Counter-Inflation (Business Rents) Orders 1972 and 1973–Leases to Minister of Works and subsequently to Secretary of State for the Environment–Whether occupation by Crown as tenant for the purpose of a business–Whether Crown or Secretary of State tenant–Premises occupied by government servants–‘Crown’ a term of art in constitutional law–Tenant the Crown in the sense of the government–Order applicable and rents frozen during standstill period–Court of Appeal’s decision reversed
This was an
appeal by the Department of the Environment from a decision of the Court of
Appeal who had held in favour of respondent landlords, London County Freehold
& Leasehold Properties Ltd and MEPC (Mayfair Properties) Ltd, that the
Counter-Inflation (Business Rents) Orders 1972 and 1973 did not apply to
tenancies of Keysign House, Oxford Street, and 17 North Audley Street, London
W1. The Department did not proceed with an appeal relating to an action by Town
Investments Ltd in respect of 11 and 12 Buckingham Gate, London SW1. The
actions had all been commenced by originating summonses seeking declarations
that the orders did not apply.
N C H
Browne-Wilkinson QC and Peter Gibson (instructed by the Treasury Solicitor)
appeared for the appellant department; S A Stamler QC and Christopher Priday
(instructed by Beachcroft, Hyman Isaacs) represented the respondent landlords.
In a speech
allowing the appeal, LORD DIPLOCK said: On November 6 1972, and at all material
times thereafter, two buildings known as Keysign House, Oxford Street, and 17
North Audley Street, in London, were occupied as government offices. November 6
1972 was the starting date of the rent freeze imposed by the Counter-Inflation
(Business Rents) Order 1972, made under section 2(4) of the Counter-Inflation
(Temporary Provisions) Act 1972, and continued by the Counter-Inflation
(Business Rents) Order 1973, made under Part II of the Counter-Inflation Act
1973, which replaced the earlier statute. These orders, as their names
indicate, dealt with rents payable under ‘business tenancies’ and their effect
was to prohibit a landlord, during a standstill period which ultimately expired
in March 1975, from recovering rent at a rate in excess of the rent payable on
November 6 1972. Each of the orders contained a definition of ‘business
tenancy’ and a statement of what was included in the expression ‘business’ in
terms that are identical so far as they are relevant to the facts of these
appeals:
‘business
tenancy’ means any tenancy where the property comprised in the tenancy is or
includes premises which are occupied by the tenant and are so occupied for the
purposes of a business carried on by him or for those and other purposes . . .
.
‘business’
includes a trade, profession or employment and includes any activity carried on
by a body of persons, whether corporate or unincorporate.
The only issue
before this House has been whether during the standstill period the premises to
which these appeals relate were the subject of ‘business tenancies’ within the
meaning
was the tenant of the premises? (2) Were
the premises or any part of them occupied by the tenant? And, if so (3) was the tenant’s occupation
for the purposes of a business carried on by him or for those and other
purposes?
The leasehold
title under which Keysign House was held on November 6 1972 was an underlease
entered into in 1952. The landlord was the predecessor in title of the
respondents, London County Freehold & Leasehold Properties Ltd; the tenant
was described as follows:
The Minister
of Works (hereinafter called ‘the lessee’ which expression where the context so
admits includes his successors and assigns) for and on behalf of Her Majesty.
In the case of
17 North Audley Street, the landlord was the predecessor in title of the
respondent, MEPC (Mayfair Properties) Ltd. The tenant was described as follows:
The Minister
of Works (hereinafter called ‘the tenant’ which expression shall where the
context so admits include his assigns) for and on behalf of Her Majesty.
Both of these
leases expired upon December 25 1972. Fresh leases for a term of five years
from December 25 1972 were entered into in substantially the same terms as
those which they replaced. The description of the lessee/tenant in the new
leases was the same as in the former leases of 1952 except that the description
‘Secretary of State for the Environment’ was substituted for that of ‘Minister
of Works.’ This change in title was a
consequence of the Secretary of State for the Environment Order 1970, made
under the Ministers of the Crown (Transfer of Functions) Act 1946. By this order
the former Ministry of Works, whose title had in 1962 been changed to that of
Ministry of Public Building and Works, was dissolved and all the functions of
the Minister of Public Building and Works, was dissolved and all the functions
of the Minister of Public Building and Works were transferred to the Secretary
of State for the Environment, to whom were also transferred all property,
rights and liabilities to which that Minister was entitled or subject before
the coming into operation of the order. Included in the functions of the
Minister of Public Building and Works transferred to the Secretary of State for
the Environment was the provision of accommodation for civil servants employed
in departments of government other than the Ministry of which that Minister was
head. At all material times the buildings that are the subject of these appeals
were used to accommodate civil servants who were not engaged in the work of the
Ministry of Public Building and Works or the Department of the Environment, but
were engaged in the work of other government departments.
The rents
reserved under the 1952 leases and current on November 6 1972 had been in the
case of Keysign House £39,690, and in the case of 17 North Audley Street
£17,500. Under the new leases the rents reserved from December 25 1972 were in
the case of Keysign House £369,500, and in the case of 17 North Audley Street
£190,000, viz more than 10 times as much as previously. If the
Counter-Inflation Orders of 1972 and 1973 applied to the premises, only the
former rents were payable in respect of the standstill period. The landlords
claim that these orders did not apply to either of the premises. They took out
an originating summons for a declaration to this effect and for a declaration
that the rents payable after December 25 1972 were the rents payable under the
new leases and not the lower rents payable under the 1952 leases. The summonses
were heard together before Foster J. The main ground on which he found in
favour of the landlords was that the Crown was not entitled to avail itself of
the provisions of either of the Acts or Orders in Council made thereunder,
because it is expressly stated in each of the Acts that it does not bind the
Crown. This ground of decision was not accepted by the Court of Appeal as
correct in law, and has not been relied upon in your Lordships’ House. In view
of the provisions of section 31 (1) of the Crown Proceedings Act 1947, I need
say no more about it.
The appeal by
the Department of the Environment from the judgment of Foster J was dismissed
by the Court of Appeal upon another ground. They held that neither of the
premises was the subject of a ‘business tenancy’ within the meaning of the
Counter-Inflation Orders. Their answers to the three questions that are posed
by this appeal were (1) the tenant is the Secretary of State for the
Environment and not the Crown; (2) no part of the premises was occupied by the
tenant, and (3) no part of the premises was occupied for the purposes of a
‘business.’
Accordingly, I
turn to these three questions:
1. Who was the tenant of the
premises?
In the Court
of Appeal this was treated as a pure question of construction of the leases
themselves, as if Her Majesty, the Minister of Works, and the Secretary of
State for the Environment were all persons to whose relationships to one
another and to third parties the ordinary principles and concepts of private
law applied. If this were right, it would involve a conflict between, on the
one hand, the statement in the lease that the Minister or the Secretary of
State is party thereto ‘for and on behalf of Her Majesty’ and, on the other
hand, the inclusion in the definition of ‘the lessee’ in the case of Keysign
House, of ‘his successors and assigns’ and, in the definition of ‘the tenant’
in the case of 17 North Audley Street, of ‘his assigns.’ This conflict was pointed out by Buckley LJ
and Sir John Pennycuick and resolved by them by-holding that the tenant was the
Minister or Secretary of State and not the Crown, and that the words ‘for and
on behalf of Her Majesty’ were either a mere indication that he was acting in
his corporate capacity as Minister or Secretary of State (Buckley LJ and Sir
John Pennycuick) or that he took the leasehold interest as trustee for the
Crown (Buckley LJ and Lawton LJ).
My Lords, the
fallacy in this argument is that it is not private law but public law that
governs the relationships between Her Majesty acting in her political capacity,
the government departments among which the work of Her Majesty’s government is
distributed, the Ministers of the Crown in charge of the various departments
and civil servants of all grades who are employed in those departments. These
relationships have in the course of centuries been transformed with the
continuous evolution of the constitution of this country from that of personal
rule by a feudal land-owning monarch to the constitutional monarchy of today;
but the vocabulary used by lawyers in the field of public law has not kept pace
with this evolution and remains more apt to the constitutional realities of the
Tudor or even the Norman monarchy than to the constitutional realities of the
20th century. To use as a metaphor the symbol of royalty, ‘the Crown,’ was no
doubt a convenient way of denoting and distinguishing the monarch when doing
acts of government in his political capacity from the monarch when doing
private acts in his personal capacity, at a period when legislative and
executive powers were exercised by him in accordance with his own will. But to
continue nowadays to speak of ‘the Crown’ as doing legislative or executive
acts of government, which, in reality as distinct from legal fiction, are
decided on and done by human beings other than the Queen herself involves risk
of confusion. We very sensibly speak today of legislation being made by Act of
Parliament–though the preamble to every statute still maintains the fiction
that the maker was Her Majesty and that the participation of the members of the
two Houses of Parliament had been restricted to advice and acquiescence. Where,
as in the instant case, we are concerned with the legal nature of the exercise
of executive powers of government, I believe that some of the more
Athanasian-like features of the debate in your Lordships’ House could have been
eliminated if instead of speaking of ‘the Crown’ we were to speak of ‘the
government’–a term appropriate to embrace both collectively and individually
all of the ministers of the Crown and parliamentary secretaries under whose
direction the administrative work of government is carried on by the civil
servants employed in the various government departments. It is through them
that the executive powers of Her Majesty’s government in the United Kingdom are
exercised, sometimes in the more important administrative matters in Her
Majesty’s name, but most often under their own official designation. Executive
acts of government that are done by any of them are acts done by ‘the Crown’ in
the fictional sense in which that expression is now used in English public law.
The executive
acts of government with which the instant case is concerned are the acceptance
of grants from lessors who are private subjects of the Queen of leasehold
interests in premises for use as government offices and the occupation of the
premises by civil servants employed in the work of various government
departments. The leases were executed under his official designation by the
minister of the Crown in charge of the government department to which, for
administrative and accounting purposes, there is entrusted the responsibility
for acquiring and managing accommodation for civil servants employed in other
government departments as well as that of which the minister himself is the
official head. In my opinion, the tenant was the government acting through its
appropriate member or, expressed in the term of art in public law, the tenant
was the Crown. I do not find it necessary for disposing of the instant appeals
to trace the history of the practice of taking grants of freehold or leasehold
interests of land required for government purposes in the names of
commissioners or heads of government departments whether corporate or
unincorporated. With the increase of government business in the early part of
the 19th century the technicalities of conveyancing made it inconvenient for
the King himself to be an executing party to conveyances and his direct
acceptance of a leasehold tenure with its implication of service due to a
feudal superior was regarded as incompatible with his supremacy. Accordingly,
one finds from the beginning of the 19th century onwards a whole variety of
statutes providing for the acquisition of land required for the purposes of a
particular government department or of the government generally, in the name
and under the seal of designated commissioners or ministerial heads of
departments. In these 19th century statutes there is no consistency in the
description of the capacity in which the persons so designated are to be
executing parties to conveyances of the freehold and leasehold interests which
they are authorised to acquire. Sometimes the interest is referred to as being
held ‘on behalf of His/Her Majesty,’ occasionally as being held ‘in trust for
His/Her Majesty.’ The use of the
expression ‘in trust,’ though it does not appear in any of the statutes under
which the Secretary of State for the Environment, the Minister of Works, or any
of their predecessors obtained the power to acquire land for government
purposes, has nevertheless been relied upon by the respondents as showing that
whenever an interest in land to be used for government purposes is conveyed to
an officer of state in his official capacity, the interest so conveyed becomes
subject to all the incidents of a trust in private law; the legal estate is
vested in the officer of state who executes the conveyance, only an equitable
interest is vested in the Crown and the relationship between him and the Crown
is subject to the equitable jurisdiction of the courts.
My Lords, I
would not exclude the possibility that an officer of state, even though acting
in his official capacity, may in some circumstances hold property subject to a
trust in private law for the benefit of a subject; but clear words would be
required to do this and, even where the person to be benefited is a subject,
the use of the expression ‘in trust’ to describe the capacity in which the
property is granted to an officer of state is not conclusive that a trust in
private law was intended; for ‘trust’ is not a term of art in public law and
when used in relation to matters which lie within the field of public law the
words ‘in trust’ may do no more than indicate the existence of a duty owed to
the Crown by the officer of state, as servant of the Crown, to deal with the
property for the benefit of the subject for whom it is expressed to be held in
trust, such duty being enforceable administratively by disciplinary sanctions
and not otherwise: Kinloch v Secretary of State for India (1882)
7 App Cas 619 per Lord Selborne LC at pp 625-626. But even if the legal
relationship of trustee and cestui que trust under a trust in private law is
capable of existing between an officer of state in his official capacity and a
subject, the concept of such relationship being capable of existing between him
as trustee and the Crown as cestui que trust is in my view wholly
irreconcilable with the legal nature in public law of the relationship between
the Crown and its servants or, in more modern parlance, the government and the
ministers who form part of it.
In leases such
as those that are the subject of the instant appeal where the person designated
as grantee is a minister of the Crown in charge of a government department, the
references to ‘successors and assigns’ or ‘assigns’ simpliciter as being
included in the definition of ‘lessee’ or ‘tenant’ are explicable as referring
to any other minister to whom the functions of the designated minister may be
transferred under the Ministers of the Crown (Transfer of Functions) Act 1946,
or otherwise, and, in the case of ‘assigns,’ also to subjects to whom the
leasehold interest may be assigned. Even if they were not, I would not treat
their presence in the parentheses as sufficient to displace the ordinary
concepts of public law as to the relationship between the government and the
ministers who form part of it.
2. Were the premises or any
part of them occupied by the tenant?
At all
relevant times the persons physically present on the premises were government
servants. Expressed in the terms of art used in public law their status was
that of ‘servants of the Crown’ and of no one else. The relationship of master
and servant does not exist between a minister in charge of a government department
and any other government servant employed in that department in whatever grade
of the civil service he may be. They are both fellow servants of the Crown. The
use of the premises by government servants for government purposes thus
constituted occupation of the premises by the Crown. Holding as I do that the
Crown was the tenant of the premises, I would accordingly answer this question
‘Yes.’
3. Was the tenant’s
occupation for the purposes of a business carried on by him or for those and
other purposes?
The answer to
this question depends upon how broad a meaning is to be ascribed to the word
‘business’ in the definition of ‘business tenancy’ in the two Counter-Inflation
Orders. The word ‘business’ is an etymological chameleon; it suits its meaning
to the context in which it is found. It is not a term of legal art and its
dictionary meanings as Lindley LJ pointed out in Rolls v Miller
(1884) 27 ChD 71 at p 88 embrace:
almost
anything which is an occupation as distinguished from a pleasure–anything which
is an occupation or a duty which requires attention is a business.
That was said
by the Lord Justice in connection with the construction of a covenant in a
lease against the carrying on of any trade or business on the demised premises;
and ever since there has been a consistent line of cases in which this broad
meaning has been ascribed to the word ‘business’ in the context of covenants in
leases restricting the permitted user of the demised premises. It appears to me
to be clear beyond argument that the use made of the premises that are the
subject of the instant appeals to accommodate civil servants engaged in what
consistently with common usage could be quite properly described as ‘Government
business,’ would constitute a breach of a covenant in a lease against
permitting
through its servants is carrying out there a duty which requires attention.
The wide
interpretation to be put upon the word ‘business’ in restrictive covenants of
this kind is dictated by the evident object of the covenants. The evident
object for which powers were conferred by the Counter-Inflation Acts 1972 and
1973 to make orders restricting increases of prices, dividends and rents, was
to curb inflation by preventing more money coming into circulation without any
corresponding increase in production of goods or services. Separate
Counter-Inflation Orders were made under the Acts, dealing respectively with
business rents, agricultural rents and the rents of dwelling-houses. The
mischief against which these orders were directed did not depend upon who the
tenant was or the use made of the premises by him but upon the receipt by his
landlord of a greater sum of money in return for what produced no greater
contribution to the national wealth than it had produced before. This would
suggest that the evident object of the two Counter-Inflation (Business Rents)
orders called for a broad construction of the word ‘business’ in the definition
of the tenancies to which they applied, so as to embrace all tenancies save
those which fell within the scope of one of the two other orders dealing
respectively with the rents of agricultural and residential tenancies or were
excluded from the definition of ‘business tenancies’ by express words–as were
‘building leases’ under the 1973 order. I would therefore hold it to be
legitimate to give to the word ‘business’ in the definition of ‘business
tenancy’ in the two orders a meaning no less wide than that which it has been
interpreted as having in covenants in leases restricting the user of demised
premises. This meaning is, in my view, wide enough to include the purposes for
which Keysign House and 17 North Audley Street were occupied by the Crown.
I do not
therefore find it necessary to rely upon any extension of the ordinary meaning
of the word that may be the result of the express inclusion of ‘a trade,
profession or employment’ or of ‘any activity carried on by a body of persons,
whether corporate or unincorporate.’
Nevertheless these express inclusions serve not only to underline the
breadth of meaning to be given to the word ‘business’ in the orders but also to
involve anomalies which cannot have been intended, if that word is not wide
enough with or without the words of inclusion to embrace the exercise of
functions of government by servants of the Crown. Functions of government in
the United Kingdom are distributed, on no very consistent pattern, between the
central government and local governmental and other statutory authorities composed
of bodies of persons, either corporate or unincorporate. The second part of the
words of inclusion clearly embrace the activities of these authorities but not
those of the Crown which is in law a corporation sole. It would be remarkable
were it intended in the order to exclude from the expression ‘business’ an
activity which would fall within it when carried on by servants of a
corporation aggregate but not if carried on by servants of the Crown simply
because it is a corporation sole. It may be that the reconciliation of the
different phraseology used in the two parts of the inclusion clause to describe
things done by or on behalf of bodies of persons and things done by or on
behalf of one, is to be found in the presence in the first part of the clause of
the expression ’employment’–a word hardly slightly less protean than ‘business’
itself. When used in relation to a natural person ’employment’ seems to me to
be broad enough to include anything which, in Lord Justice Lindley’s phrase, is
an occupation as distinguished from a pleasure, and to be understood in the
same meaning as the word ‘activities’ used in relation to bodies of persons in
the second part of the inclusion clause.
It remains to
mention two further arguments which have been advanced from excluding the
business of government from the meaning of the word ‘business’ as it is used in
the Counter-Inflation Order. The first can be disposed of shortly for only
minor importance was attached to it by the Court of Appeal. It is that the
definition of ‘business tenancy’ and the inclusion clause referring to
‘business’ were lifted by the draftsmen of the orders from section 23(1) and
(2) of the Landlord and Tenant Act 1954; and that section 56(3) of the same Act
contains specific provisions applying it to tenancies ‘held by or on behalf of
a government department’ and ‘occupied for any purposes of a government
department.’ In an Act which contained
provisions for dealing with security of tenure of tenants of business premises
by the grant of new leases and rights to compensation when a new lease could
not be granted, the fact that the draftsman of the Act has thought it prudent
to make specific provision as to its application to premises occupied for
government purposes is a frail support for the contention that but for those
specific provisions the Act would not have applied to such premises at all and
therefore tenancies of them cannot have fallen within the definition of
‘business tenancy’ in the Act, even though in the ordinary meaning of the words
of the definition, they would have been apt to include such tenancies. But any
force that there might be in this contention is wholly lost when it is sought
to use it to cut down the ordinary meaning of those words when used in other
legislation passed with an entirely different object.
However, a
matter to which all three members of the Court of Appeal appear to have
attached importance was the presence of the indefinite article ‘a’ in the
reference in the definition of business tenancy to ‘a business carried
on by him’ [sic the tenant]. Both Buckley and Lawton LJJ were I think
influenced by the conclusion they had already reached that the relevant tenant
was the Secretary of State and not the Crown. They appear to have accepted that
the activities of government through the various government departments might
properly be described as ‘business,’ but they considered that neither that part
of those activities that was carried on through a particular government
department nor, it would seem, those activities as a whole could properly be
described as ‘a business.’
My Lords, it
has been said that Roger Casement was hanged by a comma and (as Mr
Browne-Wilkinson has reminded us) that John Keats’s mind was ‘snuffed out by an
article.’ I think that in exercising the
functions of government the civil servants of the Crown are all engaged in
carrying on a single business on behalf of the Crown, ie Her Majesty’s
government in the United Kingdom. I do not see why the presence of an
indefinite article affects the matter. I do not see why this is not a
business carried on by the Crown on whatever premises may be used by it to
accommodate civil servants employed in the various government departments, or
why it is not a business for the purposes of which each of these premises is
occupied by the Crown.
For these reasons I would allow these appeals.
LORD MORRIS OF BORTH-Y-GEST, in a dissenting
speech, held that the Secretary of State for the Environment, not the Crown,
was the tenant; that the Secretary of State did not occupy the premises; and
that there was no business tenancy so as to make the counter-inflation orders
applicable. He would have dismissed the appeal.
LORD SIMON OF GLAISDALE, LORD KILBRANDON and LORD
EDMUND-DAVIES agreed with Lord Diplock that the appeal should be allowed.
The appeal
was accordingly allowed and the order of the Court of Appeal reversed (except
as to costs). Each of the respondents’ originating summonses was dismissed. No
order was made as to costs in the House of Lords.