Landlord and Tenant Act 1954, Part II — Difficulties as to dates of commencement and expiry of new tenancy — Effect of section 64 when there is an appeal to the Court of Appeal and the possibility of an appeal to the House of Lords — Commencement of new tenancy postponed by Act until after the period of 3 months from expiry of time for appealing — County court judge wished to grant a 7-year new tenancy so that its termination would be near that of leases of adjacent premises forming part of the same estate — His first order was for a tenancy of 7 years which was expected to commence in January 1981, but, owing to an appeal to the Court of Appeal and the possibility of a further appeal, the new tenancy could not commence until May 1982, thus expiring in May 1989, much later than the other leases in the estate — In an attempt to correct this result the judge varied his order by fixing the commencement of the 7-year term as January 15 1981, overlooking the fact that the new tenancy could not commence before May 11 1982 — The Court of Appeal recalled the advice of Wynn-Parry J in Re No 88 High Road, Kilburn, praised as an ‘admirable formula’ by a previous Court of Appeal in Chipperfield v Shell UK Ltd — The order should state the date of expiry of the tenancy, so that this will be certain even if the date of commencement is uncertain by reason of the operation of section 64 — Order accordingly corrected so as to provide that the new tenancy should expire on January 15 1988
This was an
appeal by Vincenzo Turone and Carlo Barbato from an order made by Judge Honig
at Bloomsbury and Marylebone County Court which varied an order previously made
by the judge as to the duration of a new tenancy of premises, used by the
appellants for a hairdressers’ business, at 1a Moxon Street, London W1. The
appellants were the tenants of the respondents, Howard de Walden Estates Ltd.
David Guy
(instructed by Colombotti & Partners) appeared on behalf of the appellants;
Nicholas Patten (instructed by Baileys Shaw & Gillett) represented the
respondents.
Giving
judgment, DUNN LJ said: This appeal raises the question of the appropriate form
of order to be made on the grant of a new tenancy of business premises under
Part II of the Landlord and Tenant Act 1954.
The premises
concerned are 1a Moxon Street, London W1, which form part of the Howard de
Walden Estates in the vicinity of Marylebone High Street. The premises comprise
a ground-floor and part-basement shop used by the tenants for the business of a
gentlemen’s hairdressers. The tenants held as assignees under a lease dated May
14 1970 for the term of 10 years less one day from September 29 1970, that is
to say for a term expiring on September 28 1980.
On December 17
1979 the landlords served a notice under section 25 of the Act specifying
September 29 1980 as the date of termination of the current tenancy. The
tenants served their counternotice on January 15 1980, and on April 1 1980 they
made application for the grant of a new tenancy of the premises. The
application was not resisted save as to duration and terms, including rent. It
came before His Honour Judge Honig, sitting in the Bloomsbury and Marylebone
County Court, on October 14 1980. The tenants had asked for a term of 10 years,
and the principal dispute at the hearing was whether it should be a 10-year
term or whether, as the landlords proposed, a seven-year term.
There was
evidence before the learned judge, which he accepted, that there were adjacent
premises, the leases of which expired at the end of September 1987, and
accordingly the judge came to the
Howard de Walden Estates and were occupied by the same tenants, it would be in
the interests of good estate management that the new lease of 1a Moxon Street
should also expire at approximately the same time. He expressed himself in this
way in his judgment. He said:
[The
landlords] have asked that the duration should be not 10 years but 7 years. Mr
Broomfield
who was the
surveyor employed by the landlords
in his
evidence attempted to justify this, and he explained that the tenants at 1a
Moxon Street are also underlessees of 43b Marylebone High Street and that the
tenure at 43b expires 7 years after September 29 1980. In the interests of good
estate management the letting of the subject premises should also be for 7
years and not 10. Mr Broomfield says also that a lease of 7 years would not
really be less advantageous because of the applicants’ rights to apply for a
new lease. This seems to me a wholly fallacious argument. To have to return to
the court to obtain a renewal is not the same as getting 10 years originally.
However, I see a certain force in the landlords’ argument based on good estate
management in this case, and I conclude that it would be reasonable to grant a
7-year term but I must take account of the fact that it puts the tenant in a
worse position when I decide the rent payable thereunder.
Then the
learned judge went on to deal in great detail with the rent, and at the end of
his judgment said:
As to the
interim rent, it is proper that some discount should be given during the period
from the expiration of the existing term to the commencement of the new term.
In this case the period is fairly nominal bearing in mind that the old
underlease expired in September 1980 and the new lease will commence in about
January 1981. This is not a case where the interim rent should be substantially
tempered. It has to be valued as a tenancy from year to year. I consider,
therefore, that the appropriate interim rent should be £2,400 from September 29
1980.
The order was
accordingly drawn up in the following form:
IT IS ORDERED
that a lease of 7 years be granted at a rent of £2,550 pa and that the rent
review be after 4 years.
AND IT IS
FURTHER ORDERED that the rate of interim rent be fixed at £2,400 pa.
The landlords
appealed on the amount of the rent, alleging that the rent was not sufficiently
high and that the judge had attached too much weight to the reduction in the
term from 10 years to seven years. The appeal was in fact not heard until
January 11 1982, when it was dismissed. This court accepted that the judge was
right to allow some reduction in the rent payable because the period of the
lease had been reduced from 10 years to seven.
The question
then arose as between the respective solicitors as to the date of commencement
of the new lease and the date of its expiration. At this stage it is necessary
to refer to the relevant provisions of Part II of the 1954 Act. They are in
fact conveniently summarised in a report, to which I shall refer in a moment,
of the consolidated cases of Chipperfield v Shell UK Ltd and Warwick
and Warwick (Philately) Ltd v Shell UK Ltd, which are reported only
in (1981) 257 ESTATES GAZETTE at p 1042. The law which is, or should be, well
known to those who practise in this field is conveniently summarised in a
series of propositions in that report. O’Connor LJ, in giving the judgment of
the court, said:
We find it
useful to set out some propositions of law which are well established and were
accepted by experienced counsel appearing in this case.
(1) A business tenancy within Part II of the
Landlord and Tenant Act 1954 does not come to an end on its contractual date;
it continues until the notice to determine it is given either by landlord or
tenant: section 24.
(2) A landlord may determine the tenancy by not
less than six months’ nor more than 12 months’ notice in accordance with the
provisions of section 25.
(3) The tenant may ask for a new tenancy by
notice in accordance with section 26.
(4) If landlord and tenant agree for a new
tenancy the court is not involved and none of the provisions which have caused
difficulty in this case apply: section 28.
(5) Where an application is made to the court for
a new tenancy, the old tenancy does not come to an end until three months after
the date on which the application is finally disposed of: section 64(1). It is
made clear by section 64(2) that the three-month period is not to start until
the date by which the proceedings on the application (including any proceedings
on or in consequence of an appeal) have been determined and any time for
appealing or further appealing has expired.
(6) A landlord may oppose the grant of a new
tenancy on the grounds set out in section 30(1) and not otherwise
— that is not
relevant to this case.
Then section
33 of the Act is set out in full in the report, and the comment on it is as
follows:
The effect of
this section when read with section 64 is that when the court of first instance
makes an order the date when the new tenancy is to begin is uncertain; it may
be postponed for a long time if there is an appeal to the Court of Appeal and
for even longer if there is an appeal to the House of Lords.
On the basis
of those propositions, the solicitors for the tenants took up the position in
correspondence that the new tenancy did not begin until three months after the
date when the time for petitioning the House of Lords on appeal from the
judgment of the Court of Appeal on January 11 1982 expired, namely May 11 1982;
and they went on to say that the judge having granted in accordance with the
order a seven-year tenancy, then that tenancy would not expire until May 11
1989.
The solicitors
for the landlords took up the position that if that were right, and it could
not be seriously contested as a matter of law that it was right, then the whole
purpose of the judge would be frustrated because the judge had made it
perfectly plain in the extract from the judgment which I have read that his
intention was that, whenever the tenancy was to start, it was to terminate at
approximately the same time as the termination of the tenancy of the adjacent
premises 43b Marylebone High Street.
The parties
could not agree about that. So they went back to the learned judge under the
liberty to apply on the landlords’ application that the order of October 14
1980 should be corrected by inserting after the words ‘a lease of 7 years’ the
words ‘expiring on September 29 1987’.
The learned judge
read his notes of the surveyor’s evidence, and he also read an affidavit sworn
by the landlords’ solicitor, and he varied the order, but he varied it so as to
provide that a lease of seven years commencing on January 15 1981 be granted at
a rent of £2,550 a year with a rent review after four years and interim rent as
before at £2,400.
It was
submitted to him, first of all, that he had no jurisdiction to correct the
order. He rejected that on the ground that the order did not correctly express
the intention of the court. In my view he was quite right to reject that
particular submission. If, indeed, the order as drawn did not accurately
reflect his intention, it could be corrected under the slip rule. He then in
his judgment said this:
It was only
when the case was opened
that is, on
October 14 1980
that it was
submitted that the intent of the landlord was no longer to concede a lease of
ten years but only of seven years. The reason given in the evidence was that
the landlords were owners of neighbouring property where the lease would come
to an end on September 29 1987, roughly seven years from the date I was sitting
here in 1980. For reasons of estate management it would be appropriate if the
lease fell in at about the same time. For that reason the landlord decided to
offer only seven years. What I had to consider then was whether the lease
should be of seven years and whether in the light of that agreement some
adjustment should be made in the rent.
I was
intending to give a term of seven years. I was impressed by the argument that
seven years would be the proper term so that the landlord could make proper
plans for this part of the estate but recognised that if I did so I should fix
a rent which would be less than the rent applicable if the term was for ten
years. On that basis I fixed the rent.
Towards the
end of my judgment I expressed the view that the tenancy would commence in
January 1981.
The judge then
said that when he did that he had in mind section 64, to which I have already
referred, and he did not anticipate an appeal. But he then went on to say this:
Had I
anticipated that that would have been the case
namely that
there would have been an appeal
I would not
have said the lease would commence in January 1981 because obviously if the
tenant is right that the case would not be finally disposed of until July 11
1982 to allow for expiration of time to appeal from the Court of Appeal, the
lease would run until July 1989 whereas I had in mind a new term expiring early
in 1988. In those circumstances, giving expression to the intention I then had,
I am not going to fix the end of the term but I am going to fix the
commencement of the term which would be, to take a convenient date, January 15
1981.
It is common
ground in this court that, having regard to the statutory provisions to which I
have referred, the one thing the learned judge could not do was to fix a date
of commencement of the new lease before May 11 1982 because the existing lease,
by reason of the statutory provisions, would not have expired until that date.
The question
is, what could or should the judge have done?
The tenants have appealed to this court, and in their notice of appeal
they have set out a number of grounds of appeal, the first of which is
conceded, namely, that the order which the judge purported to make was an order
which he had no power to make. They went on in their notice of appeal to say
that nor could the judge make an order defining the date of expiration of the
lease because that was a matter which the landlords could have raised on the
appeal to the Court of Appeal in January 1982; the delay was caused wholly by
the landlords’ action in appealing the order of Judge Honig, and in those
circumstances it was too late for them to go back to the learned judge and ask
him to fix the date of termination of the tenancy rather than the date of
commencement.
The appellants
also allege that even if the judge had jurisdiction to make the order which he
made or, alternatively, to make an order the effect of which would be to
determine the tenancy at some date before May 11 1989, he should not have done
it because such an order would have been prejudicial to the appellants by
reason of certain of the covenants in the existing lease which were carried
over into the new lease. In particular there was an absolute covenant against
assigning during the last three years of the term. It was submitted on behalf
of the tenants that if the lease was expressed to expire early in 1988, it
would only be assignable for a period of some 2 1/2 years instead of a period
of four years. Similar points were taken as to other covenants in the lease.
It was also
said that the effect of an order which provided that the lease should be
determined before May 1989 would be that there would be a shorter term granted
and that there should be some further reduction in the rent.
This kind of
situation is one which has given rise to difficulty in the past. It is a
difficulty which was dealt with in the case of Chipperfield v Shell
UK Ltd, to which I have already referred. The difficulty is that it is
impossible to say with precision at the time when the judge of first instance
makes the order granting a new tenancy when that new tenancy will commence; and
if one does not know when it will commence and nothing is said, it is equally
impossible to ascertain when it will expire.
The existence
of this problem, as this court said in the Chipperfield case, was
recognised as long ago as 1959 by Wynn-Parry J in the case of Re No 88 High
Road, Kilburn [1959] 1 WLR 279, and a solution was found. That case was
heard in February 1959. The landlords did not oppose the grant of a new
tenancy, and the issues before the court were the duration and rent. Having
construed the effect of sections 33 and 64 of the Act, the learned judge said
at the top of p 284:
The result is,
therefore, that the new tenancy must begin at the earliest three months from
today, but its commencement will, of course, be further delayed, if the tenants
(as they have every right to do) decide to test this matter before the Court of
Appeal.
I consider
that the result at which I am compelled to arrive is one which is unjust to the
landlord. But I cannot mitigate that injustice as regards rent, for the new
rent can only operate at the end of the period determined by section 64. I can,
however, intervene so far as the term of years is concerned, and I do not
propose to grant a term of 14 years, but to direct that, when the lease comes
to be executed — that is, when the matter is finally disposed of — the term of
the lease to be executed shall be for a term ending on June 24 1972.
The Court of
Appeal said in the Chipperfield case:
It seems that
this admirable formula has been overlooked by the profession. The case was not
cited to the county court in the present cases. We think it is in the interest
of both landlord and tenant that the end date of the new tenancy should be
established when the order is made even though it is not possible to make sure
when it will start. The shorter the time the more important this is. We think
that the duration of the new tenancy should always be expressed in this way.
In the
present cases we think it apparent by her reference to section 64 that the
learned judge was intending to grant new tenancies of three years ending in
July 1983. Had there been no appeal that is what would have happened. It is for
this reason that when we dismissed the appeal on October 10 we varied the order
as to duration by ordering that the new tenancies should end on July 31 1983.
That case was
cited to the learned judge on the application for correction of the order, but
the order in the form in which it was drawn does not follow it. It is difficult
to know why the judge did not do so. However, it is plain, both from his
judgment on October 14 1980 and his judgment on July 20 1982 when the matter
went back to him, that his intention was that any new tenancy should expire
early in 1988, and in my judgment the order ought to be brought in line with
that intention.
The various
objections to which I have referred as to the effect of an order in that form
and the possible prejudice to the defendants, which have been fully deployed by
Mr Guy in this court, seem to me to meet this insuperable difficulty, that once
it is accepted — and the evidence is all one way as to that — that the judge
intended that this tenancy should end early in 1988, then it follows that the
absolute covenant against assignment would start to bite three years before
that, and the same result would occur with all the other covenants so far as
they are linked to the duration of the term.
It seems to me
that the learned judge should have followed the very clear unanimous view of
this court in Chipperfield and have made the order in the form to which
I have referred. I would accordingly allow this appeal. We have power under
section 113 of the County Courts Act 1959 to make a final or other order on
such terms as the court thinks proper to ensure the determination on the merits
of the real question in controversy between the parties.
Very late in
the day a counternotice was put before us suggesting that the order should be
varied in the way to which I have referred. There is no doubt in my mind,
having regard to the express intention of the judge, that in order to determine
the real issues which were before him on October 14 1980 the order should be
corrected so as to provide that the new lease should expire on January 15 1988
with a provision that there should be a review as at January 15 1985. The
provision for interim rent will of course, it is conceded, have to continue
until May 11 1982.
To that
extent, accordingly, I would allow the appeal, and I propose an order in the
form that I have mentioned.
Agreeing,
PURCHAS LJ said: After the landlord’s appeal against the learned judge’s
original order of October 14 1980 in so far as it determined the rent to be
paid and allied matters had been dismissed in this court, difficulties arose
out of the execution of the lease in accordance with the judge’s original
order. The dispute centred over the duration of the term to be granted in the
new lease. Accordingly the landlords applied to the learned judge to clarify
and, if necessary, to correct the original order (dated October 14 1980) under
the slip rule. That was an act which he was clearly empowered to do by virtue
of the incorporation in the County Court Rules of the slip rule in the Rules of
the Supreme Court, Order 20, rule 11.
At the hearing
before the learned judge on July 20 1982 counsel for the landlords invited the
judge to amend the order and provide that the new term should determine on
January 25 1988 with a provision for a review of rent on January 15 1985 on the
basis that this was the original intention expressed by the learned judge in
his judgment given in October 1980.
The fact that
the order of October 14 1980 mentioned a specific term of seven years arose out
of an erroneous assumption made by the learned judge that the date for the
final disposal of the application within the terms of section 64 of the
Landlord and Tenant Act 1954 would be a date early in January 1981. Counsel for
the tenants opposed this application and submitted, among other grounds for his
opposition, that the learned judge did not have power to correct the order by
virtue of the fact that the matter had been to the Court of Appeal and the
point had not been taken on that appeal.
The learned
judge, in my judgment, correctly rejected those submissions, held that he had
power to correct the order that he had made in October 1980, and in a judgment
which he delivered in July 1982 clearly described his intentions as at October
14 1980, the reasons why he had reached those intentions, and in the judgment
said this:
I was
intending to give a term of seven years. I was impressed by the argument that
seven years would be the proper term so that the landlord could make proper
plans for this part of the estate but recognised that if I did so I should fix
a rent which would be less than the rent applicable if the term was for ten
years. On that basis I fixed the rent.
Towards the
end of my judgment I expressed the view that the tenancy would commence in
January 1981. Quite clearly I said that because I had section 64 in mind
and then he
recites the terms of the order
I assumed
that the final disposal by me was the final disposal of the case. I was not
taking into account that the landlord would appeal and would not succeed in
having his case heard until January 1982. Had I anticipated that that would
have been the case I would not have said the lease would commence in January
1981 . . .
It is, in my
judgment, quite unarguable that one can also infer that he would not have granted
a lease of seven years.
On the second
hearing — on the application to correct the original order — the learned judge
was referred to the Chipperfield case, to which my Lord has already
referred and the details of which it is not necessary for me to repeat. It is
unfortunate that the learned judge, from the terms of his judgment,
deliberately did not accept the invitation extended by this court to solve the
difficulties by fixing the end point of the term rather than the starting
point. He said this:
In those
circumstances, giving expression to the intention I then had, I am not going to
fix the end of the term but I am going to fix the commencement of the term
which would be, to take a convenient date, January 15 1981 — so the lease will
be of seven years commencing on January 15 1981.
The new order
will therefore be as follows
then he sets
out again that the order should be varied so as to provide a lease of seven
years commencing on January 15 1981.
That was
faithfully carried into the order when drawn up by the office, and on the face
of this judgment the learned judge erred again in providing for an order which
he had no jurisdiction to make. Nevertheless, it is quite clear what his
intention was, and it is therefore open to this court to correct the original
order of October 14 1980 in the manner in which the learned judge should have
corrected it in order to achieve his express intention as disclosed in the
judgment.
For those
reasons and for the reasons which have already fallen from my Lord, I agree
that, although this appeal should be allowed to the extent indicated, we should
make in substitution a new order in the terms proposed by my Lord.
Editor’s
note. Although the lords justices referred to the appeal being allowed to the
extent indicated, it was agreed that the form of the order was that the appeal
should be dismissed, the judge’s order being varied as indicated in the
judgments on the basis of the respondents’ notice. The new lease was to
determine on January 15 1988, with a rent review on January 15 1985, the
interim rent to be payable from May 12 1982. The respondents were awarded
costs.
