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Smoke Club Ltd and others v Network Rail Infrastructure Limited [2021] UKUT 0078

Philip Sissons (instructed by Eversheds Sutherland) represented Network Rail in this case before the Upper Tribunal (Lands Chamber) (Chamber President, Mr Justice Fancourt and Mr Mark Higgin FRCIS) which concerned proprietary estoppel and the distinction between an annual periodic tenancy and a tenancy at will in connection with the operation of Cable Nightclub from premises formed by railway arches near London Bridge Station.  

In 2011, the premises were acquired by Network Rail for use in connection with the Thameslink project using compulsory purchase powers conferred by the Network Rail (Thameslink 2000) Order 2006.  The Tribunal heard a preliminary issue to determine the extent to which the Claimants had a compensatable interest in land for the purposes of the Compensation Code.

The premises comprised disused and semi-derelict areas formed by railway arches.  The Claimants went into occupation with the knowledge and (at least) tacit consent of Network Rail and a head tenant, Thrale Limited, in late 2008/early 20009.  The Claimants spent considerable sums in fitting out the premises and opened a nightclub which traded successfully until the premises were acquired in 2011.  From around April 2009, the Claimants paid rent on a quarterly basis to the head tenant.

The Claimants contended that representations or assurances were made on behalf of Network Rail at a meeting in November 2008 on which they had subsequently relied in incurring the very substantial fit out costs.  Accordingly, they were entitled to a lease of the premises for a term of 20 years based on proprietary estoppel/constructive trust.  Alternatively, by virtue of their occupation and payment of rent the court should infer that a periodic tenancy (with the protection of the Landlord and Tenant Act 1954) had come into existence. 

Network Rail argued that no sufficiently clear representation/binding commitments had been made and that in any case it would not have been reasonable in all the circumstances for the Claimants to have relied on any such representation.  Furthermore, since the parties had at all material times remained in negotiations for the grant of a longer lease, the proper inference to draw as to the basis of occupation was that only a tenancy at will had arisen.

The Tribunal rejected the claim based on proprietary estoppel/constructive trust.  Only an agreement in principle had been reached at the crucial meeting and further terms remained to be agreed before a final and binding agreement could come into existence.  Furthermore, the individual representing Network Rail at that meeting did not have either actual or ostensible authority to make a final and binding commitment without approval from senior management.

However, the Tribunal did accept that a periodic tenancy should be inferred.  Although at all material times the parties still hoped to conclude a long lease, the circumstances were unusual in that none of the three parties involved had any objection in principle to the creation of a periodic tenancy as an interim measure, pending the grant of the longer lease and unlike in most cases there was no concern about the creation of an interest which created security of tenure.  Accordingly, the fact the parties were still engaged in negotiations to grant a long lease did not lead to the inference (as it often would) that the parties did not intend to create some other intermediate interest pending the outcome of those negotiations.

Judgment can be viewed here.

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