England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		No. HC0700581 Royal Courts of Justice
		9th October 2007

MR. JUSTICE MORGAN :

INTRODUCTION

1. Asda Stores Ltd. is the tenant, and Salya Investments Ltd. is the landlord of premises which comprise an Asda superstore at Lambrook, Taunton in Somerset. The lease of the premises was granted on 24^th May 1982 ("the lease"). In this judgment I will refer to Asda Stores Ltd. as "Asda" or "the tenant", and to Salya Investments Ltd. as "the landlord".
2. These proceedings arise out of the fact that Asda has recently carried out considerable works to the superstore at a cost of some £7.2 million. The works were completed in June 2007, and I will refer to them as "the 2007 works". The lease contains rent review provisions which provide for upwards-only rent reviews every five years during the term. The rent review provisions also provide for the possibility of an intermediate rent review between the five yearly rent review dates. It will be necessary to examine those provisions in detail later in this judgment. The parties disagree as to the application of those provisions to the 2007 works. This claim has been brought by Asda to establish the resulting legal position.

THE PLANNING BACKGROUND

3. Before turning to the terms of the lease, I will briefly describe some of the relevant planning background. The planning history involved a company called Associated Dairies Ltd. This is either the same company as Asda, before a change of name, or an associated company. I will refer to it also as "Asda" as nothing turns on this point.
4. In 1980 Asda brought a planning appeal and secured from the Secretary of State a grant of planning permission for the erection of a retail superstore of 53,000 square feet gross area, petrol filling station and tyreway and the formation of a surface car park in accordance with a 1978 application. It seems that that was not the planning permission which was ultimately implemented. The documents show that Asda applied again for planning permission on 5^th June 1981. The application was for the erection of a superstore with car parking and petrol filling station on the relevant land in accordance with a plan which had been amended by a further plan received on 13^th July 1981. In March 1982, Asda and others entered into an agreement under section 52 of the Town and Country Planning Act 1971 in relation to the proposed development. The section 52 agreement, amongst other things, provided for some land adjoining the site of the superstore to be laid out for use as recreational land or open space and to be the subject of an underlease from Asda to the local authority for a term to 2105, free of rent. The plan attached to the section 52 agreement is essentially the same plan as is attached to the lease when it was later granted. Although the relevant planning permission is not in evidence, it must have been the case that planning permission was granted on or shortly after the date the parties executed the section 52 agreement. Asda built the original store in accordance with that planning permission.

THE LEASE

5. The lease was granted on 24^th May 1982 by a predecessor in title of the current landlord to Associated Dairies Ltd., whom I will continue to call "Asda". The premises were described as:

"ALL THAT piece or parcel of land containing 13 acres in area or thereabouts situate at Lambrook Taunton in the County of Somerset and shown edged red on the plan annexed hereto, TOGETHER ALSO WITH..."

I need not read the words, but there are words which refer to the existence of an access. That which was so described was defined in the lease as "the Demised Premises".

6. The plan attached to the lease, as I have described, is essentially the same plan as that used for the purposes of the section 52 agreement. It shows the intended site of the superstore, a large area laid out for car parking, and to the left hand side of the plan the area which was plainly intended to be taken by the local authority pursuant to an underlease for recreational use or use as an open space.
7. The lease was for a term of 125 years from 29^th September 1981. The lease reserved the following specified rents. First, a peppercorn until 24^th June 1983, thereafter a rent of £35,000 until 29^th September 1986, and thereafter the rent was to be subject to review. I will refer to the rent review provisions in a moment.
8. By clause 3(4) of the lease the tenant covenanted:

"... as soon as reasonably practicable after the date [of the lease] to commence the development of the Demised Premises in accordance with the planning permission granted therefor prior to the date [of the lease] and to complete the development within twenty-four months of the date [of the lease]."

9. I draw attention to the fact that that clause does not say very much about the internal specification of the premises, and although we do not have the precise planning permission granted, it is likely that the description of the development in the planning permission referred to matters such as a superstore, petrol filling station and car parking but without further elaboration.
10. In clause 3(7) of the lease there is a restriction on the tenant carrying out certain alterations for certain further development without the consent of the landlord, such consent not to be unreasonably withheld or delayed.
11. Clause 3(10) of the lease is a user clause and in particular the user clause states that the restrictions on nuisances, annoyances and damage:

"... shall not prevent the use of the Demised Premises in a proper and reasonable manner for any Class I, III, IV or X purpose..."

Then the user clause goes on to say that the tenant covenants "to use the premises for any such purposes only". So in that roundabout way the user clause is a restriction on use to the specified classes. These are obviously references to the Use Classes Order 1972 and therefore they refer to uses such as retail use, light and general industrial use and warehousing and distribution and matters of that kind.

THE RENT REVIEW PROVISIONS

12. As the rent review provisions are at the centre of this dispute, I will set them out in full. They take the reservation of rent from the point of 29^th September 1986. It will be remembered that a specified rent of £35,000 had been reserved up to that date. Then the wording is in these terms:

"(c) thereafter the rent shall be reviewed at five yearly intervals on each fifth anniversary of the commencement of the term hereby granted and the rent for each period of five years will be 20% of the rack rental value of the Demised Premises and the buildings then erected thereon or the rent payable for the previous period of five years whichever is the greater

(d) in the event of any buildings (additional to the buildings for which planning permission has been granted prior to the date hereof) being built on the Demised Premises before 29^th September 1986 or between any subsequent review dates then the Tenant shall pay by way of an additional rent a sum equivalent to the amount by which 20% of the rack rental value of such additional buildings exceeds the rent then payable hereunder in respect of that part of the Demises Premises on which such additional buildings shall have been built such additional rent to be payable as from the date of practical completion (being the date of issue of the Architect's Final Certificate) of such additional buildings

(e) in the event of any part of the Demised Premises at any time being used for commercial purposes other than as a superstore car park petrol filling station and ancillary and related facilities as shall from time to time be normally required for use with the superstore car park or petrol filling station then the Tenant shall pay from the date of commencement of such use by way of additional rent the amount by which 20% of the rack rental value of the part of the Demised Premises to be so used and the buildings then erected thereon taking into account such use exceeds the rent then payable hereunder in respect of such part of the Demised Premises the said rent or rents shall in all cases be paid by equal quarterly payments in advance on the usual quarter days in any year without any deduction..."

The lease then provides for the date of the first payment of rent.

13. Those provisions are then subject to a proviso, and I should read the proviso which is in these terms:

"PROVIDED THAT the following definitions and provisions shall apply, namely:

(1) the expression 'rack rental value' means the annual rental value of the Demised Premises and the buildings then erected thereon in the open market which might reasonably be demanded by a willing Landlord on a lease for a term of years certain equal to that hereby granted with upward rent reviews at 5 year intervals with vacant possession at the commencement of the term based on current rental values for a comparable Class I Retail Store or Super-Stores or for class X Warehouse or Wholesale Warehouse, Class III Factory or Class IV Factory whichever is the more valuable there being disregarded

(a) any effect on rent of the fact that the Tenant has or his predecessors in title have been in occupation of the Demised Premises

(b) any goodwill attached to the Demised Premises by reason of the carrying on thereat of the business of the Tenant (whether by it or by a Predecessor of it in that business)

(c) subject as hereinbefore mentioned any effect on rent of any improvement carried out by the Tenant or a predecessor in title otherwise than in pursuance of an obligation to the Landlord hereunder

(d) any effect on rent of any licence in force in respect of any part of the Demised Premises comprising licensed premises in so far as the benefit of such licence belongs to the Tenant or any sub-Tenant of it."

14. The proviso goes on to define the rent review date. It specifies "each fifth anniversary of the said term or the date of practical completion of additional buildings as hereinbefore referred to", and that is plainly a reference back to para.(d). There is omitted any reference to an intermediate rent review coming forward under para.(e), but nothing turns on that for present purposes.
15. The rent review provisions then specify the machinery by which the amount of the reviewed rent is to be determined. I need not refer to that, save only to mention that in the event of a dispute the matter is determined by an arbitrator.

THE 1988 WORKS

16. In 1988 Asda carried out certain works to the demised premises with the consent of the then landlord. Although these present proceedings are not directly concerned with the 1988 works, it is desirable that I describe them briefly. I can take the nature and character of the works from a drawing to which my attention was drawn. The most significant item of work in 1988 was the construction of a substantial extension facing the car park and shown on the plan as "sales area extension". I am not given the precise measurements, I believe, in the evidence, but it was a significant area of extension to the retail area of the store.
17. The second area of works I ought to refer to concerned work in the service yard. I ought to explain a little about the nature of the construction of the service yard before I turn to the work done in about 1988. The service yard was open to the sky but it was enclosed by a wall and secured by a gate. The wall was on two sides, the remaining enclosure of the service yard being the original structure of the superstore. Within the rectangular enclosure called the service yard, there appear to have been a number of smaller structures. For example, there appeared to be a boiler room. There appeared to be an electricity substation. None of that changed in 1988 but what did happen was that a further structure of some kind was built upon the floor or ground of the service yard and this new structure was to receive certain produce. It looks as if the produce was to remain there overnight before then being integrated into the storage of the supermarket. Nothing really turns upon the character of that work in the service yard. It is right to say that it is an extension of fairly modest proportions.
18. The third category of works done in 1988 involved an extension to a pre-existing bakery within the store. The plan shows that there had been a bakery in one corner of the store and in order to enlarge the area available to the bakery the wall of the store was pushed out and then a satisfactory enclosure formed, so that overall one would have a larger internal bakery area. Again, the area involved is comparatively modest.
19. The fourth category of works in 1988 was to create, outside the original envelope of the 1982 building, a new room which was to be used as a training room and which was to have access from within the main store.
20. These works were the subject of a licence granted by the then landlord to Asda. The licence contains a large number of standard provisions but one of them deserves mention. Clause 5.2 of the licence provided that from the date of practical completion of the works authorised by the licence, being the date of issue of the architect's final certificate, the rent payable by the tenant to the landlord was to be increased from £100,000 per annum to £135,000 per annum, subject to review as provided by the lease.
21. It is plain that what the parties were doing in that licence was to agree an intermediate rent review, apparently pursuant to para.(d) of the rent review provisions, providing for an increase in rent on account of the tenant having extended the area of the original building in the ways in which I have described. One imagines that the most significant extension was the extension to the retail area, but I have no specific information about it.
22. I also understand that on subsequent reviews, for example those which occurred in 1991, 1996 and 2001, the area created by the 1988 works was taken into account for the purpose of assessing the rack rental value of the land and buildings. The same thing nearly happened in 2006 but before the 2006 rent review was agreed, the issues in the present litigation raised their head and they caused the 2006 rent review to remain unagreed pending the resolution of the present dispute.
23. I should say a word about these arrangements and their impact, if any, on the arguments in this case. As will be seen, the arguments that have arisen in relation to the 2007 works could have arisen in relation to the 1988 works but they did not. No one suggests that the parties' behaviour or the parties' assumptions in relation to the 1988 works gives rise to any binding estoppel in relation to the 2007 works. That is to say, it is for the court to determine in relation to the 2007 works what position is achieved on the true construction of the 1982 lease. Furthermore, it is common ground that the events of 1988 cannot be relied upon as an aid to construction of the 1982 lease as they postdate the grant, and the general rule is that events subsequent to the instrument being construed do not influence the construction of the instrument.
24. Mr. Rodger QC, who appears with Mr. Pritchett on behalf of the landlord, did argue that when one considers what reasonable people might have meant by the words used in the 1982 lease, I could be and should be influenced by what the then landlord and Asda (presumably reasonable people) thought the words meant in 1988. Suffice to say I do not regard that approach to construction as being particularly helpful on the facts, even if it does not infringe the exclusionary rule of evidence to which I have referred. When I have given my ruling in relation to the 2007 works, I will, for the sake of completeness, indicate how that ruling would apply to the 1988 works if the treatment of the 1988 works were to be regulated only by the 1982 lease and not by any other consideration, which has not been investigated or developed before me.

THE 2007 WORKS

25. In 2006 surveyors for Asda wrote to the landlord and stated that Asda intended to carry out what were called alterations to the store and car park. The letter of 2^nd May 2006 referred to some five categories of work. The fifth category of work did not in any way feature in the discussion and I need not refer to it. I will read the four categories of work as described in the surveyor's letter of 2^nd May 2006:

"1) An extension to the rear left-hand corner of the store infilling the rebate to the store footprint in this vicinity.

2) Provision of a canopy over the existing service yard to the rear right-hand corner of the store.

3) Reconfiguration of existing warehouse adjacent to extension to be provided in (1) above to include the provision of a storage mezzanine of part of the existing warehouse.

4) Revision of external car park layout to provide additional spaces."

26. Of these four categories of work, only 1 and 2 are controversial. The treatment of the mezzanine floor has not been an issue between the parties. There was some investigation at the hearing as to why that was. The facts as to the construction of that mezzanine floor are not in evidence and they could conceivably affect the result. As this point it is not in issue in these proceedings and I will say no more about it.
27. I ought to say one or two further words of explanation in relation to the work in categories 1 and 2. The work in category 1 is shown on a plan to which I was referred, and it involves an extension of reasonable size, certainly not de minimis in any sense, and it extends, as I understand it, the retail area of the store in that place. If it does not extend the retail area, it extends the structure so that there is an additional area of floor space available to the operator.
28. So far as the work involved in creating that extension is concerned, I was shown some photographs which show the nature of the construction. In the bundle of photographs the extension can be seen clearly in particular in photographs 7, 8 and 9. One sees that the original superstore had brick walls, and the extension is built in the same style with brick walls. The original superstore had a form of slated roof, and the extension has the same form of roof, the new roof being integrated or knitted into the existing roof of the existing store.
29. The position in relation to the service yard must be described in a little more detail because of a subsidiary point which turns upon the detail of the works done in the service yard. I have already described the situation prior to the 1988 works. Therefore the description of the service yard prior to the 1988 works is a description of the original service yard built in or around 1982. That is to say, the service yard built in or around 1982 was open to the elements but it had a wall and a gate enclosing it, certainly on two sides, the remainder of the enclosure being formed by the walls of the superstore. What then happened in 2007 in relation to the service yard is shown by the photographs numbered 4, 6, 11, 12 and 13. They show that after the works there exists, covering the entirety of the service yard, a substantial canopy. The canopy is supported by steel stanchions. The stanchions look substantial, and the stanchions appear to be fixed, to give greater stability, to the pre-existing brickwork structure of the superstore.
30. One feature of the result produced needs to be mentioned. On three sides of the service yard there is a gap between the original enclosure wall and the canopy above. So far as the enclosure wall on two sides is concerned, the gap is fairly consistent and is about one third of the height between ground level and the canopy. In relation to one of the walls of the pre-existing store, the gap between the wall and the canopy is much more modest because the wall of the store was higher than the enclosure wall of the yard. Then, so far as the fourth wall forming the enclosure of the yard is concerned, the canopy appears to butt up against the wall of the store so that there is no gap between the canopy and a wall beneath it. The canopy touches the wall, insofar as one can tell, and although the evidence is not precise on the point, it seems very likely indeed that in that place the canopy is affixed to the wall. I refer in particular to photograph 13 where there appear to be small pieces of steel which appear to me, on the information I have and doing the best I can, to be means of fixing the canopy to that wall. So that is something of a detailed character as to the form of construction of the canopy.

THE CORRESPONDENCE

31. There has been considerable correspondence between solicitors for the parties in relation to the 2007 works. The correspondence appears to have begun with the debate as to whether consent would or would not be given. It continued with the debate whether consent had or had not been given. At some stage in that correspondence the present issue as to the treatment of the 2007 works for rent review purposes emerged and indeed became the dominant issue between the parties, so much so that the parties no longer disagree on the question of consent. The tenant has done the works. No one suggests that the tenant has broken the lease by doing the works. Indeed, the landlord wishes to embrace the works and to have an improved rental return by reason of the existence of the works. In those circumstances, it is not necessary for me to go into what would be a rather detailed account of the correspondence. It is not material now to the issues I have to determine.

THE CLAIM

32. These proceedings were brought by the tenant, Asda. The prayer for relief claimed two declarations. The first concerned an issue as to the existence of a consent to the works and that, as I have explained, is no longer material and I make no decision upon it.
33. The second declaration was in these terms:

"A declaration that, on the true interpretation of the Lease, once the Works have been completed by ASDA at its expense, they should be regarded as improvements carried out by the tenant and therefore disregarded for the purposes of calculating the rack rental value at a rent review;"

34. Just to fill in a little more as to what is really in issue between the parties, it is not the four categories of works described in the surveyor's letter of 2^nd May 2006 which remain in issue. The issue relates to the extension in the corner of the store and the work done in the service yard. As I have explained, there is not an issue continuing between the parties as to the mezzanine nor as to the revision of the external car park layout. Furthermore, whether or not this is clear from the declaration claimed, the issue relates not just to the position on a five yearly rent review but also the position as to an intermediate rent review between the five yearly dates.

THE LANDLORD'S SUBMISSIONS

35. It is convenient to start with the landlord's submissions and then go to the tenant's submissions in response to them. I will give only a fairly brief summary of the shape of each party's case. Mr. Rodger for the landlord began by reminding me of the general purpose of a rent review clause in a commercial lease, which is to keep the rent in line with current property values, having regard to the current value of money. He submitted that that applies in this case notwithstanding that the lease is a building lease where the rent on review is to be 20% of the rack rental value of the land and buildings. He then addressed the specific language of the rent review provisions. He cited a number of authorities which, he submitted, showed language, which was not dissimilar, being used in a sense where "a building" referred to an extension to a pre-existing building. Whilst these other decisions are not said to be determinative of the issue in this case, he deployed them to show that the reading which he would put upon the words in this case was an entirely possible reading. He pointed out that the language used in the lease did not contain words of limitation such as "self-contained", "separate" or "new", nor the word "free-standing", a word which Mr. Warwick on behalf of the tenant had submitted represented the inherent limitation in this case.
36. Having considered the language of the rent review provision, Mr. Rodger then turned his attention to the commercial purpose of those provisions. He explained the significance of the fact that the rent paid was 20% of the rack rental value of the land and buildings. The tenant does not pay rent for his own improvements, i.e. a building which had been put up, but instead pays rent for the landlord's land on which the building is erected. The rent for the land is measured as 20% of the value of the land plus buildings. Mr. Rodger submitted that a distinction between a separate building (the rental value for which would be taken into account) and an extension (the rental value of which would not be taken into account) did not advance the obvious commercial purpose but frustrated it. He also suggested anomalies which would arise if the tenant's construction of the lease was adopted.

THE TENANT'S SUBMISSIONS

37. Mr. Warwick on behalf of the tenant made detailed submissions in response to the landlord's case. He submitted that the words in para.(d) dealing with the intermediate rent review referred to, and only referred to, a building which was additional to the original building. The reference could only be understood as a reference to a free-standing building. An extension to the original building could not be brought within these words. He illustrated his submission by referring to some of the modest extensions in 1988, that is excluding the extension to the retail area, and he suggested that the parties could not possibly have intended that those modest extensions would trigger an intermediate rent review. He also referred to the need for an architect's certificate which, he submitted, suggested major works rather than minor works. He also stressed that the lease contained a disregard of the effect on rent of any improvements. This was an important safeguard to the tenant. It reflected the ordinary expectation that a tenant should not pay twice for his own improvements. An extension to the store was a tenant's improvement within the disregard. Although the disregard was subject to a limitation, that limitation only applied in the case of a free-standing building and did not apply to an extension.
38. In connection with the commercial purpose of the provisions he stressed that the task of the court was to construe the words the parties had used to convey their meaning. One had to focus on the precise language used. He pointed out that Mr. Rodger's suggested commercial purpose went too far. The landlord's approach would lead one to expect that there would not be any disregard of improvements but yet the lease clearly provided for such a disregard. He also pointed out that the landlord's approach produced the result that the reference to improvements would never include the erection of buildings, whether free-standing or as an extension, whereas in this area of the law it was generally considered that the word "improvements" would include such works.
39. There was discussion as to the difficulties involved in the valuation of an extension. These difficulties did not particularly arise on each five yearly review, if one were to value the building as extended; it would arise on an intermediate review where was to value the subject matter which had triggered the intermediate review. How could one value an area of the extension which was not enclosed and had only three sides? What would one do if the area of the extension could only be accessed from the main building and the hypothetical lease of the area of the extension did not grant rights of access? A similar point arose in relation to services to the area of the extension. It was suggested that this could be a good reason for distinguishing between a free-standing building and an extension to the building.
40. Mr. Warwick also cites Stroud's Judicial Dictionary and one of the cases referred to in it in relation to the meaning of "building". It was suggested that the normal meaning of "building" required the object in question to have four walls and a roof. There was discussion as to the meaning of "free-standing" and what happened if a building which would otherwise be free-standing was connected to the original building by a corridor. There was also discussion as to how the provisions would work if one had an upwards extension rather than a sideways extension; what happened if there was a free-standing additional building and that was extended; and what happened if the original store was demolished and then replaced with a new building of similar dimensions or of greater dimensions.

DISCUSSION

41. I begin my consideration of the problem by looking at the words used in, and the structure of, the rent review provisions. The rent review provisions contain two regimes. There is the regime dealing with the five yearly rent reviews. There is the regime dealing with the possibility of an intermediate rent review. The text of the two regimes is not separated out sequentially. One would expect the words used in the two regimes to produce similar results on the various occasions that they apply. The words used to explain the operation of one regime are to be expected to inform the interpretation of the words used to explain the operation of the other regime.
42. I will refer first to the regime for five yearly rent reviews. This is dealt with in para.(c) and in the definition of "rack rental value". There are three important features of those provisions. The first is that the measure of value is the value of the land and buildings erected thereon at the date of valuation. The second is that the disregard of improvements is "subject as hereinbefore mentioned". The third is that the rent payable is 20% of the measure of value, apparently the value of the land and buildings. There is obviously room for interpretation as to the meaning of the words in the disregard, "subject as hereinbefore mentioned". That phrase could refer to the fact that the measure of value is the value of the land and buildings so that one does not disregard the buildings pursuant to a disregard of tenant's improvements. Or the phrase might be confined to the buildings (which might be a smaller set of buildings) which come within para.(d), dealing not with the five yearly rent review but with an intermediate review.
43. Suffice it to say that at this stage in the discussion there is a real possibility suggested to me by the wording that the disregard of improvements will not apply to any part of any building upon the land at the review date. In my judgment, the fact that the rent payable is 20% of whatever is the measure of the value is highly significant. If the rent payable had been 100% of the rack rental value of the land and buildings, including buildings erected by the tenant, the tenant could justifiably say that such a construction must be an improbable one to be arrived at only where there is compellingly clear language. However, the internal evidence of the lease shows clearly that a rent of 20% of the value of the land and buildings was regarded as being the appropriate return to the landlord of providing the land as a site on which the tenant would erect a building at the tenant's expense. That was clearly the position with the original development. Even on Mr. Warwick's argument, it would also be the case with any free-standing additional building erected by the tenant at its expense.
44. So, in my judgment, I do not regard the argument that the tenant should not be expected to pay rent for its own improvements in the form of extending the building as having any real force. These parties have agreed that the rent payable by the tenant will be 20% of the value of the land plus buildings, so as to represent the figure which is 100% of the value of the land and 0% of the value of the buildings.
45. Accordingly at this stage in the discussion, having considered the words which provide for five yearly reviews, I incline to the view that upon each five yearly review the values of the land and buildings, whoever has erected them and the tenant pays 20% of the resulting value. For this purpose there does not appear to be any clear distinction between a free-standing building and an extension to the original building.
46. I then turn to the provisions dealing with an intermediate rent review. These provisions refer to "any buildings... being built". The buildings referred to must be additional to the original building. The concept of being additional applies both to a free-standing building and an extension to the original building. So the focus moves to the words "any buildings". For some reason this phrase is in the plural. That may be to emphasise that the provisions are capable of applying more than once during the 125 year term. In any event, the parties agree that the plural includes the singular, so the phrase extends to the case of "any building... being built". That phrase plainly includes a free-standing building, but do the words clearly apply only to a free-standing building, as Mr. Warwick submits? My reaction to the language is that the words are nothing like so clear as to produce such a limitation. I do not find any real linguistic difficulty in reading the words "any building being built" so as to apply to the case of an extension of an existing building.
47. If the words are not to be read in the limited way suggested by Mr. Warwick, then the operation of the two regimes fits together. On both a five yearly rent review and on an intermediate rent review, one takes into account the area of the new building, whether it is a free-standing building or an extension to an existing building. The words "subject as hereinbefore mentioned" in the disregard of improvements, whether they refer to the reference to "the buildings then erected thereon" in para.(c) or to the concept of additional buildings in para.(d) refer to the same thing in either event.
48. But the matter does not stop there. There is a clear commercial purpose evinced by the words in the rent review provisions that when the tenant puts up an additional building, the tenant pays a rent for the land on which the building is put up. There is no good reason commercially to distinguish between a free-standing building and an extension. It would be particularly anomalous to take into account the rental value of a small free-standing building such as a separate boiler room or a building to shelter a car parking attendant but to leave out of account an extension which doubles the retail area of the store.
49. Mr. Warwick is right to say that the commercial logic could have been taken further so that no tenant's improvement was to be disregarded. It is, however, clear that some tenant's improvements are to be disregarded but that does not mean that I should override all the other considerations I have mentioned, which appear to me to lead to the conclusion that buildings are rentalised whether they are free-standing or extensions.
50. I have given careful consideration to the point about the difficulty which might arise on an intermediate rent review, but not on a five yearly rent review, due to the fact that an extension will often not be self-contained in terms of enclosure or services, and the hypothetical tenant might not have a right of access to it unless he is also tenant of the superstore. It should, however, be recognised that a free-standing building might also not be self-contained in terms of services and the point as to access could arise there also. The point may have some validity in that the position could be more complicated with an extension as compared with a free-standing building but, in my judgment, there is scope for difficulty in either case. It also seems that the parties in 1982 did not address any such difficulty and very probably did not foresee any such difficulty.
51. At the end of the day, I do not think that this point is of anything like sufficient force to override the other powerful considerations which make no distinction between a free-standing building and an extension. I find the authorities cited by both parties useful by way of background but not so relevant that I need to refer to them specifically in this judgment. The meaning of the word "building" is heavily influenced by the context and it is therefore important to focus on the context in this case rather than the radically different contexts in the cases which have been cited.

THE RESULT IN RELATION TO THE 2007 WORKS

52. My conclusion is that any building by way of an extension to the original building is taken into account for both the five yearly rent review and the intermediate rent review. That conclusion deals with the case of the extension on the corner of the store carried out in 2007.
53. However, an additional point arises in relation to the service yard and the canopy. For the purposes of the five yearly review, the measure of value is the value of the land and buildings, but otherwise disregarding tenant's improvements. Is the installation of the canopy something which is a building, or brings into existence a building, or, not being such, is it to be disregarded as a tenant's improvement? I doubt if the canopy by itself is a building, but it might be. It is certainly possible to argue that if the erection of the canopy is not itself a building, it must be an improvement and therefore one should value the service yard with walls and a gate but without a canopy. However, the result of the enclosing walls and gate covered by a canopy attached to one wall, and even though there are gaps between three of the walls and the canopy, is, in my judgment, to produce a building and therefore the resulting structures are to be taken into account for the five yearly rent review and this includes the canopy.
54. What of an intermediate rent review in 2007? Should it reflect the situation in the service yard produced by the erection of the canopy? Before the canopy was constructed, the service yard was not part of the superstore building, it was a yard open to the elements, albeit surrounded by a wall and a gate. After the canopy, it is, in my estimation, a building. The facts have crossed the line from there being no building in the service yard to there being a building, being a covered service area. This reasoning produces the result that the covered service area is a building to which the intermediate rent review applies.

THE RESULT IN RELATION TO THE 1988 WORKS

55. It follows from the above reasoning that the extensions carried out in 1988 are part of the land and buildings which are valued for each five yearly rent review. No question about an intermediate rent review arises in relation to the 1988 works by reason of clause 5.2 of the 1988 licence.

LATER:

MR. JUSTICE MORGAN:

56. Let me take it by degrees. Counsel agree and I also see it this way, that there should be a declaration made, and counsel will agree a form of words, and I would like to see that so that I can approve it before it is ordered. The defendant asks for its costs to be paid by the claimant. There is no dispute about that in principle. I am also asked by the defendant to do a summary assessment. Mr. Warwick on behalf of the claimant has suggested that that is not appropriate. On my reading of the rules, I should incline to do it where I can. I can in this case. I am prepared to do it and I will do it. We have looked at the bill together and the grand total of £43,706 seems to me to be high but I can well see that on a solicitor and client basis leaving no stone unturned these costs are incurred, but one must not lose sight of the fact that it was a short point of construction of the lease. I am prepared to take into account in favour of the defendant that the case came before me as a short, well-prepared case, and cases only come before the court well-prepared when there has been a lot of work in preparation. So I am going to reflect all that in the conclusion I come to.
57. Having said all that, I think that there are elements of this bill which I will tax downwards. Looking at the first page of it, in relation to the work done on documents, the number of hours, 45.4 hours does catch my eye, and I do feel that, in addition to all the other charges for attendances which I am going to allow, that one goes too far and I am going to cut the £7,945 approximately in two so that it becomes £4,000. I will leave the £427.50 unaffected. In the case of Mr. Pritchett, given that the trial was led by leading counsel, I think a proper reaction is that his brief fee in terms of recovery from the claimant should be £4,000, not £6,000. I am not going to alter the two counsel's fees, Mr. Rodger and Miss Dunn on the next page.
58. In relation to the surveyors King Sturge, they are charging £2,700-odd. They gave advice on a number of points. I am allowing 7.5 hours for the solicitors to receive the advice from Kings Sturge. I do pay some attention to what Mr. Warwick has said about what happened on the CMC and the argument about expert evidence. It seems to me that the figure for Kings Sturge is on the high side. I would, applying a broad brush, eliminate the £1,265, leaving only the £1,500.
59. In the case of Briant Champion & Long, no doubt they gave very worthwhile advice about the rent review consequences of one result or another result, but I think that is not attributable to this litigation, it is attributable to implementing the result of the litigation, and so I will disallow the two figures as against Briant Champion & Long.
60. Perhaps one little crumb of comfort which I will put in the scales in favour of the defendant is that I am told by Mr. Rodger that there is a further £1,500 in terms of an overnight stay and an attendance today. I would add that in.
61. Now, I have not done the mathematics but I hope I have indicated the ingredients and the result will follow. So I will summarily assess the defendant's costs in the resulting sum.

LATER:

MR. JUSTICE MORGAN:

62. I think different people do different things. What I intend to do is to refuse permission to appeal but of course Mr. Warwick's clients are able to go to the Court of Appeal and put their case there. I have reached a very clear view. I have reached it in reliance on a number of supporting strands of argument. I feel in the circumstances that I cannot say it meets the test which would justify the grant of permission to appeal. The Court of Appeal may very well take a different view and Mr. Warwick's clients are free to see if that is what does happen. But I myself refuse permission to appeal. Thank you very much.