A tenant’s claim for damages for trespass must take account of the rent payable under the lease to avoid over-compensation.
The court has considered this issue in Restaurant EC3 Ltd v Tavor Holdings Ltd [2024] EWHC 3104 (Ch).
The case concerned the winding up of Restaurant EC3 Ltd at the instigation of its landlord Tavor Holdings Ltd, registered proprietor of freehold premises at Cornhill, London, EC3. The company was the commercial tenant of the premises under a lease for an annual rack rent of £95,000.
On 4 October 2022, the landlord served a statutory demand on the company and following the company’s failure to pay the sums stated on 16 October 2022 the landlord re-entered the premises on the basis of non-payment of the rent due under the lease on 29 September 2022.
The company brought proceedings in March 2023, alleging that the landlord’s re-entry was unlawful and it occupied the premises as a trespasser. The company claimed possession and damages, including a claim for mesne profits at a daily rate of £260.27. If good the claim would reduce the petition debt from over £290,000 to £120,000.
The judge hearing the petition dismissed the mesne profits claim, concluding that there was no reasonable prospect of the company being able to pay the petition debt within a reasonable time and made a winding up order. The company appealed.
On the company’s appeal the Chancery Appeals judge upheld the judge’s decision. While historically damages for trespass were considered to be restitutionary, following the analysis of “user damages” in One Step (Support) Ltd v Morris-Garner [2018] UKSC 20 they are now accepted as being compensatory.
A tenant is entitled to exclusive possession of land for a rent. Failure to pay rent means the tenant loses its right to occupy the land against the landlord. The company was asserting a continuing right to possession which depended on the continued payment of rent. Otherwise, the company would be overcompensated. Damages payable by a landlord for wrongful eviction of a residential tenant are different: the damages must compensate for the letting value of the property and also the anxiety, inconvenience and mental stress involved in the loss of the tenant’s home (Smith v Khan [2018] EWCA Civ 1137).
The company’s argument that such a result was an infringement without a remedy was allayed by the fact that most commercial leases entitled the tenant to claim for loss of business and disruption, and where the open market rent exceeded the passing rent under the lease, mesne profits would be payable for the difference.
Louise Clark is a property law consultant and mediator
