable of assignment for seven years from the commencement of the term except at the full market rent. The market rent shall be such rent as may be agreed between the parties in accordance with the criteria laid down in the Landlord and Tenant Act (as amended) and in the event of the parties failing to agree such market rent then either party may upon giving notice to the other have the question of the market rent determined by a Chartered Surveyor acting as an expert and not as an arbitrator and to be appointed on the application of either party by the President for the time being of the Royal Institution of Chartered Surveyors whose decision shall be final and binding on the parties and whose fees shall be borne as directed by such expert. This provision for fixing the market rent shall apply to the initial market rent and to the market rent at the seventh and fourteenth years."

Whether in the absence of an undertaking by Ashburn to offer to Arnold & Co. a lease of a shop elsewhere on the development, Arnold & Co. would be entitled to any of the following relief, namely:-

(a) to restrain Ashburn from proceeding with any development which did not provide suitable shop premises on the land now subject to the overriding interest;

(b) to compel Ashburn to offer Arnold & Co. a lease of a shop on the land now subject to the overriding interest if shop premises were in fact to be constructed thereon or

(c) damages in lieu of specific performance.

(1) Arnold & Co. cannot have any different rights against Ashburn than Arnold & Co. had, as a matter of contract, against Cavendish. The overriding interest merely protects existing rights in respect of occupied land; it does not extend or otherwise alter them. Thus, suppose, for example, that Arnold & Co. had contracted for a lease of the whole of the development site but only had an overriding interest in respect of a small part of it. Arnold & Co. could not insist upon a lease of that part at an apportioned rent (though it may be, as Mr. Goodhart was willing to concede, that it could insist upon a lease of that part - at any rate if it was a substantial part - at the full rent).

(2) Arnold & Co. has no enforceable rights at all under clause 6 over or in respect of that part of the development site to which its overriding interest does not extend. Accordingly it has no rights in respect of any land other than the Gloucester Road site.

(3) Clause 6 conferred no rights upon Arnold & Co. to require a shop to be built upon the Gloucester Road site. The only right conferred by clause 6 was on completion of the development to have a grant of a lease of a shop in a prime position, with certain special characteristics, for the term and at the rents and subject to the provisions stated in clause 6. It is entirely a matter for Ashburn to decide where it sites shops on the development. It is asserted, as I understand it, that there never was an agreement to grant a lease but merely a warranty sounding in damages. I do not agree with that. I think that the "undertaking" given in clause 6 was a contract. Accordingly, to compel Ashburn to build such a shop would be imposing upon Ashburn a different liability to that for which it contracted in clause 6.

(4) If Ashburn build a shop completely on the Gloucester Road site and do not offer to Arnold & Co. any other shop (within the description in clause 6) Arnold & Co. are entitled to insist upon the grant of a lease of the shop on the Gloucester Road site. Mr. Goodhart was, I think, disposed to accept that but in any event it seems to me to be correct. What is protected by the overriding interest is a contract to grant a lease. The question is in what circumstances could Cavendish, consistently with the provisions of clause 6, have been compelled to grant a lease to Arnold & Co. of the Gloucester Road site. In that connection, Ashburn cannot be in any worse position than Cavendish. For present purposes, the circumstances, I think, are two. First, if the only shop premises built upon the development are upon the Gloucester Road site, the grant of a lease of that shop would be the only way of giving effect to clause 6; secondly, if shop premises are built on the Gloucester Road site and other shop premises on other parts of the development but Cavendish refused to offer a lease of any shop at all. In those circumstances, I apprehend the court would permit Arnold & Co. to make a choice itself and would enforce the choice - which could be the Gloucester Road site. In the present circumstances, Arnold & Co. cannot insist upon a lease of a shop outside the Gloucester Road site but, if one is built upon that site and Ashburn refuses to grant a lease of any other, I do not see why Arnold & Co. should not be able to insist upon a lease of the shop on the Gloucester Road site. Arnold & Co. would have no better rights and Ashburn no worse rights than Arnold & Co. and Cavendish respectively would have had if Cavendish had remained the owners of the freehold.

Order: Declarations made as sought. Plaintiffs to have costs of further argument. Leave to appeal to the House of Lords refused.