Under section 37A of the Landlord and Tenant Act 1954, the court may order a landlord to pay compensation to a tenant where the tenant proves that an order made terminating a current tenancy was obtained by misrepresentation or concealment of material facts.
The High Court has granted such an application in McDonald’s Restaurants Ltd v Shirayama Shokusan Company Ltd [2024] EWHC 1133 (Ch); [2024] PLSCS 91.
McDonald’s was the former tenant of ground-floor and basement premises within the Riverside Building at County Hall, London SE1. In November 2018 its landlord, the defendant, successfully opposed the grant of a new tenancy of the premises, relying on ground (g), that on termination of the tenancy it intended to refurbish the holding as Zen Bento Box, offering Japanese cuisine, a business to be carried on by a wholly owned subsidiary. It gave an undertaking to the court to occupy the premises for that purpose. The McDonald’s tenancy came to an end in March 2019.
Following the installation of a kitchen, the ground floor of the premises opened for business in March 2020 as the Aji Restaurant, serving takeaway Japanese food. Dine-in food commenced in July 2020 on both floors. In February 2021 an English bakery and coffee shop was opened in the basement, although the restaurant continued to make some shared use of it.
McDonald’s claimed that the termination order was secured by deliberate and/or reckless misrepresentation of the defendant’s intentions for the premises.
The certainty and precision of the defendant’s evidence at trial that it intended to occupy the premises for the purposes of operating Zen Bento was undermined by e-mails from its decision-maker and controlling mind, Masakuzu Okamoto, within hours of the trial in October 2018. Rather than referring to implementation of the business plan presented in evidence, Okamoto was throwing out different ideas for the premises.
Okamoto regarded himself as able to develop whatever kind of restaurant he wished without regard to the undertaking provided to the court. This was borne out by e-mails between November 2018 and February 2019 which contained a variety of different proposals but no reference to Zen Bento and the disappearance of the contractors, architects and executive team members that featured in the business plan.
The defendant pursued its application to take back the space from McDonald’s so that Okamoto could then decide what to do with it. Okamoto deliberately presented the evidence of the operation of Zen Bento, knowing it to be false, in order to obtain the termination order, while in fact he intended to and was keeping the defendant’s options open. The claim by McDonald’s for compensation will be determined separately.
Louise Clark is a property law consultant and mediator
