McDonald's wins dispute with landlord over renewal of premises

The High Court has ruled against a landlord that devised a development scheme to serve as grounds to regain possession of business premises occupied by McDonald’s. The case, McDonald’s Restaurants Ltd v Shirayama Shokusan Company Ltd, is a rare decision on compensation for misrepresentation under the Landlord and Tenant Act 1954. It also addresses breaches of court undertakings and the common law 'tort of deceit'.

The dispute involved the landlord's intent to oppose the renewal of McDonald's lease, citing plans to occupy the property for its own business—a ground (g) opposition. This ground allows landlords to deny a new tenancy if they intend to run a business on the premises after the current lease ends.

McDonald's had operated from the ground floor and basement of the building until 2019 under a lease protected by the 1954 Act. The landlord issued a notice under section 25 of the Act, stating its intention to open a Japanese restaurant, Zen Bento, once McDonald's vacated. In the preliminary trial, the court accepted that the landlord had a "firm and settled intention" to establish Zen Bento and deemed the plan achievable within a reasonable timeframe.

However, Zen Bento never materialised, leading McDonald's to sue for deceit and damages, claiming the termination order was based on misrepresentation. The court found the landlord had deliberately misled the court through evidence presented by its senior representative. Key emails revealed uncertainty about the business plans and the sudden departure of essential personnel connected to Zen Bento. Consequently, the court ruled that the termination order was obtained by misrepresentation, and the landlord was ordered to pay compensation to McDonald's.

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