Debenhams Retail Plc & Anor v Sun Alliance & London Assurance Company Ltd [2005] EWCA Civ 868 (20 July 2005)

Debenhams Retail Plc & Anor v Sun Alliance & London Assurance Company Ltd [2005] EWCA Civ 868 (20 July 2005)

The Court held that 'turnover' in the lease includes VAT for the purpose of calculating the additional rent, as VAT is a substitute for purchase tax, which was included in turnover at the time of the lease's negotiation. The commercial reality and continuity of economic effect between purchase tax and VAT require that VAT be included in the calculation.

Citation
[2005] EWCA Civ 868
Parties
Respondent/claimant: Debenhams Retail plc; Respondent/claimant: Debenhams Properties Ltd; Appellant/defendant: Sun Alliance and London Assurance Company Ltd
Jurisdiction
England and Wales
Judgment Date
20 July 2005
Procedural Posture
Civil Appeal / Appeal From High Court (chancery Division) to Court of Appeal
Outcome
Appeal allowed
Legal Topics
Lease Interpretation, Turnover Rent, Value Added Tax (vat), Purchase Tax, Commercial Leases
Landlord and Tenant Contract Law Lease Interpretation Turnover Rent Value Added Tax (vat) Purchase Tax Commercial Leases

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Parties

Debenhams Retail plc

Respondent/claimant

Debenhams Properties Ltd

Respondent/claimant

Sun Alliance and London Assurance Company Ltd

Appellant/defendant

Procedural Posture

Civil Appeal / Appeal From High Court (chancery Division) to Court of Appeal

Legal Issues

  1. 1 Whether 'turnover' for the purposes of calculating additional rent under the lease includes VAT.
  2. 2 Proper construction of the lease in light of changes from purchase tax to VAT.

Ratio Decidendi

The Court held that 'turnover' in the lease includes VAT for the purpose of calculating the additional rent, as VAT is a substitute for purchase tax, which was included in turnover at the time of the lease's negotiation. The commercial reality and continuity of economic effect between purchase tax and VAT require that VAT be included in the calculation.

Court Disposition

Appeal allowed

Orders

  • Declaration that VAT is to be included in turnover for the purpose of calculating the Turnover Rent under the lease dated 19 April 1971.