Top Shop Precincts Ltd v Kwik Save Stores Ltd

A lease covenant must be construed as a whole and in context. A prohibition on alterations to a building’s external construction, height, elevations or architectural appearance may apply to a substantial alteration to its facade, including a new external door. Subsequent provisions permitting alterations with consent apply to matters outside that prohibition. When damages are awarded in equity in lieu of an injunction, the Shelfer criteria provide a useful working rule. In assessing the sum payable for release of a covenant, the court may consider whether requiring reinstatement would be oppressive. An appellate court should not interfere with a trial judge’s assessment of damages where it falls within the wide ambit of judgment, particularly where the trial judge had a superior opportunity to assess the evidence.

The claimant landlord granted the defendant a long lease of supermarket premises. During a major refit, the tenant constructed an external fire door without the landlord’s consent. The landlord claimed relief for breach of the lease covenant and later sought damages in lieu of an injunction.

The Central London County Court held that the alteration breached the absolute prohibition in the lease and awarded £37,500 in damages. The tenant applied for permission to appeal on liability and quantum. The Court of Appeal considered whether the construction of the covenant was arguable and whether there was a real evidential basis for the damages award.

1. Disposition. The appeal concerning quantum was dismissed. Permission to appeal on the remaining matters was refused, with costs assessed at £5,000.
2. Construction of the covenant. The lease had to be construed as a whole and according to its context and purpose. The words referring to alterations in the external construction, height, elevations or architectural appearance were not confined to changes affecting the building’s length or height. “Elevation” referred to the facade presented by the building. The new door in the front elevation was therefore within the first, absolute prohibition and constituted a breach.
3. The later provisions concerning structural alterations, cutting or removing parts of the building, and internal non-structural partitions applied to matters outside the first prohibition. The provisions could operate without inconsistency or overlap.
4. Damages in lieu of an injunction. The four criteria in Shelfer v City and London Electric Lighting Company were a good working rule for determining when equitable damages could replace an injunction. The trial judge was entitled to consider whether the criteria were satisfied. Whether removal of the fire door would be oppressive could legitimately bear on the amount which the tenant would notionally have paid for release of the absolute covenant.
5. Quantum and appellate restraint. The judge was entitled to reject late, unsupported evidence about the cost of an alternative fire escape and to assess the payment by reference to the rental value of the relaxation, capitalised at £37,500. Although the Court of Appeal might have selected a lower figure, the award fell within the wide ambit of judgment available to the trial judge, who had heard the evidence and was better placed to assess it.
6. Judge LJ emphasised that the award was specific to the facts and should not be treated as guidance on the appropriate level of damages for breach of a similar covenant.

• Court of Appeal (Civil Division): dismissed the appeal on quantum and refused permission to appeal on the other issues, with costs.
• Central London County Court: held that the external door breached the lease covenant and awarded £37,500 in damages.