Landlords will be anxious to know that the European Medicines Agency (EMA) has permission to appeal the High Court’s decision in respect of its case against Canary Wharf (BP4) T1 Limited (CW).

The Dispute

CW (the landlord) and EMA (the tenant) entered into a 25 year lease in 2014.  However, 3 years later, EMA, an agency of the European Union, wrote to CW stating that it would treat the lease as at an end if the UK leaves the EU.

EMA were attempting to rely on the legal doctrine of “frustration”, in general terms, where a contract is discharged as something occurs rendering the contract commercially impossible to fulfil.  An historic example of frustration was the cancellation of an event contract due to the postponement of King Edward VII’s coronation as a result of his ill-health.

The Legal Proceedings

CW commenced legal proceedings against CW asking the Court for a declaration that Brexit would not frustrate the lease.  EMA defended the proceedings arguing that Brexit was a “supervening illegality” and it would be unlawful for it to continue to occupy the premises and comply with its obligations including paying rent after Brexit. EMA also argued the parties’ “common purpose” would be frustrated by Brexit.

The High Court (Smith J) disagreed concluding that Brexit would not frustrate the lease. Frustration therefore presently remains to be applied in a limited category of cases and landlords breathe a sigh of relief.

However, EMA have now been given permission to appeal the decision and an appeal has been lodged at Court. The outcome will be eagerly awaited as a successful appeal could have a significant impact on not only leases but a wide category of commercial contracts.

Lessons to Learn

In the meantime, parties should take care to carefully consider the implications of Brexit when entering into commercial contracts. If you would like advice in relation to these aspects, please contact a member of Freeman Fisher’s Commercial or Dispute Resolution teams at enquiries@freemanfisher.com or 0161 835 9090.

Case Reference: Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] EWHC 921 (Ch) (1 March 2019) (Smith J).