Landlord and tenant–Promissory estoppel–Landlord and Tenant Act 1954, Part II–Appeal on preliminary issue from decision of county court judge–Claim by tenants of motor service station and garage that, by reason of certain promises or assurances, the landlords were estopped from opposing the grant of new tenancies on the ground contained in section 30(1)(f) of the 1954 Act–Whether county court judge was correct in holding on the evidence and his findings of fact that a case of promissory estoppel was established–Evidence showed that in the course of negotiations landlords had indicated willingness in principle to grant tenants an option to renew leases for 21 years from expiry of the current leases–No concluded document granting the option was, however, agreed–No evidence that landlords gave any assurance that, in the event of negotiations for the option breaking down, they would not oppose a grant of a new tenancy under the 1954 Act–Promissory estoppel involves an unambiguous promise or assurance–In the absence of evidence of such a promise or assurance in regard to the landlords’ attitude to proceedings under the 1954 Act the judge’s decision on promissory estoppel could not be supported–Appeal allowed
This was an
appeal from a decision of Judge Wrightson in the Darlington County Court
upholding the submission of the tenants on a preliminary issue as to whether
the landlords were estopped from relying on section 30(1)(f) of the Landlord
and Tenant Act 1954 in opposing the grant of new tenancies to the tenants. The
business premises concerned consisted of the High Brough Moor Garage at
Middleton Tyas, Richmond, North Yorkshire. It was the subject of two separate
tenancies, one of which was vested in Robert Spence, the respondent to one of
the present appeals. The other tenancy was vested in Robert Spence and Henry
Edward Gray, the respondents to the other appeal. The appellants, the landlords
in respect of both tenancies, were Shell UK Ltd.
Leonard
Hoffman QC and Simon Berry (instructed by F D Duffield, Shell UK Ltd) appeared
on behalf of the appellants; Patrick Garland QC and Peter Langan (instructed by
Merritt & Co, of Yarm, Cleveland) appeared on behalf of the respondents.
Giving the
first judgment at the invitation of Megaw LJ, BRANDON LJ said: This is an
appeal from an order of His Honour Judge Wrightson made in the Darlington
County Court on December 19 1979. The order was made on the trial of a
preliminary issue in two linked proceedings between tenants and landlords under
Part II of the Landlord and Tenant Act 1954. The tenants had applied for grants
of new leases of business premises under section 24(1)(a) of the Act. The
landlords had opposed the applications on the ground contained in section
30(1)(f) of the Act. That provides that the grounds on which a landlord may
oppose an application for the grant of a new tenancy include the following:
(f) that on the termination of the current tenancy
the landlord intends to demolish or reconstruct the premises comprised in the
holding or a substantial part of those premises or to carry out substantial
work of construction on the holding or part thereof and that he could not
reasonably do so without obtaining possession of the holding.
The tenants had
alleged in their applications that the landlords were estopped from relying on
this ground of opposition. It was agreed between the parties that there should
be the trial of a preliminary issue to decide whether the landlords were so
estopped or not. That preliminary issue was decided by the judge in favour of
the tenants. The landlords now appeal.
The business
premises concerned consist of a motor service station known as High Brough Moor
Garage. It is situate at Middleton Tyas, Richmond, in North Yorkshire, at a
site near Scotch Corner. The premises are, and have at all material times been,
occupied by a partnership carrying on business under the name of the Beacon
Garage Co (which I shall call ‘Beacon’). There are presently three partners in
the business–a Mr Spence, a Mr Gray and a Mr Wright. The premises are the
subject-matter of two leases. The first lease is dated October 13 1958; the
second lease is dated May 13 1969. The original landlords under both the leases
were the National Benzole Co Ltd. Their present successors in title are Shell
UK Ltd (whom I shall call ‘Shell’). Originally there were three tenants under
the first lease, including Mr Spence. Two have died, leaving Mr Spence as the
sole surviving tenant. Originally there were four tenants under the second
lease, including Mr Spence and Mr Gray. Two
leases form part of the property of the partnership between Mr Spence, Mr Gray
and Mr Wright.
The first
lease was for a term of 21 years from March 25 1957. The second lease was for a
term of 10 years 4 months and 19 days from November 6 1967. It follows that
both leases, by their terms, were due to expire on March 25 1978. Both leases
contained a covenant by the tenants ‘Not to make or permit to be made any
external or structural alterations in or additions to the demised property
without the previous consent of the lessors.’
The second lease further contained a clause no 5 which read as follows:
‘The lessees shall at the end of the term hereby granted and at the end of the
term granted by the Lease dated October 13 1958 and made between the same
parties as are parties hereto have the option to renew both leases for a period
of 21 years on such terms and at such rents that may be required to be paid by
the lessees at the time of renewal.’
That clause is probably void for uncertainty. At any rate, both sides
were concerned that it might be and were concerned that, if it was, it should
be replaced by something which was valid. It would appear, although there is no
direct evidence on the subject, that the clause was intended to give effect to
a statement which had been made in a letter written by the National Benzole Co
Ltd to Mr Spence in June 1965. In that letter, which dealt with various
matters, paragraph 3 reads: ‘We also agree to give you an option to renew the
leases for a further 21 years on expiry of present leases.’
Against that
background, the events which are relevant to the present appeal can be regarded
as beginning in October 1974. By that date Shell had taken over from National
Benzole as landlords. Shell’s area manager was a Mr Clay and their regional
manager was a Mr Upcott. On October 17 1974 Mr Spence wrote to Mr Clay a letter
in which he asked for permission to build an extra bedroom on to the manager’s
bungalow at the service station at a cost which he said would not exceed
£1,400. The need for the permission of the landlords to such an extension arose
by reason of the covenant in the two leases which I read earlier.
On April 11
1975 Mr Upcott wrote a letter to Mr Wright following a conversation which had
taken place between the two men. The letter dealt with three subjects: first,
the question of the tenants having an option to renew the leases; secondly, the
proposed extension to the bungalow; thirdly, a meeting between the two sides
that was in contemplation.
With regard to
the option to renew, Mr Upcott wrote:
Under the
provisions of clause 5 of the lease dated May 13 1969, the lessees ‘have the
option to renew both leases for a period of 21 years on such terms and at such
rents that may be required to be paid by the lessees at the time of
renewal.’ I pointed out to you the
conflict of the drafting of this clause and indicated my opinion that in the
event of a dispute (which I have no reason to think will arise) the courts may
conclude that the option is void on the ground of uncertainty, thus depriving
your company of the alternative of renewing under the terms of the option in
addition to having its rights under the Landlord and Tenant Act 1954. I think
it would be in the interests of both of our companies if we could agree to
revise this wording or at least indicate to one another, that it is the intention
of the parties that your company would have the right to renew for a period of
21 years, on the same terms as the present lease (except for the right to
renew) and at the then market rental value.
I just pause
to observe that in describing the Beacon Garage as a company the writer was in
error. It was, as I said earlier, a partnership.
With regard to
the extension to the bungalow, Mr Upcott wrote:
We also
discussed the question of the extension of the bungalow and I indicated that,
provided the extension in my view would not in any way prejudice the operation
of the forecourt, I would be prepared to indicate approval to such an extension
if, in Shell’s opinion, it was suitably designed and of reasonable quality.
Then at the
end of the letter there was a reference to a proposed meeting to take place at
Beacon Garage on April 23 in the afternoon. That meeting did take place on the
afternoon of April 23 at Beacon Garage and there were present at it
representatives of both sides. On behalf of Shell there were present Mr Upcott,
Mr Clay, and a Mr Readman and a Mr Hunt. On behalf of Beacon there were present
Mr Spence, Mr Gray, Mr Wright, Mrs Spence and a Mr Sylvester. Various subjects
were discussed. They included, in particular, the question of the option to renew,
certain improvements to the garage which were proposed, and the proposed
extension to the manager’s bungalow, to which I have already referred.
The judge
heard oral evidence from a number of witnesses from both sides with regard to
these discussions and what was said at them. I propose to refer to his
findings, which are of the utmost importance, later in my judgment, and to
continue for the time being the story as it is revealed by the documents which
came into being at the time.
On May 1 Mr
Upcott dictated a memorandum relating to the meeting on April 23, which he sent
to a Mr Sully in the legal department of Shell. He also sent copies of the memorandum
to Mr Clay, Mr Readman and Mr Hunt, who had been present with him at the
meeting. Although the judge did not refer to this memorandum in his judgment,
it seems to me that it is of considerable significance as representing a
contemporaneous, or nearly contemporaneous, record of (at any rate) what the
senior person on one side thought had been the effect or upshot of the meeting.
I will read certain parts of it, beginning at the second paragraph:
With regard
to the renewal option in clause 5 of the lease dated May 13 1969, I now
understand that this matter was raised by Beacon Garage Company with the former
North East Region, who in turn had correspondence on the subject with Mr J D
Montgomery. Apparently his view was that there was no need to remedy the
wording and that in any case the tenants had their rights under the Landlord
and Tenant Act 1954. The tenants are not happy about that because they can
never be certain that the Act will still apply, or that Shell could not refuse
the granting of a new lease, relying upon one of the grounds in the Act. They
very much prefer a firm option to renew for 21 years, which in any event is a
longer term than could be granted by the courts under the 1954 Act. I must say
that I tend to agree with them and further, I would add that there have been
many other problems surrounding this site other than the legal ones, many of
which are still outstanding. I feel it is in the best interests of the company
to resolve all of these matters and clarify the renewal option in order that we
retain the active co-operation of the lessees.
Then a little
later in the same memorandum there comes this paragraph:
Against this
background, I should be grateful for your advice on the best way in which the
wording of clause 5 can be amended to provide for an option in favour of the
lessees to renew for a further term of 21 years, at the then open market rental
value (as at the date of renewal) and upon the same terms and conditions as the
present leases, with the exception of the right to renew, and on the basis that
in the event of a dispute over rental value, the matter shall be decided by an
arbitrator appointed by the President of the RICS.
On the same
day as Mr Upcott wrote that memorandum to Mr Sully, he wrote a letter to Mr
Wright and in the second paragraph of that letter he said:
In accordance
with our discussion, I am contacting our legal division, in order to obtain
their assistance in the matter of clarifying the wording in clause 5 of the
lease dated May 13 1969, relating to the option to renew, and I will be in
touch with you again on that matter in due course.
Then in the
next part of the letter he discussed proposed alterations to the service
station and said that, since Shell were concentrating investment on exploration
and production, they did not have much capital for alterations of that kind.
Finally, dealing with the question of the extension of the bungalow, Mr Upcott
wrote:
In the case
of the more immediate intention of extending the bungalow, I should be grateful
if you would let Mr Readman have a plan showing the details of the alterations
and any connections or alterations to the existing services, in order that I
can obtain the recommendations of my engineers and surveyors. Subject to there
being no difficulty in that regard, I shall be pleased to issue a permission in
the name of the company in accordance with the terms of your leases.
It appears,
although there is no direct evidence of this, that a written permission for the
extension was subsequently granted and that, pursuant to the permission so
given, Beacon went ahead with the plans which they had already made at an
earlier date to build the extension to the manager’s bungalow. It has further
been found by the judge that the expenditure of Beacon on that extension was
£1,300.
On July 8 Mr
Upcott wrote again to Mr Wright with regard to the option to renew. He said in
the first paragraph of that letter:
I refer to my
letter dated May 1 and in particular to the question concerning clause 5 of the
lease dated May 13 1969, relating to the option to renew. Our legal division
agree that it would be in our mutual interests to clarify the wording. They
suggest that a short deed of rectification be entered into and, if you agree, I
will ask them to contact your solicitors on the matter. Perhaps you will let me
know the name and address in due course.
On July 28 Mr
Spence wrote two separate letters to Mr Upcott in reply to that letter of July
8. I am not clear why two separate letters were written, but there is no reason
to think that it matters. In the first letter Mr Spence referred to the option
to renew and said in the second paragraph:
Referring to
clause 5 of the lease at High Brough Moor I would appreciate it if your legal
department could send me their suggested alteration of the wording to our
mutual interests. I ask this because recently our company’s solicitors have
reorganised into different sections and I will be able to peruse your
suggestions and pass them to the appropriate solicitor who is best to deal with
the matter.
Then in the
second letter, with regard to the extension to the bungalow, Mr Spence wrote:
Thank you for
your letter dated July 8 1975 granting us permission to build an additional
bedroom on to the existing bungalow, and we are pleased to inform you that the
work is in hand.
At some time
between that letter of July 28 and the later letter to which I will shortly
refer of November 13, a draft supplemental deed, that is to say, a deed
supplemental to the two leases, was prepared by Shell’s legal department and
sent, presumably, to Mr Spence as he had asked it to be. Mr Spence, presumably,
read it, although there was no evidence about this, and passed it to his
solicitors, Merritt & Co (whom I shall call ‘Merritts’). The main purpose
of the deed was to substitute for the original clause 5 in the second lease,
which both sides regarded as unsatisfactory, a new clause 5 which would be
effective to give the tenants the option to renew which they desired, that is
to say, an option to renew the two leases for 21 years from the date on which,
by their terms, they expired, namely, March 25 1978. The draft deed provided
that the renewal should be on the basis of the current market rent. It further
provided that that rent was to be agreed between the parties, if possible, or,
failing agreement, was to be determined by a surveyor. There were various
provisions in the draft deed with regard to the appointment of the surveyor and
the way in which he should act after appointment.
On November
13, Merritts, having had that draft deed passed to them by Beacon and having
examined it and digested it, wrote a letter to the legal department of Shell.
In it they said:
We have been
handed the engrossment of the deed relating to the rectification of a lease on
the Beacon Garage. We are concerned only with one thing, and that is the
capacity of the independent surveyor to whom appeal is made in default of
agreement. We consider he should act as an arbitrator and not as an expert; it
is our experience that where garage sites are concerned there are many
variables and it is proper that representations should be capable of being made
to the independent surveyor rather than simply to leave the matter to his own
expert judgment. Would you be kind enough to consider this and if you can agree,
let us know.
I pause to
observe that in that letter Merritts, acting for Beacon, were saying that, as
far as they were concerned, the draft deed was satisfactory in every respect
except the one respect which they mentioned, namely, that the surveyor, as the
deed stood, was to act as expert rather than arbitrator. That must mean that,
at that time at any rate, the proposal with regard to the rent being the
current market rent was acceptable to Merritts and to their clients.
On November 19
the legal department of Shell wrote back to Merritts and they said in the third
paragraph: ‘With regard to the penultimate paragraph of your letter, there is
of course nothing to prevent either party from making representations to the
independent surveyor whether he be acting as an arbitrator or as an expert.
However, I have no objection to the independent surveyor acting as an
arbitrator if you so prefer and I suggest that subclause (e) of the draft deed
be amended to read as follows.’ Then
there followed in the letter a proposed new subclause (e) giving effect to the
suggestion made by Merritts.
So that,
pausing again at that point, with regard to the only matter raised by Merritts
in relation to the deed, they had secured the agreement of Shell and it would
appear, or one would have thought, at any rate, at that stage there was
substantial agreement between the parties about what the deed should contain
and that it could have been finalised shortly afterwards. That, however, is not
what happened.
During January
and February 1976 there was further correspondence between the legal department
of Shell and Merritts, in the course of which various other matters were
discussed. There was a problem arising from the fact that tenants had died and
that the benefit of the two leases ought, strictly speaking, to be assigned to
the new tenants, or anyhow Shell desired them to be assigned to the new
tenants, and Shell also desired to obtain personal covenants from them. So
there was discussion about rearrangement of the parties to the leases.
On March 2
1976 Merritts wrote to the legal department of Shell: ‘We enclose herewith in
duplicate a draft which seeks to deal with first the assignment, together with
the direct covenant you request, and secondly the provisions of the draft deed sent
last October. You will note that we have further incorporated a provision
saying that this is partnership property.’
One might again have thought that that letter indicated that the other
matters to which I have just referred had been cleared up satisfactorily and
that the way was now open for the execution of the deed. Once again, that is
not what happened.
There was no
reaction from the Shell legal department and reminders were sent by Merritts
with regard to the matter on April 12, June 22 and July 14. No reaction was
forthcoming and on October 18 1976 Merritts wrote again to Shell’s legal
department. In that letter they referred to the past history of the matter so
far as the option to renew was concerned. They referred in particular to the
letter written in June 1965 by the National Benzole Co Ltd. They pointed out
that nothing had been said in that letter about increasing the rent in the
event of a renewal of the leases and they referred to the fact that their
clients had been told by Shell that Shell would honour all the commitments of
National Benzole. Finally, in the last paragraph of the letter, they wrote: ‘We
would, therefore, be grateful if you would take instructions to consider
whether or not a new lease should be offered to our clients on exactly the same
terms as those presently operating. In other words, the rent review provisions
do not come into operation at the end of the existing rent period.’
I am bound to
say that it seems to me remarkable that,
would be the current market rent, at this late stage, for the first time,
Merritts should have raised with Shell a suggestion that that was not
acceptable at all and that instead the rent should be the same as under the old
leases. One might have thought it was extremely unlikely that Shell would ever
agree to such a proposal and I find it surprising that it was ever made. It is
right to say, however, that it was no more than a proposal and the letter did
not say in terms that Beacon were not willing to have renewal upon the terms
originally suggested.
Be that as it
may, by that time, or shortly afterwards, there had been a complete change of
policy on Shell’s side. That change of policy appears from a letter dated December
29 1976 from the legal department of Shell to Merritts. It reads:
I have now
taken my clients’ instructions in connection with your letter to me of October
18 last. It is not accepted by my clients that there was any agreement on the
part of National Benzole Co Ltd to renew the leases of the above site on the
same terms as the existing leases and, in fact, the undated letter to which you
refer makes no reference to the terms on which the leases might be renewed. In
any event my clients cannot be bound by any offer made by National Benzole
Company Limited.
Then there
comes what must have been a bombshell so far as Beacon were concerned:
I understand
that my clients anticipate carrying out a major redevelopment of the site at
some time following the expiry of the existing leases, and, if my clients are
able to make any offer to renew the leases, such offer will have to incorporate
provisions entitling my clients to carry out such major redevelopment,
including the closing of the site during redevelopment, and for the payment of
a full market rent for the premises which will have to reflect my clients’
proposed capital expenditure on redevelopment. In the circumstances, the
previous offer made by my clients to substitute a new clause 5 for the existing
clause 5 of the lease dated May 13 1969 is now withdrawn and I will communicate
with you again when the time comes for my clients to serve the requisite notice
under the Landlord and Tenant Act 1954.
Merritts
replied to that letter on January 28 1977. In the fourth paragraph of their
letter they wrote:
Our clients
take a particularly serious view of the implication (if the implication as
specified above is correct) since in 1975 our clients wished certain work to be
done to improve the bungalow on the site. Your client company plainly indicated
that they had no money since it was being directed into exploration or
production, and your Mr Upcott thereupon stated: ‘I suggest you would be wise
to consider the injection of your own capital into any scheme of alterations or
improvement. . . .’ Since there had been
correspondence and discussions with this Mr Upcott at that time concerning the
way in which clause 5 was to be interpreted, our clients clearly had good
reason to believe that your company would not seek to renege on their
obligations under clause 5 and endeavour to deprive our clients of the
opportunity of extending the term of the lease for a further 21 years if our
clients were so minded. Had they thought that they would only be enjoying a
further two or three years’ lease, they would never have considered putting in
the sums of money to the improvement and extension of the bungalow that they
did.
After dealing
with other matters, they concluded with this paragraph:
We therefore
contend. First that it cannot fairly be said that that form of option contained
in clause 5 of the lease is capable of being totally disregarded since clearly
this lease would have been drafted by the landlords, ie your predecessors in
title, and must have meant something to them. We further feel that you are
estopped as a result of the conduct of a senior official of your company in
1975 from denying our clients an extension of 21 years if they are so minded in
taking one, and we would be pleased if you would confirm that this will be the
case and that the documentation further elaborating on clause 5 may now be
concluded.
I would make
two observations about that last paragraph. First, there is no reference to
what the rent would be if a new clause 5 were finalised; and secondly, in so
far as Merritts are raising an argument on estoppel, the estoppel which they
rely on is an estoppel in relation to the renewal of the leases for a further
21 years: it is not an estoppel in relation to any other matter.
That letter
marks the conclusion of what I may call the negotiations between the parties
and their solicitors and the scene now moves, not immediately but very soon,
into the Darlington County Court. On June 2 1977 Shell served notices of
termination of the two leases under section 25 of the Act of 1954. In those
notices they specified the dates of determination as the expiry dates of the
leases, namely, March 25 1978. Shell also stated in the notices, as the Act
required them to do, that it was their intention to oppose applications for the
grant of new leases on the ground specified in section 30(1)(f) of the Act of
1954, which I read earlier. When I say the Act required them to specify that
ground, I mean the Act required them to specify that ground of opposition if it
was their intention to rely on it.
On September
28 1977 the appropriate partners of Beacon issued applications for grants of
new leases under the Act of 1954. One application was made by Mr Spence in
respect of the first lease, and another application was made by Mr Spence and
Mr Gray jointly in respect of the second lease. Somewhat surprisingly, perhaps,
from a procedural point of view, those applications, besides containing the
particulars required by the Act, raised specifically the issue of estoppel in
advance. It may have been convenient to do that, since there had already been
the indication, in the notices served by Shell, that reliance would be placed
by them on section 30(1)(f).
It is, I
think, of some assistance to see how the case on estoppel was put by the
tenants in those applications. The plea of estoppel was raised in paragraph 5
of the applications and particulars of the plea were given in seven
subparagraphs. In the first two subparagraphs reference was made to the meeting
on April 23 1975 and to the persons who had been present at that meeting and to
the purpose of the meeting. Then the next five subparagraphs read in this way:
(3) At the said meeting I–that is, Mr
Spence–informed the said G G Upcott that it was the intention of my copartners
and me to continue in business at the garage for a further 21 years after the
expiration of our existing leases by the exercise of an option for renewal
(which I then believed to be valid). Mr Upcott expressed delight that this was
our intention. (4) I asked Mr Upcott whether there was any likelihood of
further development by the respondents at or adjacent to the site of the
garage. Mr Upcott informed me that there was no prospect of any further
developments being undertaken by the respondents in the foreseeable future
because all their money was going into North Sea projects. (5) I then informed
Mr Upcott that the bungalow accommodation at the site was inadequate, and in
particular that an extra bedroom was needed. Mr Upcott stated that any
improvements to the said bungalow would have to be carried out at the expense
of my copartners and me. (6) Induced by these statements, during the year 1975
my copartners and I put in hand alterations and extensions to the said bungalow
at a total cost of about £1,500. We also expended money on the toilet
accommodation at the garage and other minor improvements. (7) We incurred the
said expenditure because Mr Upcott had led us to believe that we did not merely
have another three years’ right to carry on business at the garage, but that we
would be able to stay on thereafter for a long term either under the option for
renewal above referred to or by virtue of our statutory rights under the
Landlord and Tenant Act 1954.
On June 2 1979
Shell filed their answers to the two applications and in those answers they
stated that they opposed the applications on the ground specified in section
30(1)(f). On July 23 1979 the legal department of Shell wrote a letter to
Merritts dealing in detail with the plea of estoppel raised in the
applications. I do not think it is necessary that I should read that letter.
On December 18
and 19 1979 the preliminary issue of
what happened at the meeting from Mr Spence and Mr Gray on behalf of the
tenants and from Mr Upcott and Mr Clay on behalf of Shell. His assessment of
those witnesses appears from his judgment. In one passage he said: ‘Mr Clay was
the area manager and had been employed by the respondents. He is no longer
employed by them. His evidence may be looked upon as independent and very
important. Both Mr Spence and Mr Gray have an interest in the proceedings; and
Mr Upcott has an interest as an employee of the respondents. But Mr Clay is
independent. I was impressed by the evidence that he gave.’ Then he said this: ‘I found Mr Spence an
impressive and honest witness. I accept what he said and where his evidence
conflicted with that of Mr Upcott then I prefer that of Mr Spence. I am not
implying that Mr Upcott was trying to mislead the court; it may be that his
recollection was faulty. I prefer the evidence of Mr Spence.’
I would only
pause to observe there that it would have been quite natural for a judge,
placed in the position of choosing between evidence of two witnesses about a
meeting many years ago, to have paid some attention to a near-contemporaneous
record made by one of the persons present at the meeting; but the learned judge
makes no reference to the memorandum made by Mr Upcott to which I referred
earlier.
Having formed
those opinions about witnesses, the learned judge made various findings of
fact. He said: ‘One of the answers Mr Clay gave was that ‘the whole tone of the
meeting was that the partners would remain at the garage in the foreseeable
future’.’ Further on the judge says: ‘Mr
Clay also said that Mr Upcott gave Mr Spence the assurance that they could
remain on the site if matters could be clarified. He went on to explain this by
saying that Mr Upcott had been trying to alleviate their concern and he did
nothing to cast doubt upon the future. That, in substance, was evidence of a
promise or assurance.’
Then the judge
said: ‘Mr Spence says that he told Mr Upcott about this assurance.’ That is the one given by National Benzole in
the letter in 1965. ‘Mr Upcott said, to Mr Spence, ‘we had nothing to worry
about (on obtaining a new 21-year lease); we had everything on our side; he
welcomed us because we had the capital and the know-how.’ I find as a fact that this was said and, as I
have mentioned, I accept Mr Spence’s evidence. An unqualified assurance was
given to Mr Spence and Mr Gray in connection with future security of tenure. Mr
Spence said that Mr Upcott said that Shell had no money to spend anyway because
it was to be invested in the North Sea operation. He said the tenants would
have to spend their own money on the site, in particular adding an extra
bedroom. They could spend it because they had a further 21-year lease.’
Then the judge
made further findings. He said: ‘I find that Shell’s representative did by
representation, by word or conduct, give an unambiguous assurance intended to
affect legal relations. The tenants already had established relationships and
what was said was intended to extend this into the future. The tenants acted on
these assurances; there was a very clear causal nexus.’ Then further on: ‘I am quite satisfied that
what was said did have an effect; they relied on it; they altered their
position by paying the sum of £1,300. This cannot be dismissed as minimal even
having regard to the profits which were being made at a much larger figure. In
paying this sum they acted to their detriment.’
Finally, the
judge said this: I find as a fact that the applicants have satisfied me that an
unambiguous promise or assurance was made which intended to affect legal
relations and they acted on it altering their position to their
detriment.’ Then in the next paragraph
of his judgment he stated his conclusions: ‘So, the doctrine applies’–by that
he means the doctrine of estoppel–‘and prevents the respondents from relying on
ground (f). The respondents did serve a notice saying that they intended to
demolish and reconstruct. They are prevented temporarily from doing so; the
doctrine has a temporary as opposed to a permanent effect.’
I find that
last sentence of the learned judge’s judgment a little puzzling. I interpret it
as meaning that the estoppel would last longer than the period of 21 years,
which was the length of the renewal which had been the subject-matter of the
proposed option. Even so, that would be a very long time. It would extend, not
only for a period of 14 years, which would be the maximum length of lease
capable of being granted under the 1954 Act, but a further seven years as well.
The notice of
appeal contains numerous and extensive grounds of appeal. I hope I shall not be
doing an injustice to the argument advanced by counsel for the appellants if I
say there was really only one ground of appeal and that was this, that Shell
never made any promise nor gave any assurance that they would not rely on
section 30(1)(f) of the Act of 1954, and that, without a finding that they have
made such a promise or given such an assurance, the judge’s decision that Shell
were estopped from relying on section 30(1)(f) could not be sustained. We were
referred to the 27th edition of Snell’s Principles of Equity, p 563, for
a statement of the doctrine of promissory estoppel, which I am prepared to
adopt. The rule is stated in this way:
Where by his
words or conduct one party to a transaction makes to the other an unambiguous
promise or assurance which is intended to affect the legal relationships
between them (whether contractual or otherwise), and the other party acts upon
it, altering his position to his detriment, the party making the promise or
assurance will not be permitted to act inconsistently with it.
The onus was
on the tenants to prove the facts necessary to give rise to the estoppel on
which they relied. In order to succeed, it was necessary for them to establish three
matters. The first matter was a clear and unequivocal promise or assurance by
representatives of Shell that, if the tenants applied for grants of new leases
under the Landlord and Tenant Act 1954, Shell would not oppose such grants. The
second matter was an intention on the part of Shell, in making such promise or
giving such assurance, of affecting the legal relationships between them and
the tenants. The third matter was an alteration by the tenants of their
position to their detriment in reliance upon such promise or assurance. As I
have indicated, the main ground of appeal relates to the question whether the
tenants established the first matter. If the appellants are right in their
assertion that the tenants did not establish the first matter, then the second
and third matters do not arise.
The first
point to observe is that the judge did not make any finding that Shell had made
any promise or given any assurance, of the kind which I have just mentioned, at
the meeting on April 23 1975. Indeed, the judge did not make any finding that
the legal rights of the tenants or landlords under the Act of 1954 were ever
discussed at that meeting at all. This seems curious, for there was evidence
from Shell’s side that the Act was mentioned, but that was denied by the
witnesses for Beacon. However, that is the position: the judge made no finding
on the matter at all.
Since the
judge made no express finding of any promise or assurance of the kind to which
I have referred, it is necessary for the tenants to say that such a finding is,
nevertheless, necessarily implied in the more general findings which the
learned judge did make. In this connection, counsel for Beacon submitted that
the judge had found that Shell gave two separate assurances; first, an
assurance that the tenants would be given a valid option to renew the leases
for 21 years; and second, an assurance that they would, in any event, have
security of tenure. Counsel further submitted that the second assurance
included, by necessary implication, an assurance that Shell would not oppose
the grant of new leases under the Landlord and Tenant Act 1954, anyhow on the
ground specified in section 30(1)(f).
In my opinion,
the judge’s findings do not, on a proper interpretation of his judgment, amount
to findings of two separate assurances of this kind. As I read his judgment, he
found a single assurance only, namely, the assurance that the tenants would
have security of tenure, because they would have an option to renew the leases
for a further 21 years. This finding is certainly in accordance with the
evidence, both oral (which was read to us, although I have not found it
necessary to refer to it) and documentary. That evidence seems to me to show
quite clearly that Shell’s attitude was that they were willing in principle to
give the tenants an option to renew the two leases for 21 years from the dates
of expiry of those leases at current market rents. I say that they were willing
in principle because it was obviously contemplated that some formal document
granting the option would have to be negotiated and agreed. There was no
evidence that Shell ever gave any assurance as to what they would or would not
do in relation to applications by the tenants for new leases under the Act of
1954 in the event of negotiations with regard to the terms of the option to
renew not reaching a successful conclusion. That possibility was not, on the
evidence, even discussed and since that possibility was not discussed, it
follows inevitably that no assurance as to how Shell would behave if it
materialised was, or could have been, given.
The
conclusions which I have reached, for the reasons which I have given, are
these. First, the judge did not find that Shell, either expressly or by
necessary implication, gave the tenants any assurance that, if the tenants
applied for grants of new leases under the Act of 1954, Shell would not oppose
them on the ground specified in section 30(1)(f). Secondly, there was in any
case no evidence on which the judge could have made any such finding. Thirdly,
in the absence of such a finding, the judge’s decision that Shell were estopped
from relying on section 30(1)(f) cannot be supported.
The result of
those conclusions is that the appeal must be allowed and the order of the
learned judge dated December 19 1979 must be set aside.
Agreeing
OLIVER LJ said: Whatever expression may be used to describe the equity upon
which the tenants seek to rely in the instant case, the case as argued before
the learned county court judge and as argued before this court, was and is
essentially one of promissory estoppel and nothing but that. That, by
definition, involves the making by the party claimed to be estopped–the
appellant landlords in the instant case–of some unambiguous promise or
assurance which is intended to affect the legal relations between them, and in
reliance upon which the other party has acted. Of course, there may be
circumstances in which such a promise or assurance may be implied rather than
express. But, whether express or implied, it must be unambiguous and it must be
one which is intended to affect the legal relations between the parties.
In the instant
case, it seems to me quite impossible to deduce, either from the evidence or
from the facts as found by the learned county court judge, any such unambiguous
assurance regarding the grant of the proposed option to renew for 21 years, for
the one thing that is perfectly clear on the evidence of the documents
themselves is that, both before and after the critical meeting at which the
assurance relied upon is said to have been given, the parties were proceeding
on the basis that the critical and cardinal terms of the proposed option had to
be negotiated and agreed between them: in other words, that there was not only
a consensual acceptance that nobody was bound until the negotiations terminated
in a binding contract, but that there was also inherent in their relationship
that very uncertainty and ambiguity which is fatal to the establishment of a
promissory estoppel.
Indeed, it
seems clear that the development, the expenditure on which is said to have been
undertaken on the faith of the assurance, was embarked upon at the very time
when the initial draft containing the draft terms to be negotiated was about to
be submitted. It also seems clear, from evidence of an independent witness whom
the learned judge considered reliable, Mr Clay–his findings on this were
somewhat equivocal, but it seems clear–that the option was being negotiated
again t the background that the tenants were not content to rely upon their
Landlord and Tenant Act rights, for this very reason, that, apart from a
concluded option, it would have been open to the landlords to oppose the grant
of a new tenancy on one or more of the grounds provided by section 30 of the
Act. It seems to me impossible to deduce from this, in effect, a guarantee that
the landlords would not change their then existing intentions in regard to the
premises if the negotiations failed to achieve a concluded agreement.
What brought
the negotiations to an end was a remarkably ill-advised attempt by the tenants
to resile from the fundamental basis upon which those negotiations had been
opened: namely, that any renewal would be at current market rental. While it
may be said with some justice, perhaps, that the landlords were not slow to
avail themselves of this as an escape from any moral commitment which they
might be thought to have assumed by their willingness to negotiate, it cannot,
in my judgment, be claimed that they were not entitled to do so. What is
claimed is that the assurances which were given regarding the landlords’
willingness to negotiate an option involved, by necessary implication, a
promise that, if the negotiations did not, for any reason, reach finality, they
would not oppose a grant of a new tenancy under the Landlord and Tenant Act
1954.
In my
judgment, no such clear or unambiguous assurance can be derived from the
evidence or from the facts found by the learned judge, and I am unable to spell
out any such promise, the more so because it is apparent that one of the terms
of the draft option which was being negotiated, and one to which no objection
was taken by the tenants, was that the renewed lease should be on the same
terms, except as to rent, as the original lease of October 13 1958, which
included a break clause operating at the third, fourth, fifth, seventh, tenth,
thirteenth, sixteenth and nineteenth years of the term.
In the light
of this it really is a little difficult, quite apart from any other
considerations, for the tenants to contend, as they did successfully before the
learned county court judge, that they expended moneys on the bungalow extension
in reliance upon some firm assurance that, in any event, they would have a
secured term for a further 21 years.
I agree that
the appeal must be allowed.
Also agreeing
MEGAW LJ said: I have considerable sympathy for the tenants. I have no doubt
that, when they spent £1,300 on the extension of the bungalow, they thought
that they would have the benefit of that expenditure for a considerable time in
the future. On the judge’s finding, as I understand it, that belief was a cause
of their spending the money. As it is, they may have the benefit of the
expenditure of that money only for a few years. I say ‘may’ because there are
clearly various possibilities in the future which we cannot foretell and on
which we should not speculate.
But however
sympathetic one may feel, sympathy is not enough to override the principle of
law which we have to apply. That principle has been unambiguously enunciated in
the words used by Lord Denning MR in Woodhouse AC Israel Cocoa Ltd SA v Nigerian
Produce Marketing Co Ltd [1971] 2 QB, 23. The Master of the Rolls’ relevant
observations are at p 60 C-E, and the principle is also laid down by Cairns LJ
at pp 65-H to 66-D in the same report.
Counsel for
the respondents, in his attractively presented and ingenious submissions,
sought to uphold the learned county court judge’s decision. He invited us to
say that, on the judge’s findings of fact, as expressed in his judgment, as to
what was said on behalf of the appellants at the meeting of April 23 1975,
viewed against the background of that meeting, it should be held that an
unambiguous promise of security of tenure was given. By security of tenure was
meant, it is said, that if for any reason the terms of a further 21-year lease
or the terms of an option were not agreed between the parties, then, in any
proceedings by the respondent tenants claiming the renewal of the leases under
Part II of the Landlord and Tenant Act 1954, the appellants (the landlords)
would not rely upon any rights given to them, at any rate, under subparagraph
(f) of section 30, subsection (1) of the Act. That, it is said for the
respondents, is what could fairly and properly have been understood by the
respondents’ representatives at the end of the meeting as being the promise
which had been made to them.
In whatever
precise form of words the substance of that suggested promise might be framed,
I fear that I find it impossible to accept that, on the evidence, or the
judge’s findings thereon, a clear and unambiguous promise to the effect of that
substance, however one might word it, was given or would have been understood
to have been given.
I agree that
the appeal falls to be allowed.
The appeal
was allowed with costs.
