Carter v Lotus Leisure Group Ltd

The meaning of a contractual restriction on renting property depends on the agreement’s language read in its commercial and factual setting. The word “rent” may extend beyond present occupation to include entering into a binding agreement for future occupation. Where a restriction begins on signing and protects a commercial portfolio from being bypassed, it may therefore prohibit agreements made during the restricted period even if occupation begins later. The contra proferentem rule has no application where, on proper construction, the clause is clear.

Bon Nej Locations Ltd agreed to rent a ski chalet to Lotus Leisure Group Ltd for the 1994–95 season. The agreement restricted Lotus and its directors, for the contractual period and 18 months thereafter, from renting specified chalets directly or indirectly without permission or payment.

Mr Carter, as assignee of BNL’s rights, alleged that Lotus breached the restriction by entering into a direct agreement with the owner of another specified chalet during the restricted period, although occupation was to begin afterwards. The Central London County Court construed “rent” as requiring present occupation and dismissed the claim. Mr Carter appealed on the construction of the restrictive clause.

1. Appeal allowed. The restriction covered an agreement to rent a specified chalet entered into during the 18-month period, even though the contractual right to occupy it was exercisable only after that period.
2. The court construed the agreement as a whole and in its commercial setting. The parties described Lotus as the “renters” before actual occupation began, referred to properties as “currently rented” when agreements had been made, and provided for rental payments before occupation. These features indicated that “rent” included the making of a binding agreement for future occupation.
3. The narrower construction would substantially defeat the commercial purpose of the restriction. It would allow a tour operator to secure a direct agreement with an owner immediately after the original agreement, including during the period when operators were likely to arrange the following season’s accommodation.
4. Actual occupation by holidaymakers was relevant to the relationship between Lotus and its customers, but not to the contractual relationship between Lotus, BNL and Mr Carter. Lotus obtained an immediate commercial benefit because it could market the chalet and take advance bookings.
5. Lady Justice Arden additionally held that the wording and context left no uncertainty requiring application of the contra proferentem rule. The court allowed the appeal with costs, directed an inquiry as to damages before a district judge, and refused permission to appeal.

• Central London County Court: HHJ Cooke dismissed Mr Carter’s action for breach of the restrictive clause, with costs.
• Court of Appeal (Civil Division): The appeal was allowed. The clause was construed as covering agreements to rent made during the restricted period, notwithstanding later occupation.