Commerz Real Investmentgesellschaft mbh v TFS Stores Ltd

Commercial rent remains payable during pandemic-related closure unless the lease, properly construed, provides otherwise. A keep-open covenant which is suspended because trading becomes unlawful does not, without more, suspend the rent covenant. Rent cesser provisions referring to premises damaged by an insured risk ordinarily require physical damage and do not extend to closure imposed by law.

An insurance covenant does not objectively require a landlord to insure every risk which might affect the tenant’s business where the lease leaves additional risks to the landlord’s choice. On summary judgment, the court may decide a short issue of construction or implication of terms. The second limb of CPR rule 24.2 requires a compelling reason for a trial.

The claimant, leaseholder of retail premises at Westfield Shopping Centre, claimed unpaid rent and service charges from the defendant tenant. The premises had been closed during periods of coronavirus restrictions. The defendant relied on the voluntary Code of Practice for Commercial Property Relationships During the COVID-19 Pandemic, alleged that the claim circumvented restrictions on other remedies, and argued that the claimant’s insurance and rent cesser obligations suspended or reduced the rent.

The claimant applied for summary judgment under CPR rule 24.2. The defendant applied shortly before the hearing for an adjournment to reformulate its defence. The central questions were whether the pleaded or proposed defences had a real prospect of success, whether there was a compelling reason for trial, and whether the lease required insurance cover or rent suspension during pandemic-related closure.

1. Summary judgment. The application concerned short issues of contractual construction and implication of terms. The court could determine them summarily because there were no material factual disputes, the principles were established, and the case did not involve a mini-trial or a developing area of law. The claimant had to show both that the defendant had no real prospect of defending the claim and that there was no compelling reason for a trial.
2. Code and government measures. The voluntary Code of Practice did not alter the legal relationship or lease contracts. Government restrictions on forfeiture, winding-up petitions and CRAR did not restrict a landlord’s right to bring a claim for rent or obtain judgment. Enforcement following judgment was distinct from determination of contractual liability.
3. Insurance. The lease required insurance against the defined Insured Risks and loss of rent. It did not require insurance against notifiable disease or government action, and the provision for other risks which the landlord might consider prudent did not impose an objective reasonableness standard. The claimant’s insurance protected its own insurable interests and did not provide cover for the tenant’s business losses.
4. Rent cesser. The keep-open obligation was suspended where trading became unlawful, but that did not suspend the separate obligation to pay rent. The rent cesser provisions applied where the premises were physically damaged by an Insured Risk, or the facility was so damaged as materially and adversely to affect the premises. They did not apply merely because the premises were closed by legal requirement. An implied term extending rent cesser to pandemic closure would contradict the express allocation of risk and was neither necessary nor obvious.
5. Expert determination and adjournment. No dispute within the expert determination clause had been established, and the defendant had submitted to the court’s jurisdiction. The adjournment application was late, the proposed amended defence remained diffuse, and an adjournment was unlikely to produce a viable defence. It was refused.
6. Disposition. Judgment was entered for the claimant for the rent claimed and interest at the contractual rate.