The recent case of Somerfield Stores Limited v Spring (Sutton Coldfield) Limited (in Administration)1 addresses the question of whether a tenant in contested lease renewal proceedings can use summary judgment as a tactical weapon to reduce the time available for a landlord to prove its ground of opposing the grant of a new lease.
Under Part II of the Landlord and Tenant Act 1954 (the “Act”), business tenants are entitled to be granted a new lease at the expiry of an existing one. However, in certain circumstances a landlord can oppose this. To succeed the landlord must satisfy one of a number of statutory grounds2. One such ground is that on termination of the current tenancy, the landlord intends to demolish or reconstruct the premises, or a substantial part of those premises, or carry out substantial work of construction on the let premises or a part of them and that he could not reasonably do so without obtaining possession of those premises3.
In order for a landlord successfully to establish the above ground of opposition, it must demonstrate that it has a genuine, firm and settled intention to demolish or reconstruct, which goes beyond the landlord simply asserting that it intends to do this. Also, the landlord’s intention must exist at the point at which the hearing of the landlord’s ground of opposition takes place4. Where this is dealt with as a preliminary issue, the landlord must prove its intention at the preliminary issue hearing.5 However, what had not been clear until Somerfield was whether a tenant could make a summary judgment application and thereby force a landlord to prove its intention to demolish or reconstruct at an earlier date than would otherwise have been the case. If this option was open to a tenant then it would be a powerful tactical weapon with which to pressurise a landlord in lease renewal proceedings.
Somerfield Stores Ltd (“SSL”) was the tenant under three leases of a supermarket and adjoining land in Sutton Coldfield. Spring (Sutton Coldfield) Limited (“SSCL”) was the landlord and had purchased the freehold of the property intending to redevelop it. Shortly before the end of the leases, SSL served notices on SSCL under s26 of the Act requesting new tenancies. SCCL served counter-notices indicating that it opposed the grant of new leases on the ground set out in section 30(1)(f), in other words that it intended to demolish or reconstruct the property. SSL issued a claim for a new lease and directions were given with a view to a trial in June/July 2008. The parties were negotiating terms and so did not comply with those directions. In February 2009, SCCL went into administration and SSL applied for permission to continue its proceedings, which was granted. A new directions timetable was set with a view to holding a trial between March and May 2010, but instead of waiting for that trial, SSL made an application in July 2009 for summary judgment dismissing SCCL’s ground of opposition.
At first instance, it was held that in an application for summary judgment the tenant was required to establish clearly that the landlord would be unable to prove its ground of opposition either at the date of the summary judgment hearing or in a reasonable time thereafter. It was held that SSL had failed to satisfy this test.
SSL appealed to the High Court. HHJ Cooke considered the nature and purpose of the summary judgment jurisdiction. He confirmed that this was to determine whether a party has a real prospect of establishing his cause of action (or defence) at a future trial date. This should mean a test of whether the landlord has a reasonable chance of proving his intention at the later hearing rather than a test of whether the landlord’s intention exists at that point in time. HHJ Cooke went on to state that in answering this question the court is entitled to consider evidence which may reasonably be expected to emerge in the period between the summary judgment hearing and the final hearing.
HHJ Cooke also noted that summary judgment hearings are usually conducted in writing and without cross-examination. This, he concluded, would not allow questions to be asked of the landlord and would be an inappropriate method of settling matters of contested fact. Furthermore, if the case were to proceed to an additional hearing this would raise the question of how intention should then be assessed – would it still be as at the date of the summary judgment hearing or would it be re-examined as of the new hearing date? It would seem ludicrous that any evidence that had emerged since the initial hearing would be inadmissible, but equally allowing a re-assessment would mean that the substantive question would be different to that which was assessed at the initial hearing.
For reasons of certainty, consistency and clarity it was held that the date of the hearing at which the landlord’s intention must be shown to exist is always the date of the substantive trial of its ground of opposition. This could be a trial of a preliminary issue, but not a summary judgment hearing.