Over Taylor Biggs

This enables the tenant to seek a new lease when the old lease expires and to ask for the Court’s help if the terms of the new tenancy (including the amount of rent) cannot be agreed with the landlord.  In some instances the landlord can challenge the tenant’s right to a new lease.  This right to challenge has recently been considered by the High Court, where a landlord was able to defeat the business objectives of a competitor.

The tenant was a joint venture company operated by Total and ConocoPhillips (CP).  The most significant of four leases related to the Immingham oil jetty that protrudes 1,000m into the Humber Estuary and comprises seven berths.  Three berths are deep water and two suitable for loading vessels of up to 290,000 dw tonnes.  The remaining four are suitable for barges and coasters.  Total uses the jetty for all imports of crude oil and CP uses 30% of the capacity for importation and export of finished products.  At the time of the hearing, the jetty was being operated at, or very slightly below, full capacity.

When the tenant sought to renew its lease, Associated British Ports (ABP) opposed renewal. It claimed that it wanted to occupy and manage the Immingham Oil Terminal itself.  This would mean that the tenant would need to enter into a commercial arrangement with ABP to continue to use the Terminal to supply its refineries.  If the leases were renewed, ABP proposed the combined annual rent should be increased from £4.2m to £23.7m. 

On considering the facts, the High Court decided that ABP did intend to re-occupy the Terminal.  The commercial reality was that the tenant was unlikely to remove all the works it had installed and likely to deal with ABP in order to continue to use and operate the Terminal and its facilities.

In other Court proceedings, the tenant alleged that ABP was abusing its dominant position and had acted anti-competitively.  This claim was struck out by the High Court. The tenant has appealed that decision.  The tenant also applied for a Harbour Revision Order to constitute the tenant as the Harbour Authority for the Terminal in place of ABP but this application has been rejected.  The tenant has applied for a judicial review of that decision. The hearing of that claim is understood likely to be in October 2011.

The rent under the expired lease was calculated in 1970 by reference to the capital cost of investment in the Terminal, together with a management fee.  There was no separate charge for docking or cargos.  The rent had only been reviewed once in its 40 year term.  ABP estimated that the advantage to the tenant was worth £40m a year.  ABP also argued that renewal would not use the port’s resources to best advantage.  It wanted to open up the Terminal to a wider range of customers.

The tenant argued, amongst other things, that to remove its equipment and plant and seek alternative facilities on the Humber would require the refineries to be shut down for at least two years. In Total’s case would mean 1,000 redundancies and £500m to be spent on de-commissioning. 

There was a preliminary hearing to determine whether ABP were genuine in its intention to occupy the Terminal for the purposes of its business and, if so, when, and in what circumstances, would ABP intend to occupy. 

The Court accepted ABP’s evidence that its priority was to continue to supply the refineries.  ABP regarded the tenant as an important customer but wanted to put its relationship on a similar commercial footing to other oil terminals. 

The Court noted that ABP was under a statutory duty to provide port facilities at its harbours and therefore entitled to charge ship and cargo dues.  The Court assumed that ABP would want to negotiate a commercial relationship with the tenant, under which the tenant would continue to use the jetty and supply its refineries. 

Noting that Total’s use was more dependent than CP’s, Total’s choice would be to enter into a commercial arrangement at Immingham or move its business elsewhere.  That would be determined by economic considerations.  It was unlikely that Total would remove its equipment in spite, nor close down its refinery because it was annoyed about ABP’s behaviour. 

The commerciality was that the tenant was unlikely to remove equipment and that it would continue to use and operate the Terminal.  The Court believed that the tenant would try to reach an acceptable deal before taking steps that would radically reduce UK refining capacity.

This case does not introduce any new principles of law but it is interesting because it demonstrates that by purchasing a freehold (and owning for five years), a competitor can use the Landlord & Tenant Act 1954 to drive out a commercial rival.

Humber Oil Terminals Trustee Limited v Associated British Ports 2011 (High Court)