Landlord and Tenant Act 1954 — Tenants’ entitlement to compensation under section 37 when court is precluded from granting a new tenancy — Original basis of compensation the rateable value or twice the rateable value as the case might be — Amendment to basis of compensation made by Local Government, Planning and Land Act 1980, section 193 and Schedule 33, para 4, implemented by Landlord and Tenant Act 1954 (Appropriate Multiplier) Regulations 1981 — New basis the rateable value multiplied by 2 1/4 or, as the case may be, twice the rateable value multiplied by 2 1/4 — Question as to whether in the circumstances of the present case the old or the new basis applied — The landlords had served a section 25 notice on December 17 1980, the regulations came into operation on March 25 1981 and the tenants quitted on June 24 1981 — Landlords contended that the new basis did not apply in cases where the landlords’ section 25 notice had been served before March 25 1981, the date when the regulations came into force — Presumption against retrospective legislation invoked — Held, rejecting various arguments put forward on behalf of landlords, that the new enlarged basis of compensation applied as from March 25 1981 to every tenant who quits thereafter, provided that the qualifying conditions in section 37 of the 1954 Act are satisfied — Compensation in present case was equal to the amount of the rateable value multiplied by 2 1/4
This was an
originating summons in which the plaintiffs, International Military Services
Ltd, tenants of office accommodation at St Andrew’s House, 40 Broadway, London
SW1, sought, in addition to other relief, a determination of their entitlement
to compensation under section 37 of the Landlord and Tenant Act 1954, as
amended by the Local Government, Planning and Land Act 1980, on the basis of
the rateable value of the premises, £45,180, multiplied by 2 1/4, ie in the sum
of £101,655. The multiplier of 2 1/4 was prescribed by the Landlord and Tenant
Act 1954 (Appropriate Multiplier) Regulations 1981 (SI 1981 No 69). The
landlords, defendants to the summons, were Capital & Counties PLC.
J Cherryman
(instructed by Clifford-Turner) appeared on behalf of the plaintiffs; J S
Colyer QC and M R King (instructed by Debenham & Co) represented the
defendants.
Giving
judgment, SLADE J said: In this originating summons the plaintiffs are
International Military Services Ltd. The defendants are Capital & Counties
PLC, formerly called Capital & Counties Property Co Ltd. They were also
formerly the plaintiffs’ landlords in respect of certain premises in London.
The Landlord
and Tenant Act 1954 (‘the Act of 1954′) in certain circumstances gives a tenant
the right to receive compensation on leaving the premises. By a notice of
December 17 1980 served pursuant to section 25 of the Act of 1954 the
defendants gave notice terminating the plaintiffs’ tenancy of the premises on
June 24 1981. It is common ground that the plaintiffs quit the premises on June
24 1981 and then became entitled to compensation. Effectively, the principal
issue in the case now is whether such compensation falls to be assessed in
accordance with a statutory scale of compensation which was in force on June 24
1981, as the plaintiffs assert, or in accordance with a scale which was in force
on December 17 1980, as the defendants assert.
By a lease of
May 13 1976 (‘the 1976 lease’), made between the defendants of the one part and
Four Millbank Nominees Ltd of the other part, certain office premises
comprising the fourth floor at St Andrew’s House, 40 Broadway, London SW1, were
demised by the defendants to Four Millbank Nominees Ltd for a term from
February 23 1976 to March 25 1978 at a yearly rent of £32,000. By a deed of
variation and supplemental lease (‘the 1977 deed’) dated April 18 1977, and
made between the same parties, the 1976 lease was varied so that it should
thenceforth be construed as granting a term from February 26 1976 to June 24
1981, instead of a term expiring on March 25 1978. The defendants thereby
demised office premises comprising the second-floor annexe and the third floor
at St Andrew’s House to Four Millbank Nominees Ltd from February 7 1977 for the
residue of the term of the 1976 lease as varied by the 1977 deed, at the
additional yearly rent of £34,000. By an assignment dated July 19 1978, Four
Millbank Nominees Ltd assigned the second, third and fourth floor premises to
the plaintiffs for all the residue of the term created by the 1976 lease and
1977 deed. I will call these premises collectively ‘the premises’.
At all
material times the rateable value of the premises has been £45,180. It is
common ground that the tenancy is one to which Part II of the Act of 1954
applies.
At this point
it will be convenient to summarise some of the history of the legislation
relevant to the present case. Section 24(1) of the Act of 1954, as amended,
provides:
A tenancy to
which this Part of this Act applies shall not come to an end unless terminated
in accordance with the provisions of this Part of this Act;
It further
confers on the tenant under such tenancy the right, subject to certain
conditions, to apply to the court for a new tenancy (a) if the landlord has
given notice under section 25 to terminate the tenancy, or (b) if the tenant
has made a request for a new tenancy in accordance with section 26. Section
25(1) confers on the landlord the right to terminate a tenancy to which Part II
of the Act applies ‘by a notice given to the tenant in the prescribed form
specifying the date at which the tenancy is to come to an end’, though this
subsection has effect subject to later provisions in the Act. Section 25(2)
provides:
Subject to
the provisions of the next following subsection, a notice under this section
shall not have effect unless it is given not more than 12 nor less than six months
before the date of termination specified therein.
Section 25(5)
provides:
A notice
under this section shall not have effect unless it requires the tenant, within
two months after the giving of the notice, to notify the landlord in writing
whether or not, at the date of termination, the tenant will be willing to give
up possession of the property comprised in the tenancy.
Section 25(6)
requires a landlord’s notice under the section to state whether he would oppose
an application to the court under Part II of the Act for the grant of a new
tenancy and, if so, to state on which grounds mentioned in section 30 he would
do so. Section 29(1) provides:
Subject to
the provisions of this Act, on an application under subsection (1) of section
24 of this Act for a new tenancy the court shall make an order for the grant of
a tenancy comprising such property, at such rent and on such other terms, as
are hereinafter provided.
Section 29(2)
provides:
Where such an
application is made in consequence of a notice given by the landlord under
section 25 of this Act, it shall not be entertained unless the tenant has duly
notified the landlord that he will not be willing at the date of termination to
give up possession of the property comprised in the tenancy.
Subsection (3)
provides:
No
application under subsection (1) of section 24 of this Act shall be entertained
unless it is made not less than two nor more than four months after the giving
of the landlord’s notice under section 25 of this Act or, as the case may be,
after the making of the tenant’s request for a new tenancy.
Section 30(1)
begins with the following words:
The grounds
on which a landlord may oppose an application under subsection (1) of section
24 of this Act are such of the following grounds as may be stated in the
landlord’s notice under section 25 of this Act or, as the case may be, under
subsection (6) of section 26 thereof, that is to say:
There then
follow seven subparagraphs, of which I need read only subparagraph (g):
subject as
hereinafter provided, that on the termination of the current tenancy the
landlord intends to occupy the holding for the purposes, or partly for the
purposes, of a business to be carried on by him therein, or as his residence.
Section 31(1)
provides:
If the
landlord opposes an application under subsection (1) of section 24 of this Act
on grounds on which he is entitled to oppose it in accordance with the last
foregoing section and establishes any of those grounds to the satisfaction of
the court, the court shall not make an order for the grant of a new tenancy.
Section 37(1),
in its amended form, provides:
Where on the
making of an application under section 24 of this Act the court is precluded
(whether by subsection (1) or subsection (2) of section 31 of this Act) from
making an order for the grant of a new tenancy by reason of any of the grounds
specified in paragraphs (e), (f) and (g) of subsection (1) of section 30 of
this Act and not of any grounds specified in any other paragraph of that
subsection, or where no other ground is specified in the landlord’s notice
under section 25 of this Act or, as the case may be, under section 26(6)
thereof, than those specified in the said paragraphs (e), (f) and (g), and either
no application under the said section 24 is made or such an application is
withdrawn, then, subject to the provisions of this Act, the tenant shall be
entitled on quitting the holding to recover from the landlord by way of
compensation an amount determined in accordance with the following provisions
of this section.
The words in
this subsection, reading from ‘or where . . .’ to ‘. . . is withdrawn’ were
inserted in it by section 11 of the Law of Property Act 1969 as from January 1
1970. I pause to comment that no reliance has been placed by either side in the
present case on the phrase ‘subject to the provisions of this Act’. These words
appear to refer to section 38 of and paragraph 5 of the Ninth Schedule to the
Act of 1954, and possibly to other provisions. Section 37(2), up to March 25
1981, when it was amended in circumstances which I will describe later, read:
The said
amount shall be as follows, that is to say, —
(a) where the conditions specified in the next
following subsection are satisfied it shall be twice the rateable value of the
holding.
(b) in any other case it shall be the rateable
value of the holding.
It is common
ground that this is a paragraph (b) case, because the conditions of section
37(3) are not satisfied.
Section
37(5)(a), so far as material, provides:
For the
purposes of subsection (2) of this section the rateable value of the holding
shall be determined as follows:
(a) where in the valuation list in force at the
date on which the landlord’s notice under section 25 . . . is given a value is
then shown as the annual value (as hereinafter defined) of the holding, the
rateable value of the holding shall be taken to be that value;
On November 13
1980 the Local Government, Planning and Land Act 1980 (which I will call ‘the
Act of 1980’) received the Royal Assent. Part V amended the General Rate Act
1967 so as to abolish the statutory requirement for quinquennial revisions of
rateable values. The legislature considered that this would or might
necessitate certain changes to the provisions governing the appropriate
multiplier for the purpose of section 37(2)(a) and (b) of the Act of 1954.
Section 193 provided that the enactments specified in Schedule 33 to the Act
should have effect subject to the amendments specified in that Schedule. Paragraph
4 of Schedule 33, which was headed ‘Landlord and Tenant Act 1954’, read as
follows:
(1) In subsection (2) of section 37 of the
Landlord and Tenant Act 1954 (compensation where order for new tenancy
precluded on certain grounds) the words ‘the product of the appropriate
multiplier and’ shall be inserted after the word ‘be’ in paragraphs (a) and
(b).
(2) The following subsections shall be added
after subsection (7) of that section:
‘(8) In
subsection (2) of this section ‘the appropriate multiplier’ means such
multiplier as the Secretary of State may by order made by statutory instrument
prescribe.
(9) A statutory instrument containing an order
under subsection (8) of this section shall be subject to annulment in pursuance
of a resolution of either House of Parliament.’
In the absence
of any further provision, the provisions of paragraph 4 of Schedule 33 would
presumably have come into operation as soon as the Act of 1980 received the
Royal Assent. However, subsection (5) of section 47, which was the last of the
sections in Part V of the Act of 1980 dealing with rates, made it clear that
such was not the intention. Section 47(5) provided:
The
provisions of Schedule 33 to this Act which give the Secretary of State power
by order to prescribe multipliers and which are specified in subsection (6)(a),
(b) and (c) below shall not have effect until he exercises the power conferred
by them.
Section 47(6),
so far as it is material, provided:
The
provisions of Schedule 33 mentioned in subsection (5) above are — (a) paragraph
4; . . .
The wording of
section 47(5) is not, perhaps, entirely happy. First, the use of the words
‘which give the Secretary of State power by order to prescribe multipliers’ are
a little puzzling, since the provisions of Schedule 33 specified in subsection
(6) do much more than give the Secretary of State ‘power by order to prescribe
multipliers’. Secondly, it is not entirely clear what meaning is to be attached
to the phrase ‘until he exercises the power conferred by
State makes an order prescribing multipliers but declares by his order that it
is not to come into operation until a later date. In my judgment, however — and
I do not think there is really any substantial dispute about this — the only
proper sense that can be given to section 47(5) is to construe it as meaning
that the amendments to the various specified statutory provisions relating to
multipliers, including section 37(2) of the Act of 1954, which are to be
effected by Schedule 33, are not to have effect until the date on which an
exercise of the Secretary of State’s power to prescribe multipliers is
expressed by his order to have operative effect. Any other construction of
section 47(5) could result in a twilight period between the making of a
statutory instrument and the date on which the relevant regulations came into
operation, during which there was no appropriate multiplier at all for the
purpose of section 37(2) of the Act of 1954.
I now revert
to the history of the present case. On December 17 1980, that is more than a
month after the Act of 1980 received Royal Assent, the defendants served a
written notice of that date on the plaintiffs terminating their tenancy of the
premises on June 24 1981. The notice, as usual, required the tenants within two
months after the giving of the notice to notify the landlords in writing
whether or not they would be willing to give up possession of the premises on
the specified date. It further stated that the defendants would oppose an
application to the court under Part II of the Act for the grant of a new
tenancy, on the ground that, on the termination of the current tenancy, the
defendants intended to occupy the premises for the purposes of a business to be
carried on by them in the premises, that is to say, on the ground specified in
section 30(1)(g) of the Act of 1954.
On January 21
1981 the Secretary of State for the Environment, in exercise of the new powers
conferred on him, made the Landlord and Tenant Act 1954 (Appropriate
Multiplier) Regulations 1981 (which I will call ‘the regulations of 1981’).
These provided:
1. These
regulations may be cited as the Landlord and Tenant Act 1954 (Appropriate
Multiplier) Regulations 1981 and shall come into operation on March 25 1981.
2. The
appropriate multiplier for the purposes of paragraphs (a) and (b) of section
37(2) of the Landlord and Tenant Act 1954 shall be 2 1/4.
These
regulations were subject to annulment in pursuance of a resolution of either
House of Parliament within 40 days of February 2 1981, which was the day upon
which the regulations were laid before Parliament: (see paragraph 4 of Schedule
33 to the Act of 1980, and section 5 of the Statutory Instruments Act 1946).
The regulations never were annulled and so came into operation on March 25
1981.
In the
meantime, by a letter of February 6 1981, the plaintiffs gave the defendants
notice that they would not be willing to give up possession of the premises on
the date specified in the defendants’ section 25 notice. The plaintiffs,
however, made no application to the court for a new tenancy. The last date upon
which it would have been open to them to do so would have been April 18 1981.
They let that date pass by, so that by April 19 the defendant landlords had
acquired an indefeasible right to possession of the premises on the following
June 24 1981. By a letter of April 16 1981 the defendants had claimed, first,
that the plaintiffs were not entitled to any compensation at all under section
37 of the Act of 1954 and secondly that, even if some compensation were
payable, the scale of compensation should be ascertained by reference to the
date on which the section 25 notice had been given.
The plaintiffs
duly quit the premises on June 24 1981. In the light of the information as to
the defendants’ attitude which they had received, they issued an originating
summons on June 30 1981, in which they sought the following relief:
(1) That it may be determined whether, under and
by virtue of the provisions of section 37 of the Landlord and Tenant Act 1954
(as amended) and in the events which have happened, the Plaintiff became
entitled on quitting the premises on June 24 1981 to recover from the Defendant
by way of compensation an amount determined in accordance with the provision of
the said Act.
(2) If the answer to question (1) is in the
affirmative, that it may be determined whether the said amount which the
Plaintiff became entitled on quitting the premises on June 24 1981 to recover
from the Defendant was:
(a) £45,180 (being the rateable value of the
premises) or
(b) £101,655 (being two and one quarter times
such rateable value).
(3) Payment of the amount determined in answer to
question (2) above.
(4) Interest pursuant to the Law Reform
(Miscellaneous Provisions) Act 1934 on the said amount from June 24 to the date
of Judgment.
(5) Further or other relief.
(6) Costs.
To complete
the history, by a letter of October 2 1981 the defendants accepted that
compensation is payable to the plaintiffs under the Act of 1954, and said that
in the circumstances the only issue was one as to quantum.
I now turn to
consider the nature and extent of the plaintiffs’ right to compensation. Very
briefly, they contend that question 2 of the originating summons should be
answered in the sense of alternative (b). The defendants claim that it should
be answered in the sense of alternative (a).
The effect of
the regulations of 1981, when read in conjunction with sections 47(5) and
47(6)(a) of the Act of 1980, was in my judgment that as from March 25 1981 both
the regulations themselves and the amending provisions of paragraph 4 of
Schedule 33 to the Act of 1980, relating to multipliers, came into full force
and effect. The consequences were as follows. First, section 37(2) of the Act
of 1954 thenceforth took effect in its amended form so as to read:
The said
amount shall be as follows, that is to say, (a) where the conditions specified
in the next following subsection are satisfied, it shall be the product of the
appropriate multiplier and twice the rateable value of the holding; (b) in any
other case it shall be the product of the appropriate multiplier and the
rateable value of the holding.
Secondly, as
from March 25 1981, the ‘appropriate multiplier’ for the purpose of these two
paragraphs became 2 1/4.
According to
the terms of section 37(1) of the Act of 1954, as amended, there are a number
of conditions precedent (some of them alternative) which have to be fulfilled
if a tenant is to be entitled to compensation on quitting the holding. The
relevant conditions which have been satisfied in the present case are the
following:
(1) The landlord has served on the tenant a
notice under section 25;
(2) the notice has specified no other ground
other than one of the grounds specified in paragraphs (e), (f) and (g) of
section 30 of the Act of 1954; and
(3) the tenant has made no application for a new
tenancy.
Nevertheless,
though conditions of the nature specified in section 37(1) have to be satisfied
before a tenant’s right to compensation can arise, the only event which
entitles the tenant to compensation is the actual quitting of the holding. If
for any reason whatever he does not quit, he does not become entitled to
compensation. The relevant wording of section 37(1) of the Act of 1954 is:
. . . then,
subject to the provisions of this Act, the tenant shall be entitled on quitting
the holding to recover from the landlord by way of compensation an amount
determined in accordance with the following provisions of this section.
The word
‘then’, in my judgment, merely means ‘in that event’, that is to say, if the
earlier conditions specified in the subsection are fulfilled. The entitlement
arises on the quitting of the holding (and not before). In my judgment,
therefore, it is quite plain that the amount of the entitlement must be
assessed in accordance with the law as it stands at the date of the quitting. I
am not sure that this point is really in dispute.
The argument
of Mr Colyer on behalf of the defendants, if I have understood it correctly, in
essence involves the submission that the amendments to section 37 of the Act of
1954, which were introduced by the combined effect of section 193 of the Act of
1980 and paragraph 4 of Schedule 33 to that Act, and of the regulations of
1981, which altered the scale of compensation to which tenants quitting the
premises were to be entitled, should be read with some implied limitation to
the effect that they were not to apply in respect
section 25 notice which had been served before March 25 1981. The latter is, of
course, the day when the regulations of 1981 came into operation. Any other
reading of the relevant statutory provisions would in his submission involve
giving them retrospective effect. He submitted that it is to be presumed that a
statute, or statutory instrument, of a substantive rather than a procedural
nature is not to have retrospective effect; and that the Act of 1980 and the
regulations of 1981 read together can only have retrospective effect if a clear
legislative intention of this nature has been demonstrated. Such intention, in
his submission, has not been shown.
In support of
his submissions, Mr Colyer relied heavily on a decision of Brightman J in Re
14 Grafton Street, London, W1 [1971] Ch 935. The headnote to that case,
omitting immaterial references to authorities at the end, reads as follows:
On September
27 1969, the landlords gave notice under section 25 of the Landlord and Tenant
Act 1954 terminating a business tenancy of certain premises on April 1 1970.
The notice required the tenants to notify the landlords within two months
whether they would give up possession or not; it also stated that any
application for a new tenancy would be opposed by the landlords on the basis
that the premises were to be reconstructed and that the tenants could not claim
compensation unless an application was made to the court for a new tenancy. The
tenants’ intention to vacate the premises was communicated to the landlords by
a letter dated October 13 1969. On October 22 1969, the Royal Assent was given
to the Law of Property Act 1969 which came into force on January 1 1970.
Section 11 of that Act amended section 37(1) of the Act of 1954 with the effect
that a tenant was entitled to compensation without having first applied to the
court for a new tenancy. On February 11 1970, the tenants inquired about
compensation. The landlords denied liability. On the tenants’ summons seeking
compensation to be paid:
Held, (1) that in order to be entitled to compensation for disturbance a
tenant must, first, have served a counternotice on the landlord under section
29(2) of the Act of 1954, stating that he was unwilling to vacate the premises
and secondly, under section 37(1) of the Act (before amendment), he must have
applied to the court for a new tenancy; that a counternotice which expressed
willingness to quit was irrevocable; and that, accordingly, after October 13,
the tenants could not give a notice of unwillingness to quit and had lost their
right to apply to the court and the landlords, in turn, had acquired an
indefeasible right to obtain possession on April 1 1970, without paying
compensation.
(2) That on its true construction the amendment
to section 37(1) of the Act of 1954, not being procedural, could not have
retrospective effect so as to revive the tenants’ right to compensation; and
that, accordingly, the tenants were not entitled to compensation.
I accept Mr
Colyer’s submission that this case is authority for the proposition that the
amendment to the law which was effected by the relevant statutory provisions in
the present case was substantive rather than procedural. This point has not
been in dispute. Likewise, the case is authority for the proposition that
enactments are not to be construed so as to have a retrospective operation
unless their language is such as to require such a construction. Brightman J
quoted with approval a number of passages from judgments in earlier cases which
established this principle. I need read only one.
In Lauri
v Renad [1892] 3 Ch 402, Lindley LJ said at p 420:
It certainly
requires very clear and unmistakeable language in a subsequent Act of
Parliament to revive or re-create an expired right. It is a fundamental rule of
English law that no statute shall be construed so as to have a retrospective
operation unless its language is such as plainly to require such a
construction; and the same rule involves another and subordinate rule to the
effect that a statute is not to be construed so as to have a greater
retrospective operation than its language renders necessary.
Brightman J
(at p 944F) pointed out that, in the events which had happened, the landlords
on any footing ‘had an indefeasible right to recover possession on April 1
1970, without the payment of compensation . . .’ His conclusion, on the retrospectivity point,
is to be found summarised in the following words (at p 947):
Under the Act
of 1954, by virtue of the unopposed notice served by the landlords, they had
acquired the right before the commencement of the Act of 1969 to future
possession of business premises without compensation. If the Act of 1969 is
construed in such a way as to deprive them of that right, that Act would in my
view be retrospective. Under the Act of 1954, by virtue of the notice served by
the landlords, the tenants at one time had a contingent right to compensation,
ie a right to compensation contingent upon the landlords successfully opposing
an application made by the tenants for an order for the grant of a new tenancy.
The tenants lost that right before the Act of 1969 came into operation, by
reason of their failure to take certain steps open to them. If the Act of 1969
is construed in such a way as to revive that right, that Act would in my view
be retrospective.
Having then
decided that the Act of 1969 could not properly be described as procedural,
Brightman J concluded (at p 949):
In the result
I dismiss the application, on the ground that the Act of 1969 did not deprive
the landlords of their right to recover possession without payment of
compensation and did not revive the tenants’ lost right to compensation.
I pause to
comment that there is one obvious point of distinction between the facts of the
14 Grafton Street case and those of the present case. In the former case
the effect of the construction contended for by the tenants was to revive a
right to compensation which, before the relevant legislation, had been wholly
lost. In the present case, there is no question of any right of the tenants to
compensation ever having been wholly lost. At very most, what has happened is
that the introduction of the new legislation increased the quantum of a
prospective right which the tenants had at all relevant times. On the facts of
the present case, as Mr Cherryman pointed out, the landlords did not, on any
footing, obtain an indefeasible right to possession of the premises until April
19 1981, that is to say, several weeks after the relevant statutory provisions came
into effect. On the present facts, therefore, the relevant statutory
provisions, even if applied according to their letter, will not have any
retrospective effect at all in the strict sense. When they came into operation,
even if they are construed in the manner for which the plaintiffs contend, they
operated as between the plaintiffs and the defendants merely for the future and
not for the past.
Mr Colyer
suggested that they did at least deprive the defendants of an inchoate right,
in the sense that, as from the service of their section 25 notice, the
defendants could reasonably have expected that, if the plaintiff tenants made
no application under section 24, the defendant landlords would both be able to
get possession on June 24 1981 and would only have to pay compensation
according to the tariff in force on December 17 1980. I do not find this
argument compelling. First, the section 25 notice was served after the Act of
1980 had received the Royal Assent, so that anyone interested had been warned that
a new ‘appropriate multiplier’ might be introduced in the near future.
Secondly, Mr Colyer referred me to no authority in support of his proposition
that the presumption against retrospectivity applies in respect of such vague
inchoate rights as those of the defendants as at December 17 1980 on which he
relies for this purpose.
I attach
rather more weight to another of his points. He observed that, though on the
timetable of the present case the landlords had not yet acquired an
indefeasible right to possession by March 25 1981, they could have done so, if
their section 25 notice had been served rather earlier; in this contingency,
the landlords before March 25 1981 might have acquired an indefeasible right to
recover possession at a date later than March 25 1981. On this hypothetical
timetable, the coming into operation of the regulations of 1981 would still not
have deprived the landlords of an indefeasible right to possession, so that the
case would not even then have been on all fours with the 14 Grafton Street
case. Nevertheless, the regulations would have altered the scale of
compensation which the landlords would have had to pay to the tenants, as the
price of this indefeasible right, if and when the tenants left the holding. As
Mr Colyer pointed out, the service of the landlord’s section 25 notice is the
first of the steps which begins the process of determining the tenant’s rights
to compensation; when he serves it, he may be influenced by (inter alia)
consideration of the amount of the compensation which he may in due course have
to pay to the tenant on quitting. I therefore accept that, by analogy with the 14
Grafton Street case, the plaintiffs’ construction of the relevant statutory
provisions, which makes no distinctions between cases where landlords’ section
25 notices have been served before March 25 1981 and those where they have been
served after that date, could be said to involve a degree of retrospective
effect in the hypothetical circumstances
construed so as to have greater retrospective effect than the language renders
necessary.
Nevertheless,
subject to the points arising on section 47(5) of the Act of 1980, with which I
have already dealt, the language of the relevant statutory provisions seems to
me plain and unambiguous. When they are read together, sections 47 and 193 of
the Act of 1980, paragraph 4 of Schedule 33 to that Act, and the regulations of
1981, in my judgment make it quite clear that as from March 25 1981 the new
amendments to paragraphs (a) and (b) of section 37(2) of the Act of 1954 are to
apply in the case of every tenant who thereafter quits a holding, provided only
that the other conditions of section 37(1) have been satisfied. It would have been
easy for the legislature in the Act of 1980, or for the Secretary of State in
the regulations of 1981, expressly to provide that the amending provisions
should not apply in cases where the landlord’s section 25 notice had been
served before March 25 1981. No such exception was made, and I can see no
sufficient grounds for implying one.
On the facts
of the present case, the plaintiffs on quitting the premises on June 24 1981,
for the first time acquired the benefit of what Brightman J in the 14
Grafton Street case described as ‘a debt created by statute, upon which the
tenant may sue in other proceedings if necessary’: (see [1971] Ch at p 942 C).
For the purposes of ascertaining the amount of that debt one must, in my
judgment, look at the provisions of section 37 of the Act of 1954 as they stood
in their reamended form at June 24 1981 when the right arose. In this reamended
form they were, in my judgment, unequivocal. When they are so looked at, it is
plain that the tenants’ compensation falls to be calculated with the
application of an appropriate multiplier of 2 1/4 to the rateable value of the
holding.
This, I think,
is really the end of the defendants’ case, but in deference to Mr Colyer’s
argument I should refer to one or two other points. He drew my attention to a
number of suggested capricious results or anomalies which might follow if the
plaintiffs’ construction of the relevant statutory provisions were correct. In
particular, he pointed out that the plaintiffs’ construction involves taking
the rateable value of the premises as at December 17 1980, but the ‘appropriate
multiplier’ as at June 24 1981, when the landlords’ notice expired and the
plaintiffs quit the premises. This, he submitted, means that like would not be
related to like. He contended that one would expect the provisions for an
‘appropriate multiplier’ to be prescribed so as to ensure that in any given
case the relevant multiplier would be ascertained as at the same day as that
which falls to be multiplied is ascertained.
I think that,
so far as it goes, this comment is a fair one. On the other hand, in my
judgment it has to be accepted that the statutory purpose of the introduction
of the new system of ‘appropriate multipliers’ was, as Mr Cherryman submitted,
to effect from time to time a rough and ready uplift in the amount of the
statutory compensation to be given to tenants under section 37 of the Act of
1954, in place of the automatic uplift that they would otherwise have enjoyed
by virtue of the system of automatic quinquennial rating valuations which was
abolished by the Act of 1980. The introduction of a new ‘appropriate
multiplier’ was, I think, bound to produce some anomalies, particularly in the
early stages. Nor do the anomalies appear to me all to lie in one direction,
when the competing constructions are considered. If Mr Colyer were right in
submitting that the relevant statutory provisions have no application in any
case where the landlord’s section 25 notice has been served before March 25
1981, this would mean that landlords who chose to serve a section 25 notice
during the period between January 21 1981 (when the regulations of 1981 were
made) and March 25 1981 (when they came into effect) would escape the liability
to pay compensation on the higher scale, even if the tenant quit the premises
long after March 25 1981. It is hard to see any statutory purpose reflected in
this result.
Mr Colyer did
raise some other points, but I hope he will forgive me if I do not refer to all
of them. For, once it is accepted that the relevant amendment of section 37(2)
of the Act of 1954 and the introduction of the new ‘appropriate multiplier’
came into full force and effect on March 25 1981, as I think it must be
accepted, it seems to me inevitably to follow, on the clear wording of the section
as amended, that the plaintiffs’ rights fall to be determined in accordance
with the tariff which represented the law when they quit the premises. The
words of the subsection as amended are entirely apt to apply to the plaintiffs’
situation on June 24 1981, and the defendants, in my judgment, can point to no
statutory provision which enables them to escape from their full effect.
In answer to
the questions raised by paragraphs 1 and 2 of the originating summons, I
therefore propose to answer question 1 in the affirmative sense and question 2
in the sense of alternative (b).
After
counsel had made submissions as to payment of interest, SLADE J said: It is common ground that, on the basis of my
judgment, the plaintiffs are entitled to interest on the amount of £101,655
from June 30 1981 to the date of judgment. The plaintiffs have not asked for
interest in respect of the period from June 24 to 30, I understand, because,
although they had formally quit the premises on June 24, they did continue to
have certain use of the premises for certain purposes for the next six days.
The question
arises as to the rate of interest which should be awarded to the plaintiffs in
the discretion of the court. In this context I have been assisted by a
reference to the recent decision of Forbes J in Tate & Lyle Food &
Distribution Ltd v Greater London Council [1981] 3 All ER 716. The
facts of that case were very different, but he made some pertinent observations
as to matters of principle. In particular, he pointed out (for example at p
722) that there are considerable differences between personal injury cases and
cases involving injury to business concerns. He said (at p 722 d):
. . . I do
not think the modern law is that interest is awarded against the defendant as a
punitive measure for having kept the plaintiff out of his money. I think the
principle now recognised is that it is all part of the attempt to achieve restitutio
in integrum. One looks, therefore, not at the profit which the defendant
wrongfully made out of the money he withheld (this would indeed involve a
scrutiny of the defendant’s financial position) but at the cost to the
plaintiff of being deprived of the money which he should have had. I feel
satisfied that in commercial cases the interest is intended to reflect the rate
at which the plaintiff would have had to borrow money to supply the place of
that which was withheld.
Forbes J went
on to say:
I am also
satisfied that one should not look at any special position in which the
plaintiff may have been; one should disregard, for instance, the fact that a
particular plaintiff, because of his personal situation, could only borrow
money at a very high rate or, on the other hand, was able to borrow at
specially favourable rates. The correct thing to do is to take the rate at
which plaintiffs in general could borrow money. This does not, however, to my
mind, mean that you exclude entirely all attributes of the plaintiff other than
that he is a plaintiff. There is evidence here that large public companies of
the size and prestige of these plaintiffs could expect to borrow at 1 per cent
over MLR, while for smaller and less prestigious concerns the rate might be as
high as 3 per cent over MLR. I think it would always be right to look at the
rate at which plaintiffs with the general attributes of the actual plaintiff in
the case (though not, of course, with any special or peculiar attribute) could
borrow money as a guide to the appropriate interest rate. If commercial rates
are appropriate I would take 1 per cent over MLR as the proper figure for
interest in this case.
This was the
rate which, subject to certain qualifications, Forbes J awarded.
Mr Cherryman
has told me on instructions, and this has not been disputed, that the
plaintiffs are a wholly-owned subsidiary of the Ministry of Defence but,
nevertheless, run their business as a commercial business. There is, I think,
no doubt at all that the defendant company similarly runs its business. This can,
I think, fairly be described as a commercial dispute in which, on the basis of
my judgment, the plaintiffs have been kept out of the greater part of a debt
which has been due to them since June 24 1981. I say ‘the greater part’,
because in October a payment was made by the defendants on account. In all the
circumstances of the case, I think that commercial rates are appropriate to
apply for the purpose of assessing the amount that should be paid to the
plaintiffs. I think that, on the facts which I know, it is right to treat these
particular plaintiffs as being plaintiffs of standing and prestige, who, with
the benefit of the attributes, would be able to borrow at a more favourable
rate than smaller and less prestigious concerns. I am told that
on the equivalent rate has been the Clearing Bank Base Rate.
In all the
circumstances, following the guidance of the Tate & Lyle case, I
propose to award the plaintiffs interest on the sum of £101,655 from June 30
1981 to judgment at the rate of 1 per cent over Minimum Lending Rate from June
30 to August 20, and at 1 per cent above the Clearing Bank Base Rate from
August 21 onwards until judgment. Credit, however, is to be given to the defendants
for the interest which has already been paid by them on the sum of £45,180 to
the plaintiffs.
I think that
it may be desirable that there should be some further definition of the
Clearing Bank Base Rate, for the purpose of the order which I am making.
Subject to further submissions, I think a convenient way of dealing with this
would be for the plaintiffs’ counsel and the defendants’ junior counsel to
agree and sign a minute embodying these provisions in clear workable form.
Liberty was
given on the defendants’ application to apply for a certificate under section
12 of the Administration of Justice Act 1969 to enable a ‘leapfrog’ appeal to
be brought to the House of Lords.
