Interim business rent–Court’s refusal to exercise discretion and determine a rent relating back to a date before the ‘freeze’–Fact that landlord could obtain an advantage in this way, if true, not a ground for refusing to fix a rent–Landlords’ appeal allowed
This was an
appeal by the United Kingdom Temperance & General Provident Institution
from a decision of Judge Lyall Wilkes at Newcastle upon Tyne County Court
refusing to fix an interim rent under section 24A of the Landlord and Tenant
Act 1954 for premises in Grey Street, Newcastle upon Tyne, occupied by the
respondents, the Bailey Organisation.
Mr C B Priday
(instructed by Roche, Son & Neale) appeared for the appellants, and Mr A G
Steinfeld (instructed by Grunhut, Makepeace & Duffy, of South Shields)
represented the respondents.
Giving the
judgment of the court, CAIRNS LJ said that Part II of the Landlord and Tenant
Act 1954 placed restrictions on the ending of business tenancies. Where, apart
from the Act, such a tenancy could be brought to an end by notice given by the
landlord, the landlord in order to terminate the tenancy had to give notice in
a special form, requiring the tenant to state whether he would be willing to
give up possession and informing the tenant whether the landlord would oppose
the granting of a new tenancy. Then the tenant might apply to the county court
for a new tenancy, and if the landlord did not oppose that application the
duration, rent and other terms of the new tenancy, if not agreed by the
parties, would be determined by the court. If notice to terminate had been
given and an application for a new tenancy had been made, then the old tenancy
was continued until three months after the application had been disposed of. It
was found that some tenants took advantage of section 64 by spinning out the
proceedings on an application for a new tenancy and so continuing to enjoy
possession of the premises at a rent far below what was likely to be fixed for
a new tenancy. Accordingly by the Law of Property Act 1969, section 3, there
was inserted in the 1954 Act a new section 24A which provided that once a
landlord had given notice to terminate he might apply to the court to determine
a rent which it would be reasonable for the tenant to pay while the tenancy
continued by virtue of section 24, and the court might determine a rent
accordingly. This was what had come to be known as an interim rent. Section 24A
(2) provided (so far as was applicable to the present case) that a rent
determined in proceedings under the section should be deemed to be the rent
payable under the tenancy from the date on which proceedings were commenced.
In 1971 the
Bailey Organisation held the premises 10 Grey Street, Newcastle upon Tyne, as
tenants of the United Kingdom Temperance & General Provident Institution
upon a 20-year lease from March 25 1962 at a rent of £650 a year for the first
five years and thereafter £850. The lease however contained a break clause
under which the landlords could terminate it at the end of the 10th year, ie on
March 25 1972. On September 1 1971 the landlords gave written notice to
terminate the tenancy on the following Lady Day, the notice being in the
appropriate form required by section 25 of the Act of 1954. By letter of
September 10 1971 the tenants’ solicitors notified the landlords that the
tenants would not be willing to give up possession and wished to have a new
tenancy. On November 4 1971 the tenants applied by originating application in
the county court for a new lease, proposing a term of 50 years at an initial
rent of £1,000 a year. The landlords’ answer, dated November 19 1971, did not
oppose the grant of a new tenancy, but objected to the term and rent proposed.
For the next 11 months, no further steps were taken in the court proceedings.
On October 11 1972 the landlords gave notice that they intended to apply to the
county court for an interim rent to be fixed under section 24A. This
application did not come on for hearing until January 29 1974. Ever since
November 1971, or earlier, negotiations about the terms of the new lease had
been going on, and by January 1974, subject to agreement on terms as to
insurance, etc, the parties were agreed on a rent of £2,000 a year. Further,
the tenants were willing to have the interim rent fixed at that figure and the
landlords were willing to accept it. So on January 23 1974 the tenants’
solicitors wrote to the registrar saying that they consented to the interim rent
being fixed at £2,000 a year from October 11 1972, being the date of the
landlords’ notice of application under section 24A, and asking to be excused
from attendance at the hearing on the 29th. As the matter then stood,
everything seemed set fair for the fixing of an interim rent.
On January 24
1974 the registrar of the county court, or somebody on his behalf, telephoned
the landlords’ solicitors and asked the reason for the application. The
landlords’ solicitors complied with the court’s request by writing a long
letter which made it clear that the reason why the landlords wished at that
stage to have the interim rent determined was because they had been advised
that if this were done the rent of £2,000 a year would be deemed to be the rent
payable from October 11 1972, and that date was before the rent freeze which
came into force on December 1 1972 and froze each business rent at the rate
payable on November 5 1972. The tenants and their advisers were quite unaware
of that letter, and Mr Steinfeld, for the tenants, made it clear that they
would have opposed the application if they had realised why it was being
pursued; it was for this reason that the matter had been fully contested in the
present proceedings. The county court judge refused the application to fix an
interim rent. He began by saying that the jurisdiction was discretionary. He
observed that the mischief at which section 24A was directed was dilatoriness
on the part of the tenant; here, he said, it was the landlord who was dragging
his feet. It would not seem that there was any evidence to support that
finding, and Mr Steinfeld had not sought to uphold the decision on that ground.
But then the judge went on to say that he declined to exercise his discretion
in favour of fixing the interim rent because he took the view that, if the
landlords were right in their contention, such an order would enable them to
recover the full £2,000 a year despite the rent freeze, and this was a device
to defeat the freeze to which the court ought not to accede. The landlords
appealed.
Their
Lordships did not find it necessary to decide whether, if the interim rent was
fixed at £2,000 a year, it would be payable
Rents) Order 1973 remained in force. Nor was it desirable to reach a decision
on that point in a case where the matter had not been fully ventilated, since
one side had argued that the standard rate for the purposes of the order would,
if the appropriate determination were made, be £2,000 a year, and the other
side had said only that that might be the result. In the court’s view, if the
effect of determining an interim rent was to fix the 1973 standard rate at the
same figure, that was no good reason for refusing to determine it. As between
the parties, a rent of £2,000 a year was admittedly a fair one. Section 24A
made no provision for the interim rent to be fixed by agreement (this
contrasted with sections 33 to 35, which provided for the duration, rent and
other terms to be agreed by the parties and decided by the court only in
default of agreement), and it was to be observed that before the question of
the freeze had come up both parties assumed that, despite the large extent of
agreement about the new lease which had been achieved, it was the proper course
for the interim rent to be determined by the court. Certainly their Lordships
saw no reason why the landlords should not ask the court to determine it. They
were of opinion that the freeze point was not a matter for the court to take
into consideration in exercising its discretion. If on the fair construction of
statutory provisions a person could gain an advantage by obtaining an order of
the court which, apart from the statutory provisions, was a perfectly proper
order, the fact that he might obtain that advantage could not be a proper
ground for refusing to make the order. If on the other hand, as the judge
thought at the end of his judgment, £850 would remain the standard rate
notwithstanding the determination of the interim rent at a higher figure, no
ground remained for refusing the determination: the position was just as it
seemed to be when the tenants consented to the order being made. Accordingly
the court allowed the appeal and determined the interim rent at £2,000 a year.
