Landlord and Tenant Act 1954, section 30(1)(f) — Question as to evidence of landlords’ intention to demolish or reconstruct premises with a view to a scheme of redevelopment — Tenants’ premises, occupied for sales of new and used cars, adjacent to premises occupied by landlords as a car showroom and as a workshop and garage with petrol fuel pumps — Tenants’ application for new lease opposed by landlords on the ground that they wished to redevelop the sites by building a car wash and showrooms and installing modern self-service petrol pumps, involving demolition and reconstruction of premises comprised in tenants’ holding — Issue was as to whether there was evidence that there was a reasonable prospect of bringing about the result intended by the landlords by raising the necessary finance — Deputy county court judge concluded on the evidence before him, including letters from the landlords’ bank manager promising financial assistance, that there was a reasonable prospect of the required finance being available — Held that there was sufficient material on which the judge could properly reach this conclusion, which was essentially a matter for him, and there were no grounds for interfering with it — Tenants’ appeal dismissed
This was an
appeal from a decision of Deputy County Court Judge Clayton at Portsmouth
County Court. The appellants were DAF Motoring Centre (Gosport) Ltd, tenants of
premises at Portland Road, Gosport, who appealed against the judge’s refusal to
grant a new tenancy of the premises under Part II of the Landlord and Tenant
Act 1954. The grant had been opposed by the respondents to the present appeal,
the landlords, Hutfield & Wheeler Ltd, who relied on their intention to
redevelop the site, involving the action set out in section 30(1)(f) of the
1954 Act.
M C Norman
(instructed by Roche Hardcastles, agents for J M B Turner & Co, of
Bournemouth) appeared on behalf of the appellants; D J Pearce-Higgins
(instructed by G H King & Franckeiss, of Portsmouth) represented the
respondents.
Giving the
first judgment at the invitation of Ormrod LJ, GRIFFITHS LJ said: This is an
appeal from the judgment of Deputy Judge Clayton in which he refused an
extension of a business tenancy under the Landlord and Tenant Act 1954 upon the
ground contained in section 30(1)(f), namely that, on determination of the
current tenancy, the landlords intended to reconstruct the premises comprised
in the holding.
The facts of
the matter briefly are these. The premises in question are a site in Portland
Road, Gosport, from which the appellants had since 1974 been carrying on the
business of new and used car sales. They formed a part of a trio of sites. Looking
at the sites from the road, on the right-hand side there were the premises of
which the appellants had the lease. Next door to them there was a car showroom
owned by the present respondents, and further to the left of that there was a
workshop and garage premises, together with rather old-fashioned fuel pumps
also owned by the present respondents, the landlords.
The
respondents had acquired the reversion to the premises occupied by the
appellants in 1976 and shortly after they acquired it they served a notice upon
the appellants determining the tenancy, which expired on December 6 1976. As
was to be expected, on December 22 1976 the present appellants applied for a
new tenancy and, on May 17 1977, the respondents filed their answer opposing it
on the grounds set out in section 30(1)(f), namely that they intended to
redevelop the premises themselves. For reasons which are not apparent, some
four years then elapsed before the matter came on for hearing before the deputy
county court judge on March 18 1981. Before him the sole question was whether
or not the respondents (the landlords) were able to establish their intention
to redevelop the premises.
The landlords
said that they wished to redevelop the premises by demolishing the present car
showrooms occupied by the appellants and building in their place a car wash and
storerooms, and installing modern self-service petrol pumps. As a corollary to
that scheme, they would remove the present petrol pumps that they had at the
other end of what would now be one large garage premises, and restore the car
park in that area.
Before the
learned judge there was a challenge to the actual intention in the sense of the
desire of the landlords to carry out this scheme, but the learned judge was
satisfied that it was the wish of the landlords to carry out this redevelopment
and that finding of fact is not challenged. It was also proved to the
satisfaction of the learned judge that, so far as planning permission was
concerned, it was likely that planning permission would be forthcoming, and
again there is no challenge to that part of his finding.
The final
matter that was debated in the evidence before the learned judge was the
financial feasibility of the scheme and on the authorities that have been
decided upon this section the position is this, that a landlord who wishes to
obtain possession under subparagraph (f) must prove his intention by showing,
firstly, that he desires to carry out the redevelopment and, secondly, that it
is a reasonably feasible prospect for him to do so. The point being taken by Mr
Norman in this appeal, on behalf of the tenants, is that the learned judge
erred in concluding that, on the evidence before him, there was a reasonable
prospect of the landlords being able to raise the necessary finance.
It must be
said at once that the landlords took quite a chance in coming before the court
with their financial tackle in a state of some disarray. The learned judge said
that his task would have been very
drawn up in more detail than was in fact revealed by the evidence. But the
position was this. Mr Downing, the managing director of the landlords carrying
on the present garage business, estimated that he would be able to sell something
in the order of 10,000 gallons a week from the redeveloped petrol station.
This, on the face of it, seemed a somewhat optimistic estimate because his
present sales were apparently in the order of 2,000 to 2,500 gallons a week and
undoubtedly the judge would have been assisted by some calculations of a
professional kind, perhaps from the big oil companies who have large chains of
garages, to show what the real potential of redevelopment was. However, that
was missing.
In so far as
the raising of finance is concerned, the judge had before him Mr Downing, who
was confident that he would be able to raise finance partly by using existing
overdraft facilities which he had with the bank and also by persuading his bank
manager, if he succeeded in obtaining possession of these premises, to lend him
further sums. Furthermore, he said that he would be able to raise some £20,000
to £25,000 from an associated company if necessary and he was also hopeful
that, if need be, he might be able to raise further finance from one of the
large petrol companies.
In the course
of giving his judgment the learned judge had this to say about the financial
feasibility of the scheme. He said:
In my
estimation, the scheme in itself is perfectly feasible in terms of outstanding
permissions and consents. From the business point of view the information
provided by the evidence is nowhere near as full as that envisaged in the
passage quoted above, or as full as any financial manager would require if he
were to begin to contemplate considering advancing money. However, I am not a
bank manager: my task is to assess whether there is a reasonable prospect that
a bank manager or the equivalent would advance the necessary funds if a
properly prepared scheme along the lines proposed were put up to him. That
assessment must include an attempt to estimate the business viability of the
scheme as the bank manager would estimate it, although it is not for me to
approve or disapprove it in general.
The principal
attack upon the judge’s approach to this question made by Mr Norman is that,
once the judge had said that no financial manager would contemplate advancing
money without far more detail, it meant that he could not come to the
conclusion that there was a reasonable prospect of raising the finance and if
there was no reasonable prospect of raising the necessary finance then it was
not open to him to hold that the landlords had proved the necessary intention
to redevelop the premises.
With all
respect to Mr Norman’s argument, I think that is placing far too much emphasis
upon one half of a sentence in the judgment.
There was
evidence before the judge that the landlords’ bank manager had considerable
confidence in the landlords’ business because there was a letter dated March 11
1981 showing that in its present state, ie with the business without the
redevelopment, the bank manager was prepared to allow overdraft facilities up
to a limit of £100,000, which is a very considerable sum. Mr Downing’s evidence
was that, as a general rule, he did not use those facilities to a greater
extent than £50,000, although on one occasion they had gone up as high as
£83,000. That in itself shows a very considerable confidence in the business on
the part of the bank manger.
There was
another and important letter put before the judge dated March 16 1981, which I
will read:
I was pleased
to learn from your telephone call this morning that the facilities outlined in
my letter of March 11 should prove sufficient for your company’s use for the
next 12 months.
(That is the
facility of £100,000):
I was also
interested to learn that you hope to be able to obtain repossession of that
part of the premises at present occupied by DAF Motoring Centre and that, if
successful, you would hope to incorporate this into your present set-up.
Quite
obviously this will affect the value of your premises in Forton Road and I
confirm that we have no objection in deferring the valuation of these premises
which we have requested until the position is a little clearer. I also confirm that
we would be pleased to discuss further borrowing facilities to assist you with
the redeployment of these premises as and when your plans are further advanced.
That appears to
be a most encouraging letter from a bank manager, indicating a real likelihood
that the bank would be prepared to lend even more money for the redevelopment
of these premises if the landlords were able to obtain possession.
The learned
judge concluded his judgment by saying:
When I
consider the bank’s apparent willingness to increase the borrowing; the
possibility of borrowing from other sources of credit; the possibility of
involving a petrol company (as demonstrated by Documents 10 to 15); and the
money available to Mr Downing from his other company, I come to the opinion
that there is, indeed, a reasonable prospect of the respondents being able to
finance the scheme, and that ‘there are not so many obstructions yet to be
surmounted that he cannot truly be said to ‘intend it’.
The judge
there is applying the correct tests and, in my judgment, there was sufficient
material for him to come to the conclusion that there was in this case a
reasonable prospect of raising the finance to enable the landlords to redevelop
these premises, as they undoubtedly desire to do. In coming to this conclusion,
it is very important to remember that this is essentially a matter for the
judgment of the trial judge. Provided he directs himself correctly as to the
tests to be applied, which is conceded, his assessment of the witnesses must
loom large and, in the case of a business such as this, he will form a view of
the competence of the managing director who gives evidence before him and of
the likelihood of that managing director giving confidence to the bank manager.
All the indications in this case are that the managing director does enjoy the
confidence of his bank manager and accordingly, for my part, I can see no
grounds upon which it would be right to interfere with the decision of the
learned judge, and I would dismiss this appeal.
Agreeing,
SLADE LJ said: The learned judge said this, in regard to section 30(1)(f) of
the Landlord and Tenant Act 1954:
It is
important to be clear what the concept of intention involves in this context.
It ‘connotes that the landlord does more than merely contemplate; it connotes a
state of affairs which he decides, so far as in him lies, to bring about, and
which, in point of possibility, he has a reasonable prospect of being able to
bring about, by his own act of volition’ (Woodfall on Landlord and Tenant,
28th Ed, para 2-0720).
Again — ‘It
must have moved out of the zone of contemplation — the sphere of the tentative,
the provisional and the exploratory — and have moved into the valley of
decision’ (Cunliffe v Goodman [1950] 2 KB 237, per Asquith LJ).
The test is an objective one; would a reasonable man believe on the evidence,
that the respondents have first, reached the necessary state of decision, and,
second, have a reasonable prospect of being able to fulfil that decision by
their own act of volition? The point of
time at which the test is to be applied is the time of hearing of the
application.
This succinct
summary of the legal position is, in my judgment, an accurate one and indeed
its correctness has been expressly accepted in the notice of appeal. Mr Norman,
on behalf of the appellants, has essentially based their case on the
proposition that the respondents have shown no reasonable prospect of being
able to fulfil their wish to develop the premises, because they have not shown
any reasonable prospect of being able to raise the necessary finance. The
learned judge dealt with this question, which seems to me to have been a pure
question of fact. Having applied his mind to it carefully, he came to the
conclusion that the respondents had shown a reasonable prospect of being able
to raise the necessary finance and, for the reasons given by Griffiths LJ, I
think there was an abundance of material upon which he could properly reach
that decision. I can see no grounds for interfering with it.
Mr Norman did
submit that the learned judge had misdirected himself in one respect. He
pointed to the paragraph from the judgment which has already been quoted by
Griffiths LJ, and submitted in effect that there was an inconsistency in the
judge’s conclusion, on the ground that he himself had implied that no properly
prepared scheme had yet been put before the court by the respondents.
In my judgment
there was no inconsistency. To hold that it was incumbent on the respondents to
place before the court a fully particularised scheme, such as might have been
necessary to place before a finance house in order to obtain a loan, would seem
to me to involve saying that it was incumbent upon the respondents to show, not
only that they intended to carry out the scheme, but that they were ready and
in all respects able to carry it out. That is not the
v Phillips Furnishing Stores Ltd [1957] Ch 67 at p 99:
The adoption
of Asquith LJ’s language by this court in later cases cannot be treated as
having (in effect) substituted for the word ‘intends’ in paragraph (f) (as in
paragraph (g)) of the section the words ‘is ready and able’, so as to impose
upon the landlord the onus of proving that, at whatever be the proper date, he has
not only finally determined upon the course proposed but has also taken all
necessary steps for the satisfaction of any requisite conditions to which the
course proposed is subject.
The learned
judge came to the conclusion, again as a matter of fact, that there were not so
many obstructions yet to be surmounted that the respondents could not truly be
said to intend the development in question. He applied the right test. While I
think that Mr Norman has said everything that could possibly be said in support
of this appeal, in my opinion it should be dismissed.
Agreeing, for
the reasons given in the previous judgments, ORMROD LJ added: The test is
surely now quite clear and can be stated in simple language, as was done by
Diplock LJ in Gregson v Cyril Lord [1963] 1 WLR 41 at p 46, where
he formulated the second limb in the simple words: ‘Landlords must prove that
in point of possibility, they have a reasonable prospect of being able [in that
case] to bring about this occupation by their own act of volition’ or (for this
purpose) to carry out the proposed redevelopment.
That is the
question which the learned judge had to decide. Lord Diplock went on to point
out that it is an objective test and it is essentially a question of fact. I
find it difficult to see, on the material in this case, how it could possibly
be said that the landlords have not shown that there is a reasonable prospect
of their being able to carry out the development. It would be very surprising
if they were not, having regard to all the material, and, with respect to Mr
Norman, I think he is putting the case far too high when he says that the
landlords must come forward with a cut-and-dried scheme. That is precisely what
Lord Evershed said was not the test and, indeed, we must not get too far away
from the statute. The words of the statute are ‘intends to’, and the further
away we get from the statute and the more glosses we put upon it, the more
litigation we incur. To my mind this is a pure question of fact and I, too,
would dismiss this appeal.
The appeal
was dismissed with costs.
