Landlord and tenant — Lease of business premises for a term of three years, ‘term’ being defined to include any statutory continuation thereof under Part II of the Landlord and Tenant Act 1954 — Lease included covenants to repair and to decorate in last year, with a proviso that if the tenants did not obtain an extension of the term under the 1954 Act the provisions as to repair and decoration should be void and the tenants should merely be liable to yield up the demised premises in no worse condition than at commencement of the term — Tenants did not in fact apply for a new tenancy, but at the end of the term a yearly tenancy arose by virtue of continued payment and acceptance of rent — Subsequently the tenancy was terminated by notice to quit — The questions which arose were (a) whether the yearly tenancy had become subject to the repairing and decorating covenants, (b) whether the proviso contingent on a failure to obtain an extension of the term under the 1954 Act operated on the yearly tenancy — Held that the repairing and decorating provisions did apply to the yearly tenancy, but in the events which had happened the proviso operated to render these provisions void — Landlords’ action claiming damages for breach of covenants dismissed
In this action
the plaintiffs, Felnex Central Properties Ltd, were the landlords, who had let
certain land and buildings known as Sheepscar Works, Leeds, to the tenants,
Montague Burton Properties Ltd, for a term of three years from October 18 1971.
The plaintiffs claimed damages alleging breaches by the defendants of repairing
and decorating covenants in the lease.
Henry Brooke
(instructed by Pritchard Englefield & Tobin) appeared for the plaintiff
landlords; David Barnes (instructed by Robert Sheard, solicitor to Montague
Burton Group) represented the defendant tenants.
Giving
judgment, SLADE J said: This is a judgment on certain preliminary issues which
arise in an action in which the plaintiffs are Felnex Central Properties Ltd
and the defendants are Montague Burton Properties Ltd.
By a lease
dated February 14 1972, made between the plaintiffs of the first part, the
defendants of the second part and Burton Group Ltd as surety of the third part,
the plaintiffs demised to the defendants certain land and buildings known as
Sheepscar Works, Leeds, for a term of three years from October 18 1971, at a
yearly rental of £19,850 and subject to the other terms, conditions and
covenants set out in the lease. I need refer only to very few of its
provisions. Clause 1(B)(c) provided that, unless there was something in the
subject or context inconsistent therewith, the expression ‘the term’ should
mean ‘the term of years hereby created together with any statutory continuation
thereof’. Clause 2 contained the demise itself. Clause 3 began with the
following words:
The Tenant
and the Surety to the intent that the obligations hereby created shall continue
throughout the term hereby jointly and severally covenant with the Landlord as
follows:
There then
followed 22 subclauses, which contained a number of covenants on the part of
the tenant and the surety.
I pause to
comment that the use of the phrase ‘shall continue throughout the term’ clearly
indicated that the parties contemplated that the obligations imposed by clause
3 should continue throughout the term of years created by the lease ‘together
with any statutory continuation thereof’ (within the meaning of clause 1(B)(c))
unless the context otherwise required.
Subclause (3)
of clause 3 read as follows:
To keep the
whole of the demised premises including the forecourt yard service area
boundary walls drains sanitary and water apparatus and all fixtures and
fittings and improvements thereto in good and substantial repair and condition
fit for letting to a tenant at a rack rent and to yield up the demised premises
with the fixtures and additions thereto at the expiration or sooner
determination of the said term in good and substantial repair and condition in
accordance with the covenants by the Tenant herein contained AND in
particular (and without prejudice to the generality of the aforegoing covenant)
(a) once during the last year of the said term or
at the sooner determination thereof in such month as shall be from time to time
appointed by the Landlord in that behalf to have professionally painted the
outside wood and iron and any stucco or cement work of the demised premises
with two undercoats of good white lead paint and one top coat of good oil paint
in proper and workmanlike manner and in colours to be approved by the Landlord.
(b) once during the last year of the said term or
at the sooner determination thereof to clean the external stone and brickwork
and other external surfaces of the demised premises and
(c) once during the last year of the said term or
at the sooner determination thereof to have professionally painted all the
inside wood and iron or other metal work usually painted and other internal
portions to be painted of the demised premises with two undercoats of good
white lead paint and one top coat of good oil paint in a proper and workmanlike
manner and also grain marble varnish and clean the parts of the demised
premises usually grained marbled varnished and cleaned and have all inside
walls of the demised premises usually painted or papered professionally washed
and painted with three good coats of good paint or papered with paper of good
quality in a
professionally washed and papered distempered or painted in a proper and
workmanlike manner AND to repair cleanse and maintain and keep in good repair
all roofs fences walls gates pathways gutters sewers and drains belonging to
the demised premises PROVIDED ALWAYS that if the Landlord shall so require by
notice in writing delivered to the Tenant before the last two months of the
penultimate year of the said term the Tenant shall in lieu of the redecorations
provided in this Clause to be done in the last year of the said term and in
full satisfaction of the said obligation pay a sum equal to two additional
quarters’ rent such sum to be recoverable as rent PROVIDED FURTHER that if the
Tenant shall not obtain any extension of the term hereby granted under the
provisions of the Landlord and Tenant Act 1954 or any re-enactment thereof for
the time being in force the foregoing provisions of this subclause shall be
void and of no effect and the Tenant shall yield up the demised premises with
the fixtures and additions thereto at the expiration of the term in no worse a
condition than the same are at the commencement of the term (damage by the
insured risks excepted).
It will thus
be seen that clause 3(3) contained two provisos, of which the second is of
particular importance for present purposes.
Clause 3(5)
began with the following words:
To permit the
Landlord or its agents or surveyors with or without workmen and others and
appliances at all reasonable times during the said term upon prior written
notice
(a) to enter upon the demised premises to take
schedules or inventories of the fixtures and fittings and things to be yielded
up at the expiration or sooner determination of the said term and
(b) to view the state of repair and condition of
the demised premises and of such breaches of covenants and decays defects and
wants of reparation or decoration then and there found for which the Tenant is
liable to give or leave on the demised premises notice in writing to the
Tenant. . . .
It is common
ground that the tenancy created by the lease was one to which Part II of the
Landlord and Tenant Act 1954 applied. Before summarising the subsequent history
of the matter, it will be convenient to set out the relevant provisions of that
Act (as amended). Se4ction 24(1) provides:
A tenancy to
which this Part of this Act applies shall not come to an end unless terminated
in accordance with the provisions of this Part of this Act; and, subject to the
provisions of section twenty-nine of this Act, the tenant under such a tenancy
may apply to the court for a new tenancy —
(a) if the landlord has given notice under the
next following section to terminate the tenancy, or
(b) if the tenant has made a request for a new
tenancy in accordance with section twenty-six of this Act.
Section 25(1)
provides:
The landlord
may terminate a tenancy to which this Part of this Act applies by a notice
given to the tenant in the prescribed form specifying the date at which the
tenancy is to come to an end (hereinafter referred to as ‘the date of
termination’): Provided that this subsection has effect subject to the
provisions of Part IV of this Act as to the interim continuation of tenancies
pending the disposal of applications to the court.
Section 25(5)
provides:
A notice
under this section shall not have effect unless it requires the tenant, within
two months after the giving of the notice, to notify the landlord in writing
whether or not, at the date of termination, the tenant will be willing to give
up possession of the property comprised in the tenancy.
Section 26(1)
provides:
A tenant’s
request for a new tenancy may be made where the tenancy under which he holds
for the time being (hereinafter referred to as ‘the current tenancy’) is a
tenancy granted for a term of years certain exceeding one year, whether or not
continued by section twenty-four of this Act, or granted for a term of years
certain and thereafter from year to year.
Section 26(2)
provides:
A tenant’s
request for a new tenancy shall be for a tenancy beginning with such date, not
more than twelve or less than six months after the making of the request, as
may be specified therein: Provided that the said date shall not be earlier than
the date on which apart from this Act the current tenancy would come to an end
by effluxion of time or could be brought to an end by notice to quit given by
the tenant.
Section 26(5)
provides:
Where the
tenant makes a request for a new tenancy in accordance with the foregoing
provisions of this section, the current tenancy shall, subject to the
provisions of subsection (2) of section thirty-six of this Act and the
provisions of Part IV of this Act as to the interim continuation of tenancies,
terminate immediately before the date specified in the request for the
beginning of the new tenancy.
Section 29(1)
provides:
Subject to the
provisions of this Act, on an application under subsection (1) of section
twenty-four of this Act for a new tenancy the court shall make an order for the
grant of a tenancy comprising such property, at such rent and on such other
terms, as are hereinafter provided.
Section 30 and
a number of succeeding sections contain further provisions relating to
applications to the court for the grant of a new tenancy. Section 64(1)
provides:
In any case
where — (a) a notice to terminate a tenancy has been given under Part I or Part
II of this Act or a request for a new tenancy has been made under Part II
thereof, and (b) an application to the court has been made under the said Part
I or the said Part II, as the case may be, and (c) apart from this section the
effect of the notice or request would be to terminate the tenancy before the
expiration of three months beginning with the date on which the application is
finally disposed of, the effect of the notice or request shall be to terminate
the tenancy at the expiration of the said period of three months and not at any
other time.
In the present
case, the defendants, in the exercise of the rights conferred on them by
section 26 of the Act of 1954, served on the plaintiffs a request for a new
tenancy, which was dated April 11 1974. The date specified in the request for
the beginning of the new tenancy was October 18 1974. Having made this request,
it would have been open to the defendants to apply to the court for a new
tenancy under section 24(1)(b) of the Act. If they had done so, the effect of
the request, read in conjunction with section 64(1) of the Act, would have been
to cause the tenancy to continue until the expiration of three months following
the date on which the application to the court was finally disposed of. In this
event, there would plainly have been a ‘statutory continuation’ of the term
created by the lease, such as was contemplated by the definition of ‘the term’
contained in clause 1(B)(c). In the event, however, the defendants did not
elect to make any such application to the court, with the result that the
tenancy created by the lease terminated on October 17 1974.
In these
circumstances, as at October 18 1974, the respective rights of the parties
would, I think, have been clear. Since the defendants had not, at that point,
obtained any extension of the term granted by the lease under the provisions of
the Act of 1954, the second proviso to clause 3(3) of the lease would have
operated; the plaintiffs would, accordingly, have been entitled to demand that
the defendants should yield up the demised premises, there and then, with the
fixtures and fittings thereto in no worse a condition than the same had been at
the commencement of the term. The defendants, on the other hand, would have
been entitled to claim that they were under no liability to the plaintiffs by
virtue of the earlier provisions of clause 3(3), relating to repair and
decoration and so forth, because in the events which had happened such
provisions would have become ‘void and of no effect’, by virtue of the second
proviso.
As things
turned out, however, the plaintiffs in October 1974 did not elect to exercise
their rights to cause the defendants to deliver up the premises and the
defendants did not exercise their rights to vacate them on these favourable
terms relating to repair and decoration. Instead, as is common ground, the
defendants continued in occupation of the premises under a yearly tenancy,
which arose by implication of law, through the continued payment of rent by the
defendants and the acceptance thereof by the plaintiffs at the same rate as
under the former three-year term.
In due course,
however, on March 27 1975, in exercise of the rights conferred on them by
section 25 of the Act of 1954, the plaintiffs served a letter and notice on the
defendants, the effect of which was to terminate the yearly tenancy on October
17 1975. The defendants duly yielded up possession of the premises, but the
plaintiffs claimed and claim that they did so in breach of the terms of the
covenants set out in clause 3(3) of the lease.
On October 1
1980, the plaintiffs issued a writ endorsed with a statement of claim, in which
they pleaded, inter alia, the facts which
tenancy which arose on October 18 1974 was subject to the covenants contained
in clauses 3(3)(a), (b) and (c) of the lease and that the defendants were in
breach of these covenants. On these grounds they claimed damages.
The defendants
in due course served a defence in which they denied all liability. Among the
points of law on which they relied in this pleading were the contentions that
the provisions contained in clauses 3(3)(a), (b) and (c) of the lease were not
applicable to the yearly tenancy, but that, on the other hand, the second
proviso to clause 3(3) was applicable.
The plaintiffs
served a reply. Among the points of law upon which they relied in this pleading
was the contention that the second proviso to clause 3(3) was applicable only
to the original term granted by the lease and not to the yearly tenancy which
succeeded that term.
In these
circumstances, on February 24 1981, Master Cholmondeley-Clarke made an order by
consent of the parties that there should be a trial of the preliminary issues
as to whether:
A. The yearly
tenancy which arose by reason of the continued occupation by the defendants of
premises known as Sheepscar Works after October 17 1974 was subject to:
(1) the provisions contained in clauses 3(3)(a),
(b) and (c) of the lease made between the parties and dated the 14th February,
1972.
(2) The second proviso to clause 3(3) of the said
lease.
B. In the
events which have occurred, the second proviso to clause 3(3) of the said lease
operated so as to render void in relation to the term granted by that lease the
provisions of clause 3(3) thereof.
The master
ordered that three affidavits should stand as evidence in the action, but I
need not refer to them, because there is no dispute on the facts relevant for
present purposes.
Among the
further orders which the master made, by consent of the parties, were orders
that (a) if the plaintiffs should succeed on issue A(2) they should be at
liberty to enter judgment with an enquiry as to damages to be referred to an
Official Referee; (b) if the defendants should succeed on issue A(2), the
action should be dismissed.
Before
identifying the questions of law to which I think these preliminary issues
directly give rise, I will comment on the construction and effect of the second
proviso to clause 3(3) of the lease.
I think it
clear that the phrase ‘any extension of the term hereby granted under the
provisions of the Landlord and Tenant Act 1954’, which appears in that proviso,
means the same thing as the phrase ‘any statutory continuation thereof’, which
appears in the definition of ‘the term’ contained in clause 1(B)(c) of the
lease. Both section 24(1) and section 64(1) of the Act of 1954 can, in
appropriate circumstances, operate to effect a statutory continuation of a
tenancy. This, I think, is what the parties to the lease must be deemed to have
had in mind, in referring to a ‘statutory continuation’ of the original term in
clause 1(B)(c) and to an ‘extension of the term’ under the provisions of the
Act in clause 3(3). In the course of argument, there was some discussion as to
whether the phrases would also have been apt to include a term created under a
new tenancy granted by the landlord pursuant to an order of the court. I do not
think that the phrases would have been apt to include such a term, which would have
been an entirely new one, distinct from the term granted by the original lease.
Nevertheless, in default of agreement by the parties as to the provisions of
such new lease, the court, in determining them, would have been obliged to have
regard to (inter alia) the provisions of clause 3(3) of the original
lease (see section 35 of the Act of 1954).
In the events
that happened, as I have already pointed out, the defendants obtained no
extension of the original term granted by the lease under the provisions of the
Act of 1954. Instead, as from October 18 1974, they obtained a new annual
tenancy, which arose not by virtue of the statute but by the act of the parties
— in the case of the defendants, by remaining in possession and continuing to
pay rent, and, in the case of the plaintiffs, by allowing them to remain in
possession and by accepting rent.
In these
circumstances, the question arises as to which, if any, of the provisions of
clause 3(3) of the lease must be deemed to apply to the annual tenancy, which
endured from October 18 1974 to October 17 1975. More particularly, the points
which now require decision are these:
(1) Did the second proviso to clause 3(3) of the
lease apply to this annual tenancy?
(2) If the second proviso to clause 3(3) of the
lease did not apply to the annual tenancy, did the other provisions of clause
3(3), with the exception of the first proviso, apply thereto?
It is common
ground that the first proviso to clause 3(3) cannot apply to this annual
tenancy.
There is, I
think, no doubt about the relevant principles. As Lord Hanworth MR said in Lowther
v Clifford [1927] 1 KB 130 (at p 136):
It appears to
me clear that when a tenant holds over, he holds upon the terms of the
agreement or lease, which are not inconsistent with a tenancy from year to
year.
Sargant LJ
expressed the principle in similar words in that case (at p 149 of the report).
What the court is doing in such cases, I think, is to impute an agreement to
the parties. The relevant rule is no more than a presumption and accordingly is
rebuttable, where the facts show sufficiently clearly that the parties’
intentions were of a different nature. However, where a tenant holds over after
the expiration of the term granted by a lease, and the facts do not exclude an
implied agreement to hold on the terms of the original lease, then the court
will imply that he holds subject to all the covenants in the lease which
regulate his relationship with the landlord in his capacity as tenant and are
applicable to the new situation.
There are no
special facts relied on in the present case, beyond the unusual provisions of
the original lease itself. The difficulty lies in deciding which of the
covenants in the lease were applicable to the new situation that arose from
October 18 1974 onwards, when the annual tenancy began.
Three further
authorities were cited in argument. In Bradbury v Grimble & Co [1920]
2 Ch 548, Peterson J held that an option to purchase the reversion contained in
a lease was a provision outside the terms regulating the relations between the
landlord as landlord and the tenant as tenant and, as such, was not one of the
terms of the original tenancy which would be deemed to be incorporated into the
terms of a yearly tenancy which arose when the tenant held over after the expiration
of the lease.
Slightly
closer to the present case is Johnson v Churchwardens and Overseers
of the Parish of St Peter, Hereford (1836) 11 Eng Rep 883. In that case a
lease had been granted in 1807 for a term of 21 years. It contained an express
covenant on the part of the tenants that they would during the term keep the
premises in good and tenantable repair and at the end of the term would leave
them in such repair. When the lease expired in 1828 the tenants held over by
way of an annual tenancy until they gave up possession in 1833. Meantime, in
1829, the plaintiff in the proceedings acquired the reversion subject to the
annual tenancy. At the end of the original term in 1828, the premises were out
of repair, but the arbitrator found that no deterioration in their condition
had occurred between 1828 and 1833, the dilapidations being the same at the
beginning and end of the period. The plaintiff sought to make the defendants
liable on an alleged implied contract to put the premises into such repair as they
were at the commencement of the original term. He failed for two reasons. One
was that the plaintiff was not the original lessor and original contracting
party. The other ground was that the defendant was not liable as a yearly
tenant (as opposed to a tenant under the original lease) to put the premises
into the same state of repair as they were at the commencement of the original
term. As Lord Denman CJ pointed out (at p 885 of the report):
The defendant
became tenant of the premises in that very condition which he is supposed to
have undertaken that they should never fall into.
I take the
reasoning behind this part of the decision to have been that, in all the
circumstances, the covenant in the original lease obliging the tenant to leave
the premises in as good repair as
in the contemplation of the parties as one of the provisions of any agreement
between them to be implied by the court.
I was also
referred to Martin v Smith (1874) LR 9 Exch 50. In that case, by
an agreement not under seal, the parties had agreed that the plaintiffs should
grant and the defendant should take a tenancy of certain premises for seven
years, upon terms that the defendant would in the last year of the term do
certain works to the premises. The defendant entered under the agreement and
occupied and paid rent during the seven-year period. After its expiration the
plaintiffs brought proceedings against him for his failure to do the works in
question. The agreement for the tenancy was void at law as a lease. The court,
however, held that he must be taken to have occupied upon the terms that, if he
should continue his occupation during the whole of the seven-year period, he
would do those things which were by the agreement to be done in the seventh
year, and that he was accordingly liable. In my judgment, however, this case is
far removed from the present for, as Pigott B pointed out (at p 53), the
agreement for a lease was specifically enforceable and there was, therefore,
nothing to prevent the court from giving effect to the intentions of the
parties, as expressed in that agreement, by holding that the stipulation
relating to the doing of work in the last year of the seven-year period was one
of the terms under which the defendant occupied the premises.
Apart from the
statement of principle in Lowther v Clifford, I derived little
assistance from the authorities that have been cited to me. This is scarcely
surprising, particularly because, having regard to the form of the lease in the
present case, the circumstances are somewhat unusual.
Mr Brooke, in
submitting on behalf of the plaintiffs that the annual tenancy which is deemed
to have arisen on October 18 1974 should not be deemed to include the second proviso
to clause 3(3) of the lease, made a number of points. He submitted, in effect,
that it was an exempting provision or a ‘one-off’ provision, as he put it, for
the benefit of the defendants, of which they could have availed themselves if,
and only if, they had vacated the premises at the end of the original
three-year term; and that, since they did not then avail themselves of it, it
was entirely spent after that time.
He submitted
that to incorporate it by implication in the terms of the annual tenancy would
involve a ‘rewriting’ of the second proviso, since the expression ‘the term
hereby granted’ appearing in this proviso clearly was intended to refer to the
original three-year term. He accepted and submitted that there would be nothing
in the least inconsistent with an annual tenancy if the court were to hold that
the earlier covenants in clause 3(3) of the lease, down to the two provisos,
were treated as incorporated in the implied annual tenancy. He submitted,
however (and, as I have said, this is common ground), that it would obviously
be inconsistent with an annual tenancy to incorporate the first proviso as one
of the terms to be implied therein. If the first proviso is not to be
incorporated, he contended, the second proviso likewise should not be deemed to
be incorporated in it. In his submission, just as the option in Bradbury v
Grimble & Co, the exercise of which would have destroyed the
tenancy, was held to be wholly outside the relationship of landlord and tenant
and therefore not one of the terms of the original tenancy on which the lessee
held the property when he became tenant from year to year, so in the present
case the second proviso, which would in certain circumstances extinguish the
earlier repairing covenant, was not one of the terms on which the defendants
held the premises when they became yearly tenants. He submitted that the
question for decision was whether the two provisos were intended to regulate
the parties’ mutual rights on an ad hoc basis or were intended to be
carried over into the ensuing tenancy from year to year. He submitted that, if
the second proviso to clause 3(3) were still held to apply to the annual
tenancy in the events which had happened, there would be scarcely any
circumstances in which the wider repairing covenants in the earlier part of
clause 3(3) and the ancillary provisions of clause 3(5) could have operated,
and that they would have been more or less a ‘dead letter’ from the beginning.
I hope that
this is an adequate summary of the substance of Mr Brooke’s principal
submissions, though it does not in all respects follow the order in which he
made them. It may be convenient to begin by dealing with the last two points to
which I have referred. First, it is, I think, clear that though at the time
when they executed the lease of February 14 1974 the parties intended to set
out the mutual rights and obligations that would govern their relationship both
during the original three-year term and during any ‘statutory continuation
thereof’ (in the sense which I have explained), they were not intending to
legislate for the period of any holding over by the tenant, otherwise than in
the exercise of statutory rights. There is no reason to suppose that the
possibility of any such holding over was present to their minds. Indeed, the
wording of the second proviso and the opening words of clause 3(3), which
oblige the tenant to ‘yield up the demised premises . . . at the expiration or
sooner determination of the said term’ suggest quite the contrary.
For these
reasons alone, I do not accept what I may call the ‘dead letter’ argument.
Quite apart from this, however, it seems to me that, at the time when the lease
was executed, the wider repairing covenants in clause 3(3) down to the second
proviso and the ancillary provisions of clause 3(5) were capable of having
substantial practical importance. The parties clearly contemplated that the
defendants might continue in occupation of the premises after the expiration of
the three-year term in exercise of statutory rights to do so conferred by the
Act of 1954. In my judgment, clause 3(3), when read as a whole (including the
second proviso), was intended to ensure that the defendants would become
subject to the full rigour of the repairing covenants contained in clause 3(3)
if, but only if, they relied on statutory rights conferred by the Act of 1954
or any re-enactment thereof, so as to enable them to continue in occupation of
the premises. To put the matter in more vulgar language, the lease presented
the tenants with a carrot and a stick, designed to encourage them not to rely
on these statutory rights. The carrot consisted of a complete exemption from
liability under any of the covenants contained in clause 3(3) (save the
condition obliging them to yield up the demised premises at the end of the term
in no worse a condition than they were at its commencement), if they gave up
possession of the premises at the end of the three-year term. The stick
consisted of exposure to all these covenants, if they continued in possession
in reliance of statutory rights.
Clause 3(3)
thus made provision for two alternative contingencies. It did not, however,
make provision for the third alternative contingency which, in the event,
happened, namely, that of the tenant continuing in possession after the
expiration of the three-year term by implied agreement of the parties and
otherwise than in the exercise of statutory rights.
It is, I think,
quite plain that the defendants must be deemed to have continued in possession
of the premises after October 17 1974 subject to at least some of the
provisions of clause 3(3) of the lease. It is not conceivable that their
implied agreement should have been one under which the tenants would assume no
obligations whatsoever in relation to the condition of the premises.
Mr Barnes, on
their behalf, while accepting that the opening provisions of clause 3(3) of the
lease, down to the words ‘covenants by the tenant herein contained’, applied to
the annual tenancy, submitted that none of the specific provisions of
subclauses (a), (b) and (c) were capable of applying to the annual tenancy and
should not be deemed to apply to it. This submission (which was made in the
alternative, in case his submissions relating to the second proviso were not
accepted) was based on the proposition that the obligations imposed by
subclauses (a), (b) and (c) had been expressed by the lease to operate not
generally during the term thereby granted, but only during the last year
thereof. He submitted that such an obligation, to do something once in the last
year of the term, was inconsistent with the nature of a tenancy which might
last one year or indefinitely. He sought to obtain support for this submission
from the first proviso to clause 3. While accepting that this first proviso
cannot be appropriately applied to a yearly tenancy, I cannot accept Mr Barnes’
wider submission. Since six months’ notice is required to determine a yearly
tenancy, it would be perfectly possible for the tenant’s obligations under
clauses 3(3)(a), (b) and (c) to be complied with, even in the case of a yearly
tenancy. I
inherently unreasonable that these obligations should have fallen on the tenant
under the yearly tenancy. Accordingly, subject to what I am about to say in
relation to the second proviso, I accept Mr Brooke’s submission that the
covenants contained in subclauses (a), (b) and (c) of clause 3 did apply to the
yearly tenancy.
It is,
however, still necessary to consider whether the second proviso to clause 3(3)
must also be deemed to apply to that annual tenancy. I have already dealt with
a number of Mr Brooke’s grounds for submitting to the contrary. There are,
however, two points with which I have not yet dealt. First, I am not able to
accept his submission, based on Bradbury v Grimble & Co, that
in the original lease the second proviso was not a provision which regulated
the relations between the landlord as landlord and the tenant as tenant. It
seems to me that it did regulate such relations, as much as the provisions of
subclauses (a), (b) and (c) of clause 3, and indeed that those subclauses and
the second proviso can only properly be read in conjunction with one another.
Secondly, I
must deal with his submission that the second proviso can only be deemed to be
incorporated in the annual tenancy if it is ‘rewritten’. Of course, I accept
that the phrase ‘the term hereby granted’, which appears in the proviso, must
in the context of the original lease itself be read as referring merely to the
original three-year term. But, likewise, the obligations imposed by subclauses
(a), (b) and (c) of clause 3, on which the plaintiffs rely, were only expressed
to endure during ‘the term’ as defined by the lease (see the opening words of
clause 3); and ‘the term’, as so defined, does not include a yearly tenancy
arising on a holding-over. In any case, where a holding-over is deemed to be subject
to covenants contained in an original lease, the covenants in question
thereafter have to be read with appropriate adjustments of the language, in so
far as it refers to their duration. I do not think it can properly be said to
involve any ‘rewriting’ of the lease, if the second proviso is treated as
applying to the yearly tenancy, on the footing that ‘the term hereby granted’
refers to the term granted under the yearly tenancy.
I have thus
come to the clear conclusions that (a) all the provisions of clause 3(3), with
the exception of the first proviso, were perfectly capable of applying to the
yearly tenancy which is deemed to have arisen on October 18 1974; (b) with that
exception, they are not in the least inconsistent with such yearly tenancy; and
(c) the parties must be deemed to have contracted on the basis that they would
apply to it.
I am fortified
in this conclusion by the following considerations. As at October 18 1974, and
during the succeeding months, it was still quite possible that the defendants
would invoke their statutory rights to continue in possession of the premises,
if and when the landlords came to serve a notice of termination under section
25. In the circumstances, it would have been natural for them to wish to repeat
what Mr Barnes described in argument as ‘the interplay of bargaining
advantages’ embodied in the earlier covenants contained in clause 3(3) and the
second proviso to that subclause (the ‘carrot and stick’ situation, as I have
described it), when they entered upon the new contractual relationship in or
after October 1974. And these are the intentions which I think should properly
be imputed to them. As things turned out, the defendants never did rely on
their statutory rights to remain in possession, and thus never did obtain any
‘extension of the term’ granted to them, within the meaning of the second
proviso as applied to the annual tenancy, any more than they obtained any
‘extension of the term’ granted to them under the original lease, within the
meaning of that proviso.
In these
circumstances, my decision on the preliminary issues put to me is as follows.
In regard to issue (A) I declare that the yearly tenancy which arose by reason
of the continued occupation by the defendants of the premises after October 17
1974 was subject to (1) the provisions contained in clause 3(3) (a), (b) and
(c) of the lease and (2) the second proviso to clause 3(3) of the lease.
Despite Mr
Brooke’s forceful arguments to the contrary, my decision on issue (B) is that,
in the events which have occurred, the second proviso to clause 3(3) of the
lease operated so as to render void in relation to the term granted by that
lease the provisions of clause 3(3) thereof.
In accordance
with the agreed directions contained in the master’s order, it must therefore
follow that the action is dismissed.
The action
was dismissed with costs.
