New lease of business premises–Tenants who have applied to court in time may vary their proposals as to terms of new lease either before or during the hearing of their application–But new lease cannot include a licence granted by the landlords’ predecessors in title to park vehicles on adjoining land not forming part of the tenants’ holding
This was an
appeal by the Hastings & Thanet Building Society from a decision of Judge
McCreery at Newport, Isle of Wight, County Court on November 27 1973 holding
that the terms of a new lease of business premises occupied by the respondents,
G Orlik (Meat Products) Ltd, should include a right over the appellants’
adjoining land not to be found among the terms of the current tenancy.
Mr P Medd QC
and Mr B Coles (instructed by Percy Walker & Co, of Hastings) appeared for
the appellants, and Mr F M Ferris (instructed by Robinson, Jarvis & Rolf,
of Newport) represented the respondents.
Giving the
judgment of the court, STAMP LJ said: This is an appeal from the judgment of
Judge McCreery in the Newport, Isle of Wight, County Court, delivered on
November 27 1973. The appeal concerns an application by G Orlik (Meat Products)
Ltd, whom we shall call ‘the tenants’–the respondents in this appeal–for a new
tenancy of business premises under the provisions of Part II of the Landlord
and Tenant Act 1954, as amended by the Law of Property Act 1969. The appellants
in this court–we shall call them ‘the landlords’–are the Hastings & Thanet
Building Society. They were the respondents in the county court proceedings.
They objected to the grant of a new tenancy, doing so on the
substantial breaches by the tenants of their obligations under the current
tenancy. The learned judge on the evidence heard by him rejected that ground,
the sole ground, of objection. The landlords do not in this appeal seek to attack
the judge’s decision in that respect. Accordingly, on this appeal it is
accepted that a new tenancy should be granted. The issues in the appeal relate
solely to the terms of the new tenancy. The particular matter in dispute is
that the tenants claim that the new lease should contain a term permitting
them, subject to limitations, to park motor vans used in their business in such
a way that they will, as to part of their width, stand over a part of a yard
which belongs to the landlords, adjacent to the land comprised in the lease.
The landlords contend that no such term can properly be included in the new
lease.
Before
reciting the facts which are relevant to the main argument on this appeal, we
shall deal with an argument put forward by Mr Medd on behalf of the landlords
as his second ground in support of the appeal. It was, he admitted, highly
technical. The point is simply this. In all other respects, in contrast with
what is all too frequently found in cases under Part II of the 1954 Act, all
the time provisions of the Act for the giving of notices and the initiation of
proceedings were adhered to on both sides. But in one respect, according to the
landlords, the tenants failed, and the failure, it is contended, was fatal to
their success upon–or indeed to their being heard by the county court upon–the
only matter now in issue: that is, their claim for the vehicle-parking terms to
be included in the new lease. The original application of the tenants to the
court under section 24 (1) (a) of the Act, was made within the time limits
stated by section 29 (3). It was in the form (Form No 335) prescribed by order
40, rule 8 (1) of the County Court Rules. But as originally submitted, the
proposals included in paragraph 3 of the form contained no reference to any term
relating to the parking of vehicles, whether on the landlords’ land or
otherwise. The proposals put forward were confined to rent. When the
application came on for hearing before the judge, the tenants sought to claim
rectification of the pre-existing lease so that it should be altered in such a
way as to provide for the parking rights. It was pointed out that the court did
not have jurisdiction to entertain such a claim. The tenants then, it would
seem, abandoned any suggestion of rectification of the lease, but sought
instead leave to amend the proposals contained in their application so as to
include amongst them a term relating to the parking of their vehicles on, in
part, the landlords’ adjacent land. The application to amend was opposed by the
landlords, one ground being the ground urged in this court: namely, that
because of the time limits in section 29 (3) of the Act, which had by then
expired, there was no jurisdiction to give leave to amend.
It does not
appear to have been suggested that the landlords were taken by surprise, but,
of course, if there were lack of jurisdiction the absence of any prejudice
created by the granting of leave would not be relevant. In our judgment, no
ground has been shown for holding that there is no jurisdiction to allow an
applicant to amend, after the four-month period, the proposals contained in an
application to the court made within that period. Counsel for the landlords is
right in saying that the Act is strict, and uses strict language, in its time
provisions, but we are unable to see anything in the Act which deprives the
court of jurisdiction to grant leave to the applicant to amend the detail of
his proposals after the expiration of the four-month limit. The decision of
this court in Williams v Hillcroft Garage Ltd, reported in The
Times newspaper as decided on January 27 1971 [see 218 EG 1163], if not a
direct authority for that proposition, provides, at the least, most persuasive
indication that it is correct. Accordingly, we reject this second ground put forward
in support of the appeal.
We now come
back to the relevant facts which should be narrated for the purpose of
considering the first ground put forward in support of the landlords’ appeal.
The facts as found by the county court judge may be summarised as follows.
Since 1963 the tenants have carried on the business of wholesale butchers upon
premises in Union Road, Ryde, in the Isle of Wight. These premises have been
and are held under a title with which this application is not concerned, and we
refer to them as ‘the tenants’ main premises.’
Adjoining the tenants’ main premises was a parcel of land consisting of
a yard with an entrance on Union Road belonging to Victoria Wine-Tylers Ltd. In
June 1964, faced with difficulties in parking vans used by them for the
purposes of their business, the tenants opened negotiations with Tylers with a
view to renting the yard for parking their vans. Tylers had a garage and store
behind the yard and, subject to a way from the entrance of the yard to this
garage and store being kept clear and open at all times, Tylers on July 28 1964
indicated that they were agreeable to the tenants parking their vans on the
site. They suggested the payment of £100 per annum for this privilege and
expressed their understanding that there was sufficient room for four vans.
Negotiations were protracted. Mr Orlik, the tenants’ managing director, thought
it would also be of advantage to use part of the yard as a cold store, and
after, at one time, resiling from that suggestion he again put it forward. The
learned judge summarised the result of the negotiations by saying that he was
satisfied that Mr Orlik’s original intention in respect of the land was to use
it only as a parking place, that that intention was neither replaced nor
altered by the subsequent plan for a cold store, and that by the autumn of 1966
Mr Orlik and Mr Edwards (who was Tylers’ property manager) had agreed in
principle upon a lease which would entitle the tenants to use the land not only
for a cold store but also for the parking of three vans. The judge found that
it was further agreed that the three vans should be parked in such positions as
would allow Tylers to park their own van at the back of the yard. We would
emphasise that what the judge held had been agreed in principle was a lease
containing the provisions to which he referred.
The judge went
on to say that, agreement having thus been reached, the tenants built their
cold rooms early in 1967. The cold rooms were built along the side of the yard
adjoining the tenants’ main premises, so reducing, so long as they remained
there, the area of yard available for parking. There was, however, still room
for the parking of three vans in agreed positions, two of them alongside the
cold rooms and the third on the site of the wash room, to which we will refer.
So parked, this left room for Tylers to take a vehicle across the yard from its
entrance in Union Road to Tylers’ garage and store at the rear of the yard.
Some time after the completion of the cold rooms–the judge found the exact date
uncertain and immaterial–the tenants built alongside them–again, we would add,
on Tylers’ land and on the side of the yard adjoining the tenants’ premises–a
wash room. This further reduced the area available for parking and thereafter
the tenants could not, without obstructing Tylers’ access, park more than two
vans: that is to say in the two agreed positions alongside the cold rooms.
The tenants’
existing lease was dated December 11 1967. It contained a demise to the tenants
of the premises to which we shall refer more particularly in a moment for a
term of seven years from September 29 1966 at a rent of £150 per annum. Because
it was common ground in this court that in view of the construction of the cold
rooms and wash room its effect was to preclude the parking of any of the
tenants’ vans in the yard, we need only summarise its provisions. What was
demised to the tenants was not the whole of the yard subject to a right in
Tylers giving them access to their garage and store room, but what was
substantially a rectangular piece of the yard adjoining the tenants’ main
premises, embracing the area of the cold room and wash room buildings and a
very narrow strip of land beyond. Excluded from the demise was the smaller
rectangular part of the yard, which we will call the landlords’ part of the
yard, at the far side of the yard from the tenants’ main premises. Included in
the demise to the tenants was the right to use the landlords’ part of the yard
for the purpose of access to and egress from the demised premises. The narrow
strip of land beyond the cold-room and wash-room buildings included in the
demise was not wider than was necessary to park a motor cycle. It was far too
narrow for a van. The lease contained a covenant both by the tenants and Tylers
designed to prevent the obstruction of access to their respective premises ‘by
permitting or suffering the standing or parking of vehicles or storage of
merchandise’ on the landlords’ part of the yard. The learned county court judge
found that from the time in 1967 when the tenants built their cold room they
parked their vans daily in the yard in the agreed positions, and that after the
construction of the wash room they continued to park on the two positions
alongside the cold room: that is to say, partly upon the landlords’ part of the
yard. We complete the history of the matter by stating that in 1969 the
reversion expectant upon the determination of the lease was assigned to one
Darken, and that in September 1970 it was assigned to the landlords.
The tenants’
claim to have included in the new lease a term conferring on them the right to
park two vans in the agreed positions, ie partly on the landlords’ part of the
yard, is based on the submission that they already have that right in
connection with their tenancy. Accordingly, so the argument runs, a term
conferring that right ought to be included in the new lease either under
section 32 (3) or under section 35 of the 1954 Act. We will refer to those
sections later in this judgment. We will, however, first consider whether the
submission that the tenants now have a right of parking on the landlords’ part
of the yard during the continuance of the current lease is well founded. It was
submitted, and the learned county court judge accepted this submission, that an
irrevocable licence to park two vans in the two agreed positions for the term
of the lease ought to be inferred. Expressing himself as satisfied that the
agreement as to parking entitled the tenants to park their vans in the yard,
and that that agreement was put into effect early in 1967 and acted upon by
both parties to the lease, the judge inferred the grant by Tylers to the
tenants of a licence to park three vans in the yard, such parking to be in such
a position as not to interfere with access for Tylers’ own van. The terms of
the licence were, he said, subsequently modified to provide for the parking of
two only of the tenants’ vans. Having regard to the circumstances in which the
licence was granted and to the importance to the tenants’ business of the
rights which it conferred, the judge was satisfied that the licence was
intended to run throughout the term of the tenants’ lease and he held it was
irrevocable and binding upon Tylers’ successors in title.
There are, in
our judgment, two fatal objections to this finding. In the first place it is
axiomatic that where there is a contract which is afterwards reduced into a
deed, then, unless there is something to show that the parties intended to make
some term which was not to be included in the deed and which was, to quote the
words of Bowen LJ in Palmer v Johnson (1884) 13 QBD 351 at 357,
‘to go on to any extent’ after the execution of the deed, the rights of the
parties are governed entirely by the deed: see also the judgment of Brett LJ in
Leggott v Barrett (1880) 15 Ch D 306 at 311. Here the right to
park was to be included in the deed; and if the lease did not give
effect to the common intention of the parties the tenants’ remedy was to seek
its rectification. Secondly, if there was such a licence as was found by the
judge, it was contractual only, arising out of a contract to which the
landlords, as assignees of Tylers, were not parties. There was no finding, and
no evidence to support a finding, that the landlords even knew of the existence
of a licence when they acquired the reversion, and we cannot accept Mr Ferris’s
submission that it was for the landlords to establish that they were not bound
by it. The absence of evidence that the landlords when they acquired the
reversion knew anything of the negotiations leading to the execution of the
lease is likewise, in our judgment, fatal to a submission that the tenants have
a right to have the existing lease rectified and that this is a right to which
effect ought to be given in the new lease. No authority was cited to show in
what circumstances, if any, a party to a deed may have it rectified when the
rights of the other contracting party thereunder have been assigned to a third
party; but it would plainly be contrary to principle that there should be
rectification on the ground of mutual mistake where the assignee at the time of
the assignment was unaware of the right of rectification or of the mistake out
of which the right arose.
Alternatively
Mr Ferris relied upon a proprietary estoppel. What, as we understand it, is
said is that the tenants incurred expenditure in the mistaken belief that they
had or would have the right to park in the two agreed positions and that the
landlords are estopped from denying the existence of a right to do so. We do not
think it necessary to elaborate on the submission, because one of the
conditions essential to establish a right by the effect of such an estoppel was
simply not shown to exist. In the passages in Snell on Equity, 27th ed,
pp 565-568, which were alone relied upon in support of the estoppel that was
sought to be established, it is pointed out that one of the conditions which is
required to be satisfied is that the person against whom the right is claimed
should have known that the claimant was incurring the expenditure in this
mistaken belief, but nevertheless stood by or participated in the expenditure;
and there is, in our judgment, no room for the application of the doctrine
where, as here, a deed quite simply does not give effect to the common intention
of the parties. The equity relied on is based on unconscionable behaviour or
fraud, and there was in this case no scintilla of evidence, nor any finding,
that either party to the lease was aware that it did not give effect to their
common intention, and nothing to indicate unconscionable behaviour on the part
of Tylers. There is nothing to indicate that after the execution of the lease
the tenants incurred expenditure or altered their position, or that Tylers
stood by knowing they were doing so in the mistaken belief that they had the
right of parking which they claim. Moreover, even assuming the existence of
such an equitable right, there was no evidence that the landlords purchased
with notice of its existence.
We conclude
that neither by the effect of a grant contained in the lease nor by the effect
of any irrevocable licence or any equity have the tenants as against the
landlords any such right of parking as is claimed. If it be right that the
tenants have no right of parking such as is claimed, subsection (3) of section
32 of the 1954 Act, which was relied upon on behalf of the tenants and requires
that where the current tenancy includes rights enjoyed by the tenant in
connection with the holding, those rights shall (in the absence of agreement
between landlord and tenant) be included in the new tenancy, affords the tenant
no assistance. Section 35 of the Act is in more general terms. It provides as
follows:
The terms of
a tenancy granted by order of the court under this Part of this Act (other than
terms as to the duration thereof and as to the rent payable thereunder) shall
be such as may be agreed between the landlord and the tenant or as, in default
of such agreement, may be determined by the court; and in determining those
terms the court shall have regard to the terms of the current tenancy and to
all relevant circumstances.
The object of
Part II of the Act is to give security of tenure to business tenants by (inter
alia) conferring power on the court to order a new tenancy of the property
comprised in ‘the holding’: that is to say (see section 23 (3)),
for business purposes; and however widely expressed, section 35 cannot, in our
judgment, consistently with the scheme found in Part II, be construed to enable
the court to enlarge the holding, for example by ordering the grant of an
easement over the landlords’ land or by conferring rights over the landlords’
land not hitherto enjoyed. Mr Ferris relied upon the judgment of Upjohn J in Re
Albemarle Street [1959] Ch 531 as authority for the proposition that
section 35 gave the court the widest possible discretion as to the terms to be
included in the new tenancy. There, the tenants under the terms of their
existing tenancy had a right to exhibit advertising signs outside a part of the
landlords’ building of which the demised premises formed part. The right was,
as the judge held, one which had no connection with the demised property and
was purely personal and merely a licence. The judge, pointing out that the
great width of section 35 was shown by the fact that the court was entitled and
bound to have regard, not only to the terms of the current tenancy, but to all
relevant circumstances, held that he had jurisdiction to make an order for a
new lease containing this term of the current lease. It is not necessary to
comment on that decision except to point out that there the tenant had under
the current lease the very right which it was sought to have included in the
new lease, whereas in the instant case the tenants had no such right. In our
judgment, the new tenancy ought not to contain a new term as to parking, and we
therefore allow the appeal to the extent of varying the order in the court
below accordingly.
The appeal
was allowed with costs in the Court of Appeal. The matter was remitted to the
county court for reconsideration in the light of the court’s judgment.
