Competition law and leases

In general, Part II of England’s Landlord and Tenant Act 1954 gives business tenants the right to a new lease at a market rent when their current lease expires. Landlords have a right to oppose the grant of a new tenancy on certain grounds set out in section 34 of the Act. Humber Oil Terminals Trustee Ltd v Associated British Ports ([2012] EWCA Civ 36) concerned the possible role of competition law in the lease renewals process. Associated British Ports (‘ABP’) owned a port on the River Humber. Humber Oil Terminals Trustee (‘HOTT) was the tenant of land on which it had an oil terminal serving two inland refineries. It was a joint venture created by the owners of each of the two refineries. ABP served a notice under section 25 of the Landlord and Tenant Act 1954 indicating its intention to oppose the grant of a new tenancy on the ground that it intended to use the property for the purposes of its own business. In that process, it claimed that its intention was to take over the running of the terminal. It would then use that terminal to service the needs of the two refineries and of other parties.

HOTT claimed that ABP’s conduct amounted in several respects to a breach of European competition law. For the purposes of the argument, ABP accepted that it occupied a dominant position in the relevant market and that European competition law was engaged. The alleged abuses of the dominant position arose from the rental figure proposed by ABP in the course of failed lease renewal negotiations and from HOTT”s claim that  the terms suggested by ABP for access to the terminal’s facilities (if it recovered possession as envisaged) were an abuse of its dominant position.

The competition law claims had been struck out at first instance. This was for reasons specific to the proceedings and not as a matter of principle. This appeal sought to preserve HOTT’s ability to rely on its competition law objections in the lease renewal proceedings. The appeal failed. The English Court of Appeal emphasised that it was not ruling out that competition law might, in general, have a role to play in the lease renewal proceedings. In essence, the appeal failed because the Court of Appeal was of the view that the fact that a landlord might have made an ‘abusive’ offer  made in lease renewal negotiations (a proposed rent well above market value reflecting its control of an essential facility) did not prevent it from opposing the grant of a new lease. In any event, if the rental figure could not be agreed then the court would be asked to fix the rent. The statutory valuation formula would strip out any ‘ransom’ gain attributable to the landlord’s dominant position.

Etherton LJ said that the problem with HOTT’s particulars of claim was that they failed to distinguish between:

1. allegations that ABP lacked the necessary intent to use the property for its own business;

2. allegations that the terms of access to the terminal would be likely to be abusive which could be dealt with in separate competition proceedings; and

3. other competition law reasons for saying that refusal to grant new leases would be abusive. (para. 39).

Allegations in categories 1 and 3 would be relevant to lease renewal proceedings. It had already been decided in another hearing that ABP had the necessary intent. The particulars of claim did not spell out anything that would fall within category 3. Allegations in category 2 would not be relevant (it might be otherwise if, for some reason, a remedy in separate competition proceedings might be inadequate).

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