In McDonald's Restaurants Ltd v Shirayama Shokusan Company Ltd [2024] EWHC 1133 (Ch), the High Court held that the former landlord was liable to compensate its former tenant under section 37A of the Landlord and Tenant Act 1954 (“LTA 1954”) having previously obtained an order terminating the lease by misrepresentation.

Background

Shirayama Shokusan Company Ltd, the tenant, initiated the lease renewal process by serving a Section 26 Request on McDonald's Restaurants Ltd in their capacity as landlord.  The landlord had opposed the grant of a new tenancy relying on Ground (g) of section 30(1) of the LTA 1954 on the basis that it intended to occupy the premises for the purpose of running its own business. The landlord’s opposition was successful and no renewal lease was granted.

When making the order the judge found that the landlord had a firm and settled intention to open a Japanese restaurant (Zen Bento) and a reasonable prospect of achieving its intention within a reasonable time following termination of the lease. As evidence of its intention, the landlord had given to the court an undertaking to commence trading as Zen Bento as soon as reasonably practicable after obtaining vacant possession.

The landlord did not open Zen Bento by the specified date and later opened a different restaurant and bakery at the premises. As a result of this, the tenant issued a claim for deceit and for compensation under section 37A of the LTA 1954 claiming that the Order made by the court was obtained by misrepresentation.

Issues

The court was asked to consider:

1. Whether the landlord had a fixed and settled intention to occupy the Premises;
2. Whether misrepresentations were made regarding the landlord’s intention to open Zen Bento; and
3. Whether the tenant is entitled to compensation under Section 37A.

Decision

The High Court found that the landlord did mislead the court as to its intention to occupy the premises because at the time that it gave its evidence, it did not have a firm and settled intention to open Zen Bento. The order terminating the tenant’s tenancy was found to have been obtained by misrepresentation within the meaning of section 37A of the LTA 1954.

The claim for damages in the tort of deceit was dismissed. The court was not satisfied that the tort of deceit was sufficiently flexible to accommodate the situation whereby the representation had been made to, and relied on by, a third party (the court), rather than the claimant.  However, a case where the relevant misrepresentation had been made by the defendant to a third party, intending it to be communicated to the claimant and the misrepresentation being so communicated to, and relied on by, the claimant, was actionable in deceit.

The landlord was liable to pay compensation to the tenant pursuant to section 37A of the LTA 1954, with quantum to be determined at a subsequent trial.

Lessons to be learnt.  

The case will be welcomed by tenants as it strengthens their prospect of obtaining compensation in circumstances where a landlord has misrepresented its position.

The case highlights the importance of landlords being aware about the need to have a firm and settled intention to occupy the premises at the date of the hearing as they will be required to follow through with their obligations to implement their plans in a timely manner. It also provides a reminder that specific undertakings should not be given where a landlord is uncertain of its future plans.