Co-op loses High Court dispute over car park

Supermarket Co-operative Group Food has lost a High Court dispute over the rent payable on a Birmingham car park that has been tenanted by a series of now-insolvent retailers. The case highlights some of the legal complications caused by a decade of contraction and upheaval in the retail sector. The car park in question is owned by A&A Shah Properties and is located on Coventry Road, Yardley, Birmingham. In 2006, A&A let the car park to supermarket Somerfield on a 25-year lease. In 2011, Co-op took over Somerfield, and the car park under the terms of the lease. Somerfield’s owner, The Food Retailer Operations, subsequently went into insolvency. At the end of 2011, Co-op agreed to assign the lease to 99p Stores Limited, making them the tenants, but leaving Co-op as guarantor under the lease. Poundland bought 99p Stores in 2015, and put the company into administration two years later. This left A&A in the following situation: the original tenant was insolvent, the last tenant was insolvent, and the tenant before last was not. Therefore A&A pursued Co-op for the rent based on the guarantee provisions in the lease. According to the judgement, written by Mr Justice Mann, the legal point in question is whether the guarantees are compliant with the provisions of the Landlord and Tenant (Covenants) Act 1995. He notes in the ruling “the provisions of the Act are somewhat long and not straightforward, and they have been the subject of judicial decisions over the intervening period.” More specifically, he said, the case rests on whether the guarantee clauses in the agreement contain sub guarantees, which would make them enforceable. In his ruling today, Mann backed the A&A. He said it was “apparent that [the parties] intended meaningful obligations to be assumed by the Guarantor notwithstanding the Act. “I therefore found that [the relevant clause] imposes valid guarantee obligations on the guarantor,” he ruled. Co-operative Group Food Limited v A&A Shah Properties Limited; Prank Forney & Partners LLP Chancery Appeals (Mann J) 12 April 2019 On appeal from the decision of Master Clark of 18th May 2018 Nicholas Taggart (instructed by the Co-operative Group Legal Department) for the Appellant Mark Warwick QC and Neil Mendoza (instructed by Adams and Remers) for the first respondent.