UK: Apportioning The Magic And Sparkle - Supreme Court To Consider M&S Break Clause Rent Apportionment Case

Marks and Spencer plc v. BNP Paribas Securities Services Trust Company (Jersey) Limited

M&S's Christmas campaign focuses on two good fairies doing good deeds. Clearly the M&S fairies have been working their magic on the Supreme Court as the Court has confirmed that it will hear an appeal of the Court of Appeal decision in Marks and Spencer plc v. BNP Paribas Securities Services Trust Company (Jersey) Limited [2014] EWCA Civ 603.

Whether the decision to hear the appeal is a good deed depends upon your perspective. Tenants will be pleased that the apportionment door has not been entirely shut. Landlords will be concerned that the Court will seek to find an implied term in the lease to enable the tenant to recover rent from the break date to the end of the relevant quarter. This lends itself to uncertainty, which in itself is not something that is particularly helpful when trying to interpret parties' contractual relationships.

The facts of the case were that the lease contained a break clause. The break date fell between quarters. There was no express apportionment provision. The lease stated that there was to be "no arrears at the break date". Crucially, the lease provided for M&S to pay a substantial break premium in order for the break to be effective.

At first instance, the Court confirmed that the "no arrears at the break date" wording was not an express apportionment provision. The Court further held that the parties must have intended for the rent payable for the quarter to be apportioned so that M&S only needed to pay for the period between the break date and the preceding quarter day. The reason for this being the break premium - the Court taking the view that the parties would not have intended a further sum to be payable to the landlord.

The Court of Appeal disagreed - if the parties had intended for the rent to be apportioned, they would have expressly provided for it. The Court of Appeal therefore was seeking to promote certainty over any perceived unfairness to the tenant. In general terms, whether the Court will find that an implied term exists is entirely fact-specific. By implying a term in circumstances where the parties, professionally advised, could simply have included an express provision and where the implication of the term was not fundamental to the construction of the contract was not a desirable outcome. The message from the Court of Appeal was unequivocal - if the parties intend for rent to be apportioned, they must so provide for it.

It is therefore of great interest as to why the Supreme Court has decided to hear an appeal of this decision. Given that its remit is to hear matters that are of public importance, it may be the case that the Court wishes to look at not just the fact-specific implied term issue, but also implied terms generally, rent apportionment and perhaps break clauses and conditions.

It is of course welcome to have the considered views of the most senior members of the judiciary on an area of landlord and tenant law that has been subject to considerable scrutiny in recent years. However, it will be of concern in some quarters that the certainty promoted by the Court of Appeal is now to be considered and perhaps overturned by the Supreme Court. Whether the good fairies of the Supreme Court will magic up such a result remains to be seen. Either way, a Supreme Court determination will conjure up some break clause related sparkle and treats for property litigators to indulge themselves on.

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