The High Court has given a significant ruling in McDonald’s Restaurants Ltd v Shirayama Shokusan Company Ltd, surrounding compensation claims under section 37A of the Landlord and Tenant Act 1954 (LTA 1954). This case gives an important insight into the interpretation of ground (g) for opposing lease renewals and the consequences of misrepresentation in such cases.
McDonald’s Restaurants Ltd v Shirayama Shokusan Company Ltd [2024] EWHC 1133 (Ch)
Key facts:
- McDonald’s wanted to renew its lease for its premises at the Riverside Building in London
- The landlord, Shirayama Shokusan, opposed Mcdonald’s lease renewal under ground (g) of section 30(1) LTA 1954
- The County Court was satisfied that ground (g) had been established and granted an order for termination of the lease in November 2018 based on the landlord’s evidence at trial that it intended to operate a restaurant Business known as “Zen Bento Box”.
- McDonald’s vacated the premises but later claimed compensation under section 37A LTA 1954, alleging misrepresentation of the landlord’s intention.
The judgement
- Misrepresentation: The Court held that the landlord had misrepresented its intentions. The landlord stated that its intention was to operate a resutarant business with a “Zen Bento” style but it did not suggest that it would operate a restaurant with the cuisine, style, and identity to be determined. Email evidence revealed that the landlord had several different restaurant proposals with “Zen Bento” missing as a proposal.
- Causation: The judge held that the specific misrepresentation was the operative cause of the termination order, regardless of whether a more general intention might have been served.
- Ground (g) interpretation: While ground (g) does not explicitly force a specific business intention, the Court stated that a non-specific intention might be difficult to meet the “firm and settled” decision standard.
- Section 37A application: The claim under section 37A LTA 1954 was upheld, while a separate claim in the tort of deceit was rejected.
What are the key implications?
Landlords must be careful in presenting their intentions when opposing lease renewals under ground (g). Vague or changing plans can be scrutinised. The ruling reinforces tenants’ protections such as the right to seek compensation for losses resulting from misrepresentation in lease termination proceedings.
Internal communications and subsequent actions can be essential in determining the genuineness of stated intentions, showing how important evidence is. This case also highlights potential risks for tenants who franchise out their operations, potentially losing standing under the LTA 1954. Even though it is not addressed in this judgment, the Court noted that factors such as potential break clauses in a hypothetical new lease might affect compensation results.
Comment
This case shows how Landlords must ensure their stated intentions for premises are true, specific, and well-documented. Tenants should also be cautious in scrutinising landlords’ claims when opposing lease renewals. This case emphasises the importance of transparency and intent in lease renewal proceedings and that you are aware of the potential for compensation claims under section 37A LTA 1954 in cases of misrepresentation.
How can we help?
Simon Waterfield and Chris Chan are Partners in our expert Dispute Resolution team, specialising in property disputes, rights of way claims, landlord and tenant disputes and commercial disputes.
For more information on the subjects discussed in this article, get in touch with Simon or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
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