HM Revenue & Customs v Mayflower Theatre Trust Ltd

A landlord’s power to regulate traffic under a lease permits reasonable directions about circulation, parking and unloading. It does not authorise the landlord to obstruct or eliminate an expressly granted route of access. Such an obstruction may breach both the right of way and the covenant for quiet enjoyment, particularly where access is essential to the permitted use of the premises. A contractual proviso limiting a right of way does not, when the lease is read as a whole, answer a separate claim for breach of quiet enjoyment. A counterclaim may be set off against damages where the pleadings and evidence establish that sums claimed overlap. A pleading that a lease has been rendered worthless may sufficiently raise a claim for its lost value.

The appeal arose from a county court judgment awarding the tenant damages for breaches of a right of way and the covenant for quiet enjoyment, and dismissing the landlord’s counterclaim. The premises formed part of an industrial estate and were leased for use as a café. The landlord closed an entrance and erected a wall which obstructed the route around the estate and impeded access to the café.

The landlord argued that the lease permitted regulations directing traffic and that the counterclaim should have been allowed. A further procedural complaint concerned the pleading of compensation for the value of the remaining lease. The central issues were the scope of the traffic-regulation proviso, the effect of the obstruction on quiet enjoyment, the set-off of the counterclaim, and the sufficiency of the pleading.

1. Appeal dismissed. The landlord’s construction of the traffic-regulation proviso was untenable. At most, the power permitted directions requiring traffic to circulate in a particular direction. It did not permit the landlord to close part of the route, block the roadway, or require users to abandon the route and enter the premises by an obstructed and substantially different means [11]–[13].
2. The lease had to be read as a whole. The premises were let for use as a café, and the tenant was entitled to access the café without unlawful interruption or disturbance. The obstruction therefore amounted to a substantial derogation from the grant and breached the covenant for quiet enjoyment. The traffic proviso could limit the right of way but could not eliminate the separate protection afforded by quiet enjoyment [13].
3. The traffic regulations also had to be reasonable. The landlord’s works were undertaken to divide the site rather than to regulate traffic, and the erection of a large solid wall was not a reasonable regulation for that purpose. The county court judge was entitled to find a substantial interference with the right of way and quiet enjoyment [26]–[28].
4. The counterclaim was properly set off against the tenant’s damages. The pleadings raised set-off, and the evidence showed that the dishonoured cheque formed part of the wider arrears of rent and electricity. The judge was therefore entitled to deduct the relevant sums when assessing the tenant’s loss [15]–[20].
5. The pleading sufficiently indicated a claim that the remaining lease had been rendered worthless and that the sums paid for it should be recovered. It was not proportionate to reopen the matter for a more elaborate formulation of the claim [21]–[25].
6. Lady Justice Arden added obiter guidance that appeal bundles and skeleton arguments in property cases should contain and clearly identify complete, legible plans, maps, diagrams and photographs showing all material features [29]–[31].

• Court of Appeal (Civil Division): Dismissed the landlord’s appeal and upheld the county court judgment.
• County court: Awarded the tenant £5,296 including interest and dismissed the landlord’s counterclaim.