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Break-ing News: Supreme Court to review M&S Break clause case

In May this year, the Court of Appeal overturned a High Court decision that Marks & Spencer could recover from its former landlord excess rent relating to the period between a break date in its lease and the end of the rental quarter in which it fell.  M&S had been required to pay the full quarter’s rent in advance in order validly to exercise the break clause.  There was no express clause in the lease entitling M&S to a reimbursement.

The High Court took into account that the break conditions also included the payment of a penalty by the tenant (which had been satisfied). Therefore, it was concluded that the parties could not have intended that the landlord should keep the excess rent as well.  It followed that there should be an implied term that the excess rent should be repaid.

The Court of Appeal disagreed, saying that any such intention should have manifested itself in an express term and no such term could be implied.

M&S applied for permission to appeal to the Supreme Court.   In a move which may take some by surprise, the Supreme Court has granted permission. The highest court in England & Wales only concerns itself with cases which “raise an arguable point of law of general public importance which ought to be considered by the Supreme Court at that time, bearing in mind that the matter will already have been the subject of judicial decision and may have already been reviewed on appeal.”

As break clause cases are very much based on their own facts, it might seem unlikely that a simple interpretation point (based on whether the landlord was already adequately compensated by the penalty payment) would attract the Supreme Court’s interest. The fact that permission has been given raises the possibility that the Supreme Court wishes to look at break conditions more generally or even the wider issue of implying unwritten terms into leases to achieve a commercially “fair” result. In that case, there is the potential for this area of law to change fundamentally.  Watch this space!

Case: Marks and Spencer PLC v BNP Paribas Securities Services Trust Company (Jersey) Ltd & Anr [2014]EWCA Civ 603