Parties agree in principle on a new lease of business premises from 29.9.72 at rent to be fixed–Counter-inflation orders supervene–New rent of £5,000 nevertheless ‘standard rate of rent’ for purposes of orders–Legislation to be interpreted ‘in business sense’
This was an
appeal by Rossetti Lodge Investment Co Ltd from a decision of Judge Dewar at
Clerkenwell County Court on May 22 1974 declaring in favour of the respondent,
the Secretary of State for Social Services, that the standard rate of rent
payable under the terms of the Counter-Inflation (Business Rents) Orders 1972-3
for premises at 309 Gray’s Inn Road, London WC, was £900 per annum.
Mr R H
Bernstein QC and Mr E Prince (instructed by Michael Conn & Co) appeared for
the appellants, and Mr R R F Scott (instructed by Bird & Bird) represented
the respondent.
Giving
judgment, LORD DENNING said that by a lease made in 1951 the appellant landlords
let business premises forming part of a hospital to the then Minister of Health
at £900 a year for 21 years, the term expiring on September 29 1972. Before the
lease came to an end the Secretary of State for Social Services took over, and
in due course he claimed a new lease under the Landlord and Tenant Act 1954.
Early in 1972 the parties fixed a date during July 1972 in the county court for
the hearing of an application for a new lease at a new rent under the Act, but
by letters in June they agreed to adjourn the hearing and negotiate a new lease
to take effect from September 29 1972, the landlords putting forward £5,000 a
year as the appropriate figure for the new rent. Before the new lease was made,
however, the Counter-Inflation (Temporary Provisions) Act 1972 was speeded
through Parliament, and the Counter-Inflation (Business Rents) Order 1972 (SI
No 1850) was made and brought into immediate operation, providing that rents of
business premises should not be increased above the ‘standard rate’ existing on
November 5 1972. ‘Standard rate’ was defined in article 2 (2) as, in relation
to any premises where a business tenancy was subsisting on November 5 1972,
‘the rate at which rent was payable (whether or not then determined as to
amount) under that tenancy at that date.’
The new lease was executed in 1974 for 14 years with effect from
September 29 1972 and at the landlords’ suggested figure of £5,000 per annum.
On an application to the county court for a declaration as to what was the
standard rate of the premises under the 1972 order and a continuation order of
1973, Judge Dewar declared that the rate was £900, and the landlords were
appealing against that decision.
There was no
doubt that if the matter had been heard on the date fixed, ie in July 1972,
there would have been a new tenancy at a new rent, or an interim rent could
have been fixed on an application under the new section 24a of the 1954 Act.
But the parties had agreed to negotiate. What was the effect of the
counter-inflation legislation? On the
facts, a business tenancy was subsisting on November 5–
tenancy continuing under section 64 of the 1954 Act. What was the standard rate
on November 5? The definition had clearly
been drafted with the 1954 Act in mind. He (his Lordship) thought that the
words in brackets in article 2, ‘whether or not then determined as to amount,’
showed that even though the rent had not been determined on November 5 it was
nevertheless to be taken as the rent payable under the tenancy agreed to start
on September 29 1972. Any other interpretation would have very odd results. The
counter-inflation legislation should be interpreted in a business sense without
going into questions of the exact legal situation. The sensible interpretation
of the facts was that the standard rate on November 5 1972 was the £5,000 later
agreed. The appeal should accordingly be allowed.
Concurring,
ORR LJ said that on the particular facts he declined to hold that that which
could have been achieved without offending the order by way of varying the rent
became a contravention because the parties decided to embody it in a new lease.
Also
concurring, SCARMAN LJ said that the Act and the orders constituted an
interference with contractual rights required to protect the national economy
over a limited period of crisis. The courts’ approach to such legislation
should be broad and business-like. Though under strict property law the only
rent payable under the business tenancy subsisting on November 5 was £900, the
legislature by its definition of ‘standard rate’ indicated that the brutal
process of cutting across contractual relationships should, having regard to
the words in brackets, be done as humanely as possible. The rent was determined
later, and it then became the new rent which the parties had agreed as long ago
as June 1972 should be substituted for the rent of £900 which otherwise existed
under the 1951 lease. On November 5 1972, therefore, there was not only a
business tenancy subsisting, but there was under that tenancy and at that date
a new rent payable even though the amount was not yet determined.
The appeal
was allowed, and a declaration substituted establishing the standard rate of
rent for the purposes of the orders of 1972-3 as £5,000 per annum.