Welcome to the fourth edition of RED Alert of 2024.
Also featuring in this month's update:
Leicester Square (2015) Limited & Others v Empire Cinema 2 Limited [2024] EWHC (Ch)
Cinema lease forfeited for non payment of rent accrued during Covid Pandemic
Summary
The Empire Cinema in Leicester Square stopped paying rent when it was closed during the Covid lockdown. The landlord forfeited the lease by re-entering the cinema. The cinema sought an injunction to be allowed back in and then claimed the forfeiture was unlawful. The County Court agreed with the cinema and the landlord then appealed to the High Court.
The facts
The premises in question were let to the cinema tenant for a term of 99 years expiring in 2036. The rent payable was only £5000 per annum despite the premises being in Leicester Square but this was probably due to the length of the lease. Insurance rent was payable in addition.
The tenant failed to pay the rent for the period from 21 March 2020 to 18 July 2021 when it was closed due to the pandemic. The arrears amounted to £16,413.98. This rent was "protected rent" for the purposes of the Commercial Rent (Coronavirus) Act 2022 which meant there were restrictions on the landlord's ability to enforce payment during the statutory moratorium which expired on 24 September 2022. This moratorium was automatically extended if the matter was referred to arbitration, in which case, it expired in other prescribed circumstances, including at the time the period for appealing expires without an appeal being brought.
In this case, the tenant did refer the matter to arbitration. However, the application was dismissed by the arbitrator as it was determined that the cinema business was not viable in any event, that being a statutory ground for dismissal. That award was made on 23 April 2023. In accordance with the Arbitration Act 1996, the right to appeal expired 28 days thereafter on 21 May 2023.
On 4 May 2023, the landlord forfeited the lease by peaceable re-entry, entering through the fire exit door. By noon that same day, the premises were licensed to third parties who paid £180,000 in fees/deposit, a sum clearly substantially more than the annual rent payable by the cinema. One of those third parties was then granted a lease the following day.
In the meantime, the cinema tenant paid the arrears in the afternoon of the day of forfeiture and applied for an emergency order allowing it back into possession which was granted. The tenant also applied for summary judgment in respect of its claim that the forfeiture was unlawful. That initial application was successful and so the landlord appealed.
The landlord argued:
- summary judgement should not have been granted in this case as there were "prolonged and serious arguments which were inappropriate" for summary determination
- the statutory moratorium had expired as the cinema never genuinely intended to appeal the arbitrator's award
- the cinema was seeking to deceive the parties and the arbitrator – illegality
- the cinema had either waived, was estopped and/or abandoned it's right to appeal and therefore the moratorium had expired before the forfeiture was effected
- there was some other compelling reason for the issue to proceed to trial.
The decision
The High Court judge considered the circumstances in which a court should award summary judgment and in particular the authority of Easyair Ltd v Opal Telecom Ltd [2009] EWHC 39 (Ch). There must be a "realistic" as opposed to "fanciful" prospect of success. "Realistic" means it must carry some degree of conviction rather than being merely arguable.
Also, the court should have regard to what evidence might be available at a full trial whilst not carrying out a mini-trial at that stage. Furthermore, if there is a short point of interpretation and the parties have argued their respective positions, the court should "grasp the nettle and decide it."
The Judge considered that the point on the interpretation of when the moratorium ended was a short point and was capable of being decided by way of summary judgment in accordance with the Easyair principles. The Judge considered the point itself and held that it arose "more from the ingenuity of counsel than from any difficult questions arising out of statutory drafting". The Judge found in favour of the tenant and held that the moratorium was continuing at the time of the forfeiture and was therefore unlawful. The Judge also dismissed the other arguments advanced by the landlord and found there was no compelling reason for the matter to progress to trial.
Our comments
The Coronavirus Act 2020 and the Commercial Rent (Coronavirus) Act 2022 were intended to protect commercial tenants from the devastating effect of the pandemic. The landlord here was clearly keen to secure the new tenant at the much higher rent but the forfeiture action was premature. It is good to see the courts granting summary judgement in appropriate cases. This should go some way to speeding up the conclusion of disputes and relieving some of the delays in getting to trial.
