In September, the High Court handed down summary judgment in Creative Foundation v Dreamland Leisure Ltd. The case concerned the ownership of a mural. Mr Justice Arnold's judgment has implications for future landlord and tenant disputes.
Background
On 28 September 2014 during the Folkestone Triennial, the famous graffiti artist Banksy spray-painted "Art Buff", a graffiti mural (the "Mural") on the external wall of an amusement arcade. The tenants of this building were Dreamland Leisure Limited ("Dreamland"). In November 2014, Dreamland removed the Mural and the underlying plaster from the wall and subsequently shipped it to the USA with the intention of selling it. The Mural had received one valuation which valued it as being worth as much as £470,000.
The Creative Foundation ("Creative"), the organisers of the Folkestone Triennial, took an assignment of the title to the Mural and the causes of action relating to it from the Landlord and brought a claim for its return.
The Case
Creative argued that the bricks and cement of a building form part of the freehold title belonging to the Landlord and that the Lease did not allow the tenant "to cut, maim or injure any of the walls...of the demised premises" without the consent of the Landlord. They also claimed that following its removal the Mural became a chattel, title to which was vested in the Landlord.
Dreamland's defence to the claim was firstly, to contend that they were complying with the tenant covenants contained within the Lease to "keep the whole of the demised premises...in good and substantial repair and condition" and secondly, that there was an implied term in the Lease that having removed the Mural it belonged to them as the tenant of the property.
Creative applied for summary judgment on the grounds that Dreamland's first contention had no real prospect of success and the second contention was wrong as a matter of law.
The two key issues MR Justice Arnold had to resolve were:
(1) Was Dreamland entitled to remove the Mural and make good the wall in compliance with their repairing obligation; and
(2) Having removed it from the wall, did Dreamland then own the Mural
Mr Justice Arnold accepted that the presence of graffiti on the wall of the property could engage Dreamland's repairing obligations, however the onus fell on Dreamland to establish that the removal and replacement of the underlying wall was an equally objective method of repair as other methods available to them. Mr Justice Arnold determined that Dreamland had no reasonable prospect of establishing this argument.
Mr Justice Arnold affirmed the common principle that once parts of the building are removed they revert to the status of the chattels. Therefore, in establishing the ownership of the Mural once removed, the dispute concerned what term should be implied with respect to those chattels. Mr Justice Arnold concluded that the chattel becomes the property of the Landlord. His conclusion was based on the following reasons:
- the default position is that every part of the property belongs to the Landlord and therefore the tenant must show that it is proper to imply a term to the contrary;
- Removing items, under a repairing obligation, does not mean that the ownership of such items has transferred to the tenant;
- Even if a term may be implied as to ownership of waste items or those chattels with negligible value, it does not follow that it should be implied in respect of the ownership of a chattel with substantial value; and
- The fact that the value attributable to the chattel results from the spontaneous actions of a third party does not have any bearing on the above conclusions.
Consequently, Mr Justice Arnold found that Creative was entitled to summary judgment on its claim for the return of the Mural.
Implications for Landlords and Tenants
Whilst Mr Justice Arnold pointed out that the facts in this case were "exceptional", this case nonetheless brings a degree of clarity to the rights of landlords and tenants regarding repairing obligations, the removal of parts of a building and subsequent ownership of such items.
This case should act as a warning to tenants that they must take care when complying with repairing obligations. Whilst the decision in this case favours the Landlord, it would be prudent for landlords and their advisers to consider and expressly provide for any high value chattels which will be within the demised premises.
This article was written by Rudy Capildeo, Senior Solicitor, Corporate department with assistance from Freya Marks, trainee solicitor.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.