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Frustrated?

Whether you itch to hear the latest on Brexit or rush to switch off the news, one has to wonder what differences it will make to our lives.  There has been much written, for instance, about potential changes to the property market but one question has arisen at Canary Wharf which may affect the law.  Lawyers up and down the land await the outcome of the court proceedings.

Canary Wharf granted a 25 year lease commencing in 2014 to the European Medicines Agency of 10 floors of a building in Canary Wharf.  The demised premises were to be used as the Agency’s European headquarters.  Due to Brexit, the Agency is to move its headquarters to Amsterdam.  In consequence, it is claiming that the whole reason behind taking the lease has been undermined, the lease is legally ‘frustrated’ and is of no effect.  Canary Wharf has issued proceedings for unpaid rent, rates and service charges allegedly reaching a sum in excess of £550M.  The landlords claim that Britain withdrawing from the EU was always on the cards and was foreseeable.  The question of frustration does not arise.  The case awaits hearing.

Interestingly, it has never been finally decided whether or not the doctrine of ‘frustration’ – recognized in other contractual relationships – extends to leases.  The point is open for the Supreme Court to decide although it has always been recognized that if the answer should be ‘yes’, the concept will be used rarely.  Lord Hailsham said in National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8 “The point, though one of principle, is a narrow one.  It is the difference immortalised in H.M.S. Pinafore between “never” and “hardly ever””.  He commented that the judges in previous cases “clearly conceded that, though they thought the doctrine applicable in principle to leases the cases in which it could properly be applied must be extremely rare.”

Will the judges in this case sidestep the question of frustration and do as others have done before them and say even if the doctrine of frustration applies to leases, the facts of this case do not amount to an example?  Watch this space.

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