HOW BIG IS A SUPERMARKET?

It is not often that an argument about the size of a supermarket reaches the courts and makes it into an official law report, as in the case of Kilmartin SCI (Hulton House) Limited v Safeway Stores [2006].

Background

• Kilmartin was carrying out a major refurbishment of a building in Fleet Street, London. As part of that scheme, it was creating retail space on the basement and ground floors.
• Safeway agreed to take that space on a lease for 25 years at a premium of £1m, and at an initial rent of £600,000 per annum. Following acquisition of Safeway by Morrisons Plc, a reassessment of Safeway’s needs was undertaken and it was decided that Safeway would rather not proceed with the acquisition.
• However, Safeway was bound to proceed, unless the net internal area (NIA) as constructed was less than 1852.7m2 (being a variation of 3% from the anticipated NIA of 1910m2). In that case Safeway was entitled to terminate the agreement.
• Following practical completion, Safeway’s solicitors served a termination notice on the ground that the NIA was less than the minimum area.

Cracking the code

The agreement provided that measurement was to be in accordance with the 5th Edition of the RICS Code of Measuring Practice (“the Code”). There was no dispute between the experts as to the actual measurement of dimensions, but there were five disputed areas of the property, the question for determination being whether they fell within NIA as defined by the Code.

Under the Code, NIA is the usable area within a building measured to the internal face of the perimeter walls at each floor level. The words “usable” and “floor” within that definition were at the heart of the dispute. Mr Justice Warren was hearing the case in the Chancery Division. He made it clear that he did not consider that it was his function to examine the Code and its construction as though it were a tightly drawn family settlement or commercial document. As both experts agreed, the interpretation of the Code can often give rise to matters of pure judgment in deciding whether a particular area falls within NIA or not.