McDonald’s Restaurants Limited v Shirayama Shokusan Company Limited

For the purposes of paragraph (g) of section 30(1) of the Landlord and Tenant Act 1954, a landlord must prove both a fixed and settled intention to occupy the holding and a reasonable prospect of doing so within a reasonable time. The intention must exist when the court decides the issue. A landlord may later change its mind, provided the original intention was honestly held.

Where a landlord presents a specific business proposal to obtain a termination order, deliberately misrepresenting that proposal may engage section 37A(1). The misrepresentation must have been an operative cause of the order. The tenant need not prove that an alternative, truthful case would also have failed. The tort of deceit does not extend, on the materials considered, to a case where the false representation was relied on by the court rather than by the claimant.

The claimant tenant held business premises under a lease protected by Part II of the Landlord and Tenant Act 1954. The defendant landlord opposed renewal under paragraph (g) of section 30(1), asserting that it intended to occupy the premises through a subsidiary for a specific Japanese restaurant known as Zen Bento.

The landlord succeeded before the Central London County Court, which made an order terminating the lease. The tenant later alleged that the landlord had deliberately misrepresented its intentions and had given an undertaking to open Zen Bento, while post-judgment conduct showed that no such settled intention existed. The liability issues were whether there had been misrepresentation, whether the termination order was obtained by it, and whether the claims under section 37A and in deceit succeeded.

1. Paragraph (g) test. The landlord must prove a fixed and settled desire to occupy the holding for the relevant purpose and a reasonable prospect of bringing about that occupation by its own act of volition. The intention must exist when the court decides the issue, and occupation must occur within a reasonable time after termination. The court must distinguish a settled decision from mere contemplation or an exploratory project.
2. Specific case advanced. The landlord had put forward a specific and unqualified case that it would operate Zen Bento through Aji (Restaurants) Ltd. The evidence, undertaking and business plan were directed to that particular restaurant, rather than to an unspecified future business.
3. Misrepresentation. The post-judgment emails and conduct demonstrated that the controlling decision-maker had not held the represented intention at the preliminary issue trial. The representations concerning Zen Bento, the proposed fit-out, contractors, personnel, systems, licensing and timetable were therefore false. Mr Okamoto made the misrepresentations deliberately. It was unnecessary to decide whether Mr Chauhan had acted deliberately.
4. Undertaking. The court did not decide whether the undertaking had been breached, since that issue was properly for contempt proceedings. However, the promise that Zen Bento would commence trading was itself a deliberate misrepresentation of intention. The wider promises to occupy through Aji Restaurants and provide finance were not shown to have been misrepresented.
5. Section 37A. Under section 37A(1) of the Landlord and Tenant Act 1954, the tenant had to show that the termination order was obtained by the misrepresentation. The false Zen Bento case was the operative cause of the order. The tenant was not required to prove that a different case based on the truth would have failed. The statutory claim therefore succeeded, with compensation to be assessed at a later quantum trial.
6. Deceit. The ordinary ingredients of deceit were not satisfied because the representations were relied upon by the court, not by the claimant. The court was not satisfied that the tort could be extended to that situation. The deceit claim was dismissed.

This was a first-instance liability judgment following an earlier decision of the Central London County Court on the landlord’s application under section 29(2) of the Landlord and Tenant Act 1954. The earlier court made an order terminating the lease. The present court did not determine quantum.