Bella Italia Restaurants Ltd v Stane Park Ltd & Ors

An agreement for lease is not personal to the named landlord merely because the agreement defines “landlord” by reference to that party. The court must construe the agreement as a whole, considering its language, structure and commercial purpose. Express provisions identifying particular obligations as personal are significant, especially where the obligation in question is omitted from that list. A transferee may therefore perform the landlord’s obligation to grant the lease unless the agreement makes that obligation personal. The statutory effect of the Landlord and Tenant (Covenants) Act 1995 on conditional agreements for lease was left open.

Bella entered into an agreement for lease with the Trustees, who were to develop and grant a lease of retail premises. Before the agreement became unconditional, the Trustees transferred their interest in the premises to Ropemaker, which was willing and able to grant the lease.

Bella refused to complete, contending that the agreement required the Trustees personally to grant the lease. It sought declarations that the agreement had been terminated or that it was not in breach. The Defendants sought declarations that the agreement remained in force and that Bella was liable to complete. The issues were contractual construction and, alternatively, the effect of the Landlord and Tenant (Covenants) Act 1995.

1. Claim dismissed. The Defendants were entitled to a declaration that the agreement had not been validly terminated and that Bella was liable to complete the lease offered by Ropemaker.
2. The obligation in clause 15.1 was not personal to the Trustees. The agreement had to be construed as a whole, by asking what its language would signify to a properly informed observer in the context of the document and its obvious purpose, with business common sense in mind. The court applied the approach stated in Margerison v Bates [2008] EWHC 1211 (Ch).
3. Clauses 28.1 and 28.2 expressly identified other obligations as personal to specified parties, but did not include clause 15.1. That omission was significant. Although expressio unius is only a principle of interpretation and must not be rigidly applied, there was no basis to treat the omission as drafting error.
4. Clauses 15.2 and 15.3 made the tenant’s benefit personal and non-assignable, but contained no equivalent restriction on the landlord’s obligation. The different treatment of landlord and tenant supported the conclusion that clause 15.1 was not personal to the Trustees.
5. The reference to the lease being granted at the Developer’s direction, and the draft lease’s reference to the Trustees as landlord, did not alter that construction. The obligation could be performed by Ropemaker as transferee.
6. The alternative statutory issue was not decided. The court recorded the competing arguments concerning whether a conditional agreement for lease is an “agreement for a tenancy” and whether clause 15.1 is a “landlord covenant” under section 28(1) of the Landlord and Tenant (Covenants) Act 1995, but left those questions for a future case.