Can Gyle Shopping Centre tenant M&S withhold consent to development on shared areas?

Gyle Shopping Centre General Partners Ltd as Trustee for and General Partner of Gyle Shopping Centre Limited Partnership v. Marks and Spencer Plc, 12 February 2015

Background

This is an Outer House case concerning a lease of premises at the Gyle Shopping Centre in Edinburgh under which Gyle was the landlord and Marks & Spencer, the tenant.

Gyle entered an agreement with Primark for the erection of a new store on land which included part of a car park. However, Marks & Spencer’s premises were let together with a one-third pro indiviso share of shared areas which included the car park. In two previous decisions Lord Tyre found (1) that M&S had not consented to the building of the Primark Store and that the building of the store without consent would be a breach of the lease; and (2) that M&S was not personally barred from preventing Gyle from erecting the store on the car park.

In this case Gyle sought declarator that any refusal of consent to the Primark development by M&S would amount to an unreasonable withholding of consent. The relevant clause in the lease provided that works on the shared areas could be carried out with the consent of M&S (to the effect that they accepted that any works would not render the mall or shared areas materially less adequate, commodious or convenient to them) and that that consent could not be unreasonably withheld.

Arguments

After Lord Tyre rejected an argument by M&S that the relevant clause could not be construed so as to permit works which effected a permanent alteration to the extent of shared areas, the question for the court was whether it was unreasonable for M&S to withhold consent.

Gyle offered a number of arguments why it was unreasonable for M&S to refuse consent to the development including contentions that the proposed development would benefit public access to the shopping centre, that car parking would remain in excess of the requirements and that the alterations were sufficiently remote not to have a significant impact on the servicing and usage of the M&S store. As a result of the various arguments, Gyle expressed the opinion that it would be unreasonable to conclude that the development would render the Mall or the Shared Parts materially less adequate, commodious or convenient to M&S.

M&S did not challenge those arguments or Gyle’s opinion. However it argued: (1) that the proposed “works” were too unspecific; (2) that loss of ownership rights in relation to the shared areas was sufficient of itself to render them less adequate; and (3) that as the case was ongoing at the time when the Gyle sought M&S’s consent, it could not be said that M&S acted unreasonably in withholding consent.

Decision

Those arguments were rejected by Lord Tyre who found: (1) that the proposed works were detailed in plans provided to M&S prior to its refusal of consent (and in respect of which planning permission had been granted); (2) the loss of M&S’s interest in the shared areas as tenant under the lease did not of itself render the shared areas materially less adequate (the criteria of adequacy, commodiousness and convenience being concerned with practical consequences rather than the technicalities of characterisation of M&S’s right under the lease; and (3) M&S’s entitlement to withhold consent in terms of the relevant clause had to relate to the three specified criteria. (Thus the fact that there was subsisting litigation was not a relevant matter at the time when consent was refused.)

The full judgement is available from Scottish Courts here.

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