Leasehold Property (Repairs) Act 1938, section 1(5) — ‘Leave shall not be given unless the lessor proves’ — Proof required in order to obtain leave — Appeal allowed from decision of Court of Appeal and the ‘formidable authority’ of Sidnell v Wilson in favour of establishing merely a prima facie or arguable case rejected — Battle between landlord and tenant to be fought under section 1(5) of the 1938 Act, not in forfeiture proceedings under section 146 of the Law of Property Act 1925, where only the question of relief will be determined — Thus under section 1(5)(a) the landlord must actually prove that the immediate remedying of a breach of the repairing covenant is necessary in order to save him from the substantial loss or damage which he would otherwise sustain.
respondents, landlords of a disused dry dock, had sought leave under the
Leasehold Property (Repairs) Act 1938 to take proceedings for enforcement of
their right of entry for breach of repairing covenant and for damages on the
grounds set out in section 1(5)(a) of the Act — They had relied on both limbs
of para (a), namely, that the immediate remedying of the breach was requisite
for preventing substantial diminution in the value of their reversion and that
the value thereof had been substantially diminished by the breach — After an
inspection the respondents had served notices under section 146 of the Law of
Property Act 1925 and schedules of dilapidations — Appellant tenants served a
counternotice claiming the benefit of the 1938 Act — Leave to take proceedings
was given to the respondents by a master and, on appeal by the appellants, by
Harman LJ and, on appeal from his decision, by the Court of Appeal — Appellants
now appealed to the House of Lords
Appeal were bound by the decision of the court in Sidnell v Wilson and had
accepted the interpretation of that decision given by Megarry V-C in Land
Securities plc v Receiver for the Metropolitan Police District — The effect of this
view was that the only ‘proof’ that a landlord had to give was to make out a
prima facie or arguable case that at least one of the paras in section 1(5) was
satisfied — There was no need to show in accordance with the balance of
probabilities, in the light of evidence adduced by both parties, that one or
more of the grounds set out in paras (a) to (e) of section 1(5) were satisfied
Lords unambiguously rejected this interpretation of applications under the 1938
Act as being in the nature of interlocutory proceedings — They took their stand
on the express direction in section 1(5) that leave shall not be given ‘unless
the lessor proves’ one of the grounds set out — Parliament had directed that
the battle ‘shall be fought under the Act of 1938 when the landlord seeks leave
to pursue his remedies for breach of covenant, leaving only the question of
relief to be determined under section 146 of the Act of 1925’ — Of course, if
the landlord and tenant agreed that the battle should be fought in the
forfeiture proceedings, then leave to proceed under the 1938 Act might be
granted by consent without the landlord having to adduce detailed evidence at
that stage
however, accepted that the present landlords had been concerned only, applying
the Court of Appeal decision in Sidnell v Wilson, to put before
Harman J a prima facie or arguable case — They now wished to produce further
evidence — It was therefore decided, with the acquiescence of the appellant
tenants, that the respondents’ application for leave should not be dismissed
but should be remitted to a judge other than Harman J to rehear the application
with the benefit of such further evidence as the parties might wish to adduce
and in the light of the opinions expressed by the House — Appeal allowed and
direction given accordingly
The following
cases are referred to in this report.
Hyman v Rose [1912] AC 623
Land
Securities plc v Receiver for the Metropolitan
Police District [1983] 1 WLR 439; [1983] 2 All ER 254; (1983) 46 P&CR
347; [1983] EGD 531; 267 EG 675
Metropolitan
Film Studios Ltd’s Application, Re [1962] 1 WLR
1315; [1962] 3 All ER 508
National
Real Estate & Finance Co Ltd v Hassan
[1939] 2 KB 61
Phillips v Price [1959] Ch 181; [1958] 3 WLR 616; [1958] 3 All ER 386
Rose v Spicer [1911] 2 KB 234
Sidnell v Wilson [1966] 2 QB 67; [1966] 2 WLR 560; [1966] 1 All ER
681, [1966] EGD 48; (1966) 197 EG 363
This was an
appeal by the tenants, C H Bailey plc, from the decision of the Court of Appeal
upholding the decision of Harman J, who had dismissed the tenants’ appeal from
the master’s order, granting the landlords (present respondents), Associated
British Ports, leave to take proceedings to enforce their right of entry under
a lease. The lease was for a term of 99 years from July 31 1950 of the
commercial dry dock at Barry in South Wales. Harman J’s decision is reported at
[1989] 1 EGLR 69 and that of the Court of Appeal [1989] 2 EGLR 83.
Kim Lewison
(instructed by Le Brasseur & Davis, of Newport, Gwent) appeared on behalf
of the appellants; Peter Birts (instructed by the Solicitors’ department,
Associated British Ports) represented the respondents.
In his speech,
LORD TEMPLEMAN said: The appellant tenants, C H Bailey plc, appeal
against an order which granted the respondent landlords, Associated British
Ports, leave to apply for forfeiture of the lease and damages for breach of a
repairing covenant.
By a lease
dated February 15 1955 and made between the landlords’ predecessors in title,
the British Transport Commission, and the tenants, expressed to be in
consideration of the widening and improvement by the tenants of the commercial
dry dock at Barry in Glamorgan, two pieces of land containing 26,040 sq yds
comprising the dry dock, together with certain buildings thereon and a large
number of fixtures and machinery necessary for the operation of the dry dock,
were demised to the tenants for a term of 99 years from July 31 1950 at a rent
which has now reached its maximum of £4,000 per annum. The lease contained a
covenant by the tenants to use the dry dock as and for the purpose of a dry
dock only and not without the consent of the landlords to carry on upon the
demised premises any other trade or business save that of ship repairers. The
lease also contained the following repairing covenant on the part of the
tenants:
To keep the
demised premises and all fixtures works appliances and machinery used in connection
therewith . . . and all junctions and sidings now or which may be laid thereon
in good and substantial repair and condition to the satisfaction of the
[landlord] and so that the said dry dock is maintained at all times in a state
of full efficiency.
As a result of
the decline in demand for ship-repairing facilities in Glamorgan, the dry dock
has not been used since 1983, the buildings, which are largely of corrugated
iron, have become derelict and most of the fixtures and machinery have
disappeared or perished or become obsolete. It is doubtful whether the dry dock
will ever be brought back into use as a dry dock and it is likely that anyone
who in the year 2049 wished to carry on the business of ship repairers or any
other business on the demised premises would construct entirely new buildings
and install modern machinery and equipment. The lease contains the usual
proviso for re-entry if, inter alia, ‘there shall be a breach of any of
the covenants on the part of the lessees or conditions herein contained’.
By a notice
dated August 28 1987, the landlords alleged that the tenants had broken their
repairing covenant (an allegation which could not be gainsaid) and required the
dilapidations specified in the schedule to the notice to be remedied. The cost
of complying with that notice would exceed £600,000. The tenants have submitted
evidence by a chartered surveyor that the buildings and fixtures and machinery
would, in any event, have been useless by the year 2049 and that the diminution
in value of the landlords’ reversion attributable to the present state of
disrepair is £3,500. The landlords’ consultant surveyor does not ‘accept that
the equipment was or is obsolete’ and does not accept that the buildings would
in any event be useless in 2049. He disputes the allegation that the landlords’
reversion has only been diminished by about £3,500. It is abundantly clear that
if the lease were enforced according to its express terms, the lease would be
forfeited and the tenants held liable to pay heavy damages. But statute has
intervened.
Section 14(1)
of the Conveyancing and Law of Property Act 1881, replaced by section 146(1) of
the Law of Property Act 1925, debarred a landlord from exercising his right of
re-entry or forfeiture for breach of covenant until after the landlord has
served a notice specifying the breach, requiring the breach to be remedied and
requiring compensation and after the tenant has failed within a reasonable time
to comply with the notice.
Section 14(2)
of the Conveyancing and Law of Property Act 1881, replaced by section 146(2) of
the Law of Property Act 1925, provides as follows:
Where a
lessor is proceeding, by action or otherwise, to enforce . . . a right of
re-entry or forfeiture, the lessee may, in the lessor’s action, if any, or in
any action brought by himself, apply to the court for relief; and the court may
grant or refuse relief, as the court, having regard to the proceedings and
conduct of the parties under the foregoing provisions of this section, and to
all the other circumstances, thinks fit; and in case of relief may grant it on
such terms, if any, as to costs, expenses, damages, compensation, penalty, or
otherwise, including the granting of an injunction to restrain any like breach
in the future, as the court, in the circumstances of each case, thinks fit.
In Rose
v Spicer [1911] 2 KB 234, at p 241, Cozens-Hardy MR considered section
14(2) of the Conveyancing and Law of Property Act 1881 and thought it expedient
to lay down some general principles with regard to the grant of relief against
forfeiture on the application of the tenant:
In the first
place the applicant must, so far as possible, remedy the breaches alleged in
the notice and pay reasonable compensation for the breaches which cannot be
remedied . . .
On appeal under
the title Hyman v Rose [1912] AC 623, at p 631, Earl Loreburn LC
pointed out that:
. . . the
discretion given by the section is very wide. The court is to consider all the
circumstances and the conduct of the parties. Now it seems to me that when the
Act is so express to provide a wide discretion, meaning, no doubt, to prevent
one man from forfeiting what in fair dealing belongs to someone else, by taking
advantage of a breach from which he is not commensurately and irreparably
damaged, it is not advisable to lay down any rigid rules for guiding that
discretion. I do not doubt that the rules enunciated by the Master of the Rolls
in the present case are useful maxims in general, and that in general they
reflect the point of view from which judges would regard an application for
relief. But I think it ought to be distinctly understood that there may be
cases in which any or all of them may be disregarded. If it were otherwise the
free discretion given by the statute would be fettered by limitations which have
nowhere been enacted. It is one thing to decide what is the true meaning of the
language contained in an Act of Parliament. It is quite a different thing to
place conditions upon a free discretion entrusted by statute to the court where
the conditions are not based upon statutory enactment at all. It is not safe, I
think, to say that the court must and will always insist upon certain things
when the Act does not require them, and the facts of some unforeseen case may
make the court wish it had kept a free hand.
In the present
case, therefore, it would be open for a judge in the exercise of the discretion
conferred on him by section 146 of the Act of 1925 to grant relief against
forfeiture of a lease with nearly 60 years to run without requiring the tenant to
spend over £600,000 without substantial benefit to anybody.
Since 1925
additional steps have been taken by Parliament to protect a tenant against the
consequences of a breach of a repairing covenant. By section 18(1) of the
Landlord and Tenant Act 1927:
Damages for a
breach of a covenant . . . to keep or put premises in repair during the
currency of a lease, or to leave or put premises in repair at the termination
of a lease, . . . shall in no case exceed the amount (if any) by which the
value of the reversion . . . in the premises is diminished owing to the breach
of such covenant . . . and in particular no damage shall be recovered for a
breach of any such covenant . . . to leave or put premises in repair at the
termination of a lease, if it is shown that the premises, in whatever state of
repair they might be, would at or shortly after the termination of the tenancy
have been or be pulled down, or such structural alterations made therein as
would render valueless the repairs covered by the covenant . . .
So there is no
question of the landlords, in the present case, being awarded damages remotely
comparable to the sum exceeding £600,000 which the landlords have required the
tenants to expend.
The provisions
of the Act of 1927 are material in an action for forfeiture, but a tenant faced
with a formidable schedule of dilapidations annexed to a notice under section
146 of the Act of 1925 was obliged to determine which repairs were necessary
and to speculate whether the premises would be demolished or reconstructed or
reoccupied at the end of the term. Then in any action for forfeiture, the
tenant, having committed breaches of covenant, was dependent on relief being
granted to him. In practice many a tenant lost his lease or submitted to an
increased rent or substantial expenditure rather than face the expense and
uncertainty of a forfeiture action.
The Acts of
1925 and 1927 as construed and applied by the courts were found by Parliament
to be insufficient protection for tenants. By the Leasehold Property (Repairs)
Act 1938 further protection was afforded to tenants of long leases of small
houses and that protection was by section 51(1) of the Landlord and Tenant Act
1954 extended so that the tenants are protected in the present case. By section
1 of the Act of 1938, as amended, and so far as material to this appeal:
(1) Where a lessor serves on a lessee under
subsection (1) of section 146 of the Law of Property Act 1925, a notice that
relates to a breach of a covenant or agreement to keep or put in repair during
the currency of the lease all or any of the property comprised in the lease,
and at the date of the service of the notice three years or more of the term of
the lease remain unexpired, the lessee may within 28 days from that date serve
on the lessor a counternotice to the effect that he claims the benefit of this
Act.
In the present
case a notice was duly served under the Act of 1925 and a counternotice was
duly served claiming the benefit of the Act of 1938.
(3) Where a counternotice is served by a lessee
under this section, then, notwithstanding anything in any enactment or rule of
law, no proceedings, by action or otherwise, shall be taken by the lessor for
the enforcement of any right of re-entry or forfeiture under any proviso or
stipulation in the lease for breach of the covenant or agreement in question,
or for damages for breach thereof, otherwise than with the leave of the court.
In the present
case the tenants now appeal against the grant of leave by Harman J [1989] 1
EGLR 69, upheld by the Court of Appeal (Nourse and Stuart-Smith LJJ) [1989] 2
EGLR 83.
(5) Leave for the purposes of this section shall
not be given unless the lessor proves —
(a) that the immediate remedying of the breach in
question is requisite for preventing substantial diminution in the value of his
reversion, or that the value thereof has been substantially diminished by the
breach;
(b) that the immediate remedying of the breach is
required for giving effect in relation to the premises to the purposes of any
enactment, or of any byelaw . . . or for giving effect to any order of a court
or requirement of any authority . . .,
(c) in a case in which the lessee is not in
occupation of the whole of the premises . . . that the immediate remedying of
the breach is required in the interests of the occupier of those premises or of
part thereof;
(d) that the breach can be immediately remedied
at an expense that is relatively small in comparison with the much greater
expense that would probably be occasioned by postponement of the necessary
work; or
(e) special circumstances which, in the opinion
of the court, render it just and equitable that leave should be given.
(6) The court may, in granting or in refusing
leave for the purposes of this section, impose such terms and conditions on the
lessor or on the lessee as it may think fit.
Thus, save in
special circumstances, the landlord must prove that the immediate remedying of
a breach of the repairing covenant is required in order to save the landlord
from substantial loss or damage which the landlord would otherwise sustain. By
section 1(6) the court can specify action to be taken by the tenant or impose
other conditions in granting or withholding leave for the landlord to sue for
forfeiture or damages.
In National
Real Estate & Finance Co Ltd v Hassan [1939] 2 KB 61, at p 78,
Goddard LJ said that the mischief that the Act of 1938 was designed to remedy:
. . . was
speculators buying up small property in an indifferent state of repair, and
then serving a schedule of dilapidations upon the tenants, which the tenants
cannot comply with . . . this is the general mischief, that the speculator buys
at a very low price, turns out the tenants, and gets the reversion which he has
never paid for, which is a great hardship to the tenants.
Parliament
must have concluded that similar mischief was caused to tenants of all
properties because by section 51(3) of the Landlord and Tenant Act 1954, leases
of all properties, except agricultural property, became subject to the Act of
1938. In the present case the landlords are not speculators or purchasers but
have served a notice of dilapidation which can be complied with only by
expenditure exceeding £600,000 which, according to the tenants, will be useless
expenditure to the tenants and of minimal value to the landlords. If the
landlords are allowed to pursue their remedies, the landlords may be able to
recover the demised premises in the year 1990 instead of the year 2049.
Section 1 of
the Act of 1938 prevents the landlord from bringing proceedings for forfeiture
and damages ‘otherwise than with the leave of the court’. The immunity from
suit thus conferred on the tenants is absolute unless the landlords prove that
at least one of the requirements imposed by paras (a) to (e) of
section 1(5) is satisfied. The landlords have only established a prima facie
or arguable case. The landlords have not proved in accordance with the balance
of probabilities in the light of the evidence adduced by both the landlords and
the tenants that the immediate remedying of the tenants’ breach of their
repairing covenant is requisite for preventing substantial diminution in the
value of the landlords’ reversion or that the breach has substantially
diminished that value. The landlords submit that they need only establish a prima
facie or arguable case and must then, upon the true construction of the Act
of 1938, be granted leave to institute proceedings for forfeiture and damages.
In the course of those proceedings the tenants may seek to satisfy the court
that they should be granted relief from forfeiture for their admitted breaches
of covenant on the ground that the immediate remedying of the tenants’ breaches
of covenant is not required for the protection of the landlords. It is said, on
behalf of the landlords, that the authorities and the practice of the courts
support the view that in an application under section 1 of the Act of 1938, the
landlords are entitled to leave to pursue their remedies if the landlords
adduce evidence which consists of material upon which, if it were accepted as
accurate, an arguable case can be put forward. The justification for this
course is said to be the avoidance of duplication and the saving of time and
expense. If the landlords and the tenants produce their best evidence and the
landlords prove the need for immediate remedying of breaches of covenant as
required by the Act of 1938, the same or better evidence must be rehearsed in the
ensuing action for forfeiture if the tenants resist forfeiture or seek relief
from forfeiture. These arguments on behalf of the landlords require careful
consideration in the light of the authorities, some of which provide powerful
support for the landlords’ contentions.
In Phillips
v Price [1959] Ch 181 at pp 188, 189, Harman J decided that the landlord
had proved his case under section 1(5)(a) and he said:
In my view,
the words ‘unless he proves’ cannot mean more than that the court, on balance
of the evidence, is persuaded, and would accept it as proved in a civil action;
and I prefer the evidence of . . . the applicant’s surveyor, on this part of
the case to that of . . . the respondents’ surveyor, who merely says, in a
vague and completely general way ‘I am of opinion that even if Garfield House
had been maintained in proper condition to the fullest extent required by the
covenants of the lease, the bad arrangement and age of the property would have
rendered it just as unfit for human habitation as it is now.’
The judge then
analysed the conflicting evidence and gave leave to the landlord, under the Act
of 1938, to take proceedings for forfeiture and damages. It does not appear to
have occurred to the judge or to the legal advisers of the litigants that the
issues under the Act of 1938 would be duplicated in the subsequent forfeiture
proceedings or that it was undesirable or inconvenient for the landlord to do
more than establish a prima facie or arguable case under section 1(5)(a)
of the Act. A similar approach was taken by Ungoed-Thomas J in Re
Metropolitan Film Studios Ltd’s Application [1962] 1 WLR 1315.
However, in Sidnell
v Wilson [1966] 2 QB 67 the lease contained a covenant by the landlord
to keep the exterior of the building in good and tenantable repair and to do
such structural repairs as might be necessary for the convenient occupation of
the building. The tenant covenanted to keep the building in good and tenantable
repair. The landlord contended that dry rot which caused the collapse of a floor
was due to a breach of the tenant’s covenant. The tenant contended that the dry
rot was due to a breach of the landlord’s covenant. It was clear that if the
tenant was in breach, then the value of the reversion had been substantially
diminished. Counsel for the tenant conceded that the landlord need only show a prima
facie case of breach by the tenant. This concession was accepted by the
court. Lord Denning MR said at pp 77-78:
After all,
the application for leave is only an interlocutory application. It cannot be
supposed that the landlord has to prove his whole case as if it were the trial.
It must be sufficient if he shows a prima facie case, by which I mean a
case which, if believed, would enable him to succeed. . . . The judge treated
this application almost as the trial of the action by requiring a breach to be
proved. Whereas all the landlord had to show was a prima facie case.
Harman LJ said
at p 79:
. . . the
county court judge approached the matter on the footing that it was necessary
that it should be proved before him that a breach had occurred. If that be
right, one of the effects of the Act is to make two actions flourish where one
flourished before. Having proved that a breach has occurred for the purpose of
getting leave, you have to prove it all over again for the purpose of the
action. I do not think that can have been meant. What must have been meant was
that the applicant must show a prima facie case and it is enough if that
is what he does. . . . This was a case which was to be judged as interlocutory
applications on motion are judged. If the applicant shows a case for it, he is prima
facie entitled to have his relief. That decides finally nothing between the
parties.
Diplock LJ
said at p 80:
Parliament
cannot have intended by its provisions for application for leave in subsection
(5) that there should be two trials of the matter. It must, I think, follow,
therefore, that when in subsection (5) it is said that ‘leave for the purposes
of this section shall not be given unless the lessor proves’, and then (a)
to (e), that that cannot require a standard of proof of the same
character as that which is required in the trial of an action. I agree with my
brethren that he must be satisfied that there is material on which, if it were
accepted as accurate, an arguable case can be put forward that the conditions
set out in the subsection are fulfilled. I use the expression ‘arguable case’
rather than the expression ‘prima facie case’ because the difficulty of
the latter expression seems to me to be that it invites an inquiry at the
hearing of the application itself into evidence contradicting what in the first
instance is a prima facie case and therefore would lead to a complete
trial of the action or is capable of leading to a complete trial of the action
on the application for leave. I think it is sufficient that the lessor should
show that there is a bona fide arguable case that the conditions or one or
other of them set out in the paragraphs of the subsection are fulfilled, and
that if he does that, it is no function of the county court judge on the
application for leave to go into the merits of the matter and hear rebutting
evidence as if the trial were taking place then. The hearing of the application
is not the occasion for resolving conflicts of evidence, for non constat
that the resolution would be the same in the light of further evidence which
each party would be entitled to call at the trial itself.
In Land
Securities plc v Receiver for the Metropolitan Police District
[1983] 1 WLR 439 at p 443, Sir Robert Megarry V-C, applying the decision in Sidnell
v Wilson, rejected an argument that:
The question
whether one of the heads of section 1(5) was satisfied would have to be
determined once and for all on the application for leave to bring the
proceedings, and so, unlike the question whether there was any breach of
covenant, would not arise for a second time at the trial.
In the present
case Harman J, and the Court of Appeal, followed, as they were bound to do, the
guidance of the Court of Appeal in Sidnell v Wilson.
As against the
formidable authority of a powerful Court of Appeal in Sidnell v Wilson,
there stands the express direction in section 1(5) of the Act of 1938 that the
landlord shall prove that the immediate remedying of a breach of a repairing
covenant by the tenant is necessary to prevent the landlord coming to harm. The
battle between landlord and tenant must be fought at some stage and Parliament
has directed that it shall be fought under the Act of 1938 when the landlord
seeks leave to pursue his remedies for breach of covenant, leaving only the
question of relief to be determined under section 146 of the Act of 1925. If
the landlord fails to prove that he is entitled to pursue his remedies, the
tenant is entitled, as of right, to a dismissal of the landlord’s application
under the Act of 1938; the tenant is immediately relieved from the threat of
forfeiture implicit in the section 146 notice served on him and from the
expense and uncertainty of forfeiture proceedings in which, if there are many
allegations of breach of covenant, the tenant must rebut every single
allegation of breach or plead for mercy in respect of any breach which is
proved. If the landlord, applying under the Act of 1938, proves that the tenant
is in breach of his repairing covenant and that the immediate remedying of the
breach is necessary, the tenant will know what steps he must take to avoid
forfeiture. In an appropriate case, the court, hearing the application under the
Act of 1938, can itself specify the breaches which must be remedied and, for
example, may, in exercise of the power conferred on the court by section 1(6)
of the Act of 1938, adjourn or dismiss the application of the landlord on
condition that certain repairs are carried out. Of course, if landlord and
tenant agree that the battle shall be fought in forfeiture proceedings, then
leave to proceed under the Act of 1938 may be granted by consent without the
landlord adducing detailed evidence at that stage. But if the landlord and
tenant do not agree, then the landlord must attempt to prove his case under the
Act of 1938 and, if he fails to do so, there will be no forfeiture proceedings.
If the landlord does prove his case under the Act of 1938, I do not accept that
it is necessary or proper that the battle need or should be fought all over
again on the hearing of forfeiture proceedings or that, in practice, additional
expense and delay will result. In any event, the Act of 1938 requires that the
landlord shall prove his case; the Act of 1925 requires that the tenant shall
satisfy the court that he is entitled to relief.
In the present
case the tenants have adduced expert evidence that damage to the reversion is
not substantial and that, in any event, immediate remedying of the breaches of
covenant at a cost of £600,000 is not requisite for preventing substantial
damage to the value of the reversion and is wholly out of proportion to the
extent of the damage to the reversion. The tenants’ evidence is that the builders’
fixtures and machinery are bound to be obsolete by the year 2049, useless for
the purposes of a modern dry dock and ship-repairing business and useless for
any other purpose. The landlords’ expert brushes aside the evidence adduced by
the tenants and asserts that, in effect, serious breaches of a repairing
covenant must damage the reversion. No doubt this proposition is true in most
cases but has not been proved to be true in the peculiar circumstances of the
present. The landlords appear to be asking for £600,000 to be spent on the
demised premises to no good purpose and the tenants appear to be determined to
pay £4,000 per annum until 2049 for premises for which there is no business use
permitted by the lease. The evidence discloses that development plans are
contemplated for the docks at Barry; if the landlords can forfeit the lease
now, the value of the reversion will be much enhanced. If the tenants can
resist forfeiture now, their lease will be of some substantial value because
their consent or co-operation will be required and some compensation will be
payable if the demised premises are to be included in future development. The
landlords are getting and will continue to get their rent of £4,000 a year. In
the circumstances it is difficult to accept that the landlords or any
purchasers of the reversion are entitled to be frightened about what the
position will be in the year 2049. Section 1 of the Act of 1938 is there to
protect a tenant from a landlord whose only object is to turn out the tenant 59
years in advance.
The landlords
wish to produce further evidence because, as their counsel, Mr Birts, pointed
out, they were only concerned, applying the decision of the Court of Appeal in Sidnell
v Wilson [1966] 2 QB 67, to produce before Harman J a prima facie
or arguable case. The landlords would, in any event, be able to launch a fresh
application under the Act of 1938 and in these circumstances Mr Lewison, who
appeared on behalf of the tenants, is content that the landlords’ present
application under the Act of 1938 should not be dismissed, for what it is
worth, but shall be remitted to a judge other than Harman J to rehear the
application in the light of the opinions expressed by your lordships and with
the benefit of such further evidence as the parties may wish to adduce. Mr
Lewison earned the gratitude of your lordships by a model address on behalf of
the tenants, setting forth with clarity and brevity the relevant statutory
provisions and authorities and making cogent submissions with skill and moderation.
Mr Birts responded by urging with force the desirability of adhering to earlier
Court of Appeal authority and present practice. Mr Birts, however, was unable
to persuade me that when Parliament directed that the landlords should prove
their case, Parliament intended that the landlords should only produce a
plausible case which the tenants were not permitted to controvert. I would
allow the appeal, set aside the order of Harman J affirmed by the Court of
Appeal, and direct that the landlords’ application under the Act of 1938 be
reheard with leave to both parties to adduce further evidence. The landlords
must pay the tenants’ costs in the courts below and in this House.
LORDS
BRIDGE OF HARWICH, GRIFFITHS, OLIVER OF AYLMERTON
and LOWRY agreed and did not add anything.
