23 Jul 2019

Dispute Resolution

In the case of Seafood Shack Ltd v Darlow [2019] EWHC 1567 (Ch)

Background

Our client instructed a Firm of solicitors (not this Firm) to draft and complete a lease over commercial premises on St Mary’s Street, Cardiff City Centre. It transpired that the lease was granted to a non-existent, company tenant (Seafood Shack UK Ltd  – “SSUK”).

The premises over which the lease was granted was actually occupied by Seafood Shack (Cardiff) Ltd (“SSCL”) and not SSUK. Long after “completion” of the lease to SSUK, a company called Seafood Shack Ltd (“SS”), the parent company of SSCL, tried to remedy what it claimed was a mistake in the original lease by way of a new lease. However, before a new lease was ever completed between our client and SS, SSCL (in occupation) was wound up. The liquidators of SSCL disclaimed any interest in the premises and our client peaceably re-entered the premises and changed the locks.

SS issued court proceedings against our client, claiming amongst other things, that it was entitled to possession of the premises and that our client had acted unlawfully in recovering possession of the premises.

Issues for determination at Trial

The matters to be determined at Trial were whether:

a) on the true construction of the lease, SS was a party to the lease;

b) if rectification be required to show SS as a party to the lease, rectification ought to be granted;

c) the re-taking of possession of the premises by our client was lawful; and

d) SS is entitled to possession of the premises.

SS amended its claim a few months before Trial, claiming to be owed millions of pounds of damages by our client, but Directions to hear that issue were contingent on the result of the Trial to determine the above-listed matters.

Held

The Judge held that:

  1. Our client was not aware of the existence of either SS or SSCL on completion of the lease and cited case law which confirmed that the lease must be interpreted in a way that: “a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”. In the circumstances, it was not possible to say that a reasonable person would believe that the parties intended SS to be the correct tenant.
  2. SS could not readily be substituted into the lease on the basis of a misnomer (i.e. inaccurate use of a name);
  3. It was not possible to rectify the lease to refer to SS as the tenant; there must be a common intention between the parties that have not been put into effect by the lease;
  4. SS was not, and had never been, a party to the lease; and
  5. In light of the foregoing findings, our client lawfully recovered possession of the premises.
Case Note

This case highlights the importance of undertaking due diligence on the parties in a lease, or indeed the parties in any commercial transaction, at least by reference to records publically available at Companies House.

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