Court of Appeal upholds summary judgment for rent accrued during Covid closures of commercial premises, rejecting arguments based on implied terms and “failure of basis”

The Court of Appeal has dismissed appeals against the grant of summary judgment to commercial landlords for payment of accrued rent in two cases where the relevant premises (in each case operated as cinemas) had to be closed for extended periods due to Covid restrictions: Bank of New York Mellon (International) Ltd v Cine-UK Ltd; London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2022] EWCA Civ 1021.

Although set in a non-financial context, this decision will be of interest to financial institutions considering the ongoing impact of the pandemic. The decision serves as a reminder of the high threshold for implying contractual terms, namely where it is necessary to give business efficacy or so obvious as to go without saying. As the court commented, the scope for implication is particularly limited where the contracts in question are detailed documents prepared by lawyers.

It also illustrates that a claim based on unjust enrichment (such as here for total failure of consideration, or “failure of basis”) will not be available where this is inconsistent with the express terms of the contract.

The court rejected an argument that, as the restrictive legislation introduced to address the Covid pandemic was “unprecedented”, it was appropriate for the court to consider applying the law in a fresh light. Even if the legislation were unprecedented (which the court said was debateable) that was no reason to disregard or disapply fundamental principles of the law of contract or to extend the law of unjust enrichment beyond its proper bounds.

For a more detailed analysis of this decision, please see our Litigation Notes blog post.