Seven-Figure Price of Epic Restaurant Lease Dispute

A total breakdown of trust and confidence between the tenants of a pizza restaurant and their landlord led to an epic High Court battle and seven-figure legal costs bills which hugely exceeded the relatively modest sums at stake.

Relations between the parties were already tense when the landlord began building works upstairs to create three new flats. During the works, there were a number of water leaks into the restaurant and matters reached a head when a fire, probably sparked by a builder’s blowtorch, left the restaurant badly damaged.

The restaurant’s doors had remained closed for more than four years since the blaze and no rent had been paid. In a case marked by intransigence on both sides, as well problems with insurance, the tenants launched proceedings against the landlord accusing him of various breaches of his obligations under the lease.

Following a hard-fought hearing which lasted more than a week, the Court handed down a judgment which ran to over 450 paragraphs. The parties had presented no less than 76 issues for determination, mainly focused on the level of damage to the restaurant, the tenants’ loss of profits and the landlord’s repair obligations.

In a decision which did not entirely satisfy any of the parties, the Court found that the landlord was obliged to carry out all necessary remedial works to the restaurant and that those works should have been completed by November 2011. The Court accepted the landlord’s undertaking that the relatively simple works required would now be executed with due diligence and within a reasonable time.

However, the tenants’ entitlement to damages was relatively modest in that they had failed to establish that the restaurant was a profitable business before the fire or that it would have become profitable had it not been forced to close. The tenants’ claim for exemplary damages was also dismissed. Further issues, including the amount of compensation payable, were left over for argument on another day.