Landlord and Tenant Act 1954, Part II — Tenant’s appeal from determination of rent and interim rent in county court under sections 34 and 24A of the Act — Subject property was the Gate House, the only surviving portion of the old Clifford’s Inn — Owing to the unusual character of the property there was for valuation purposes no real comparable — The assistant recorder, who described the property as ‘incomparable’, could find useful, although limited, guidance in only one other property, premises at 233 Strand, opposite the Law Courts — The valuations of the experts called on each side, who carried out devaluations of the Strand property, differed substantially, the tenant’s valuer proposing a rent of £4,000 for the new lease and an interim rent of £2,000 and the landlord’s valuer proposing a rent of £8,000 and an interim rent of £7,250 — The assistant recorder reached figures of £6,500 for the rent and £5,200 for the interim rent — These figures were criticised on various grounds by the appellant and the criticisms are considered in detail in the judgment of Robert Goff LJ — Held, however, that there was no justification for interfering with the assistant recorder’s determinations — The Court of Appeal would not put parties to the delay and expense of a new trial unless the figures arrived at by a tribunal which had seen the property and seen and heard the expert evidence were so obviously wrong that, in the words of Order 59, r 11(2), ‘some substantial wrong or miscarriage has been thereby occasioned’ — Appeal dismissed
This was an
appeal by the tenant, Alfred Peter Halberstam, solicitor, from a decision of Mr
Assistant Recorder Herbert at the Mayor’s and City of London Court, by which he
determined the rent for a new lease and the interim rent of the Gate House,
Clifford’s Inn, London EC4. The landlords, respondents to this appeal, were
Tandalco Corporation NV.
Peter Cowell
(instructed by Alfred P Halberstam) appeared on behalf of the appellant;
Nicholas Wood (instructed by Withers) represented the respondents.
Giving the
first judgment, at the invitation of Stephenson LJ, ROBERT GOFF LJ said: We
have before us an appeal by Mr Alfred Peter Halberstam against a decision by Mr
Assistant Recorder Herbert, dated November 25 1983, by which he determined that
the rent payable under a new lease of certain office premises should be £6,500
per annum and that the interim rent to be paid until the commencement of the
new lease should be £5,200 per annum. These determinations were made under
sections 34 and 24A respectively of the Landlord and Tenant Act 1954.
The premises
in question are the Gate House of Clifford’s Inn. The appellant, who is a
practising solicitor, became a tenant of the premises on April 29 1975 by an
assignment of an existing tenancy. That tenancy was for a period of 7 years and
1 month, expiring on September 30 1976, at a rent of £650 per annum. The
appellant’s landlords were then the Legal and General Assurance Company. They
served a notice on the appellant under section 25 of the Act of 1954, expiring
on September 30 1976. A counternotice was served on January 13 1976 and on
March 16 1976 the appellant applied for a new tenancy. Negotiations then took
place, and the terms of a new lease were agreed in March 1977, subject to
contract; the new lease was to be for a term of 7 years at a rent of £1,750 per
annum. However, in April 1977 the Legal and General assigned the reversion to a
company called Tannergate Ltd. The appellant heard of this in July 1977 and in September
1977 Tannergate agreed, again subject to contract, to a new lease on the same
terms. Then the appellant heard no more, until he discovered in April 1979 that
Tannergate had assigned the reversion to the respondents in the present
proceedings, Tandalco Corporation NV. To cut a long story short, the
respondents did not agree to the new lease negotiated by the appellant with
their predecessors in title and, having been substituted as respondents in the
present proceedings under the Act of 1954, issued an application for the
assessment of interim rent under section 24A of the Act.
The matter
first came before the assistant recorder on Monday November 15 1982. The
appellant’s surveyor, Mr N J Winbourne, had produced a report on the previous
Friday, November 12, which revealed that the top floor of the premises was in
the occupation of a Mr Thompson, who used it for residential purposes. When
they discovered this, the respondents decided to issue a notice under section
146 of the Law of Property Act 1925, claiming forfeiture of the tenancy, and
the proceedings before the assistant recorder were therefore adjourned. A writ
was then issued by the appellant claiming a declaration that the respondents’
notice was invalid; and, after Order 14 proceedings in that action, an order
was made by consent declaring the notice to be invalid. So the proceedings
under the Act of 1954 were resumed. The matter came again before the assistant
recorder on Friday June 24 1983. By that time it had been agreed that the
period of the new lease would be 5 years, with no rent review. On the day of
the hearing, a surveyor’s report by Mr J J Wakeling was produced and put in on
behalf of the respondents, and the appellant’s surveyor, Mr Winbourne, gave
evidence. On July 18 1983 a further hearing took place before the assistant
recorder, when submissions were made by counsel. The assistant recorder
reserved his judgment, which he delivered on November 25 1983. His judgment
appears not to have been read but to have been delivered from notes. In his
judgment he determined the terms of the lease and further determined that the
rent payable under the new lease should be £6,500 per annum and that the
interim rent should be £5,200. It is from that judgment, in so far as it
determines the rents, that the appellant now appeals to this court.
I must now
describe the premises in question, which are most unusual. The Gate House is
all that survives of the old Clifford’s Inn. It is about 400 years old, though
it has a 19th-century exterior. It is of course in the heart of legal London;
but it is down a narrow lane off Fleet Street, so to that extent it is
inconveniently situated, and the premises themselves, though they have an
individual character, are awkwardly arranged for an office, being a four-storey
building with a narrow staircase and no lift. The four storeys consist of a
basement, containing a kitchen; a reception office on the ground floor and two
offices on each of the two upper floors, though the top floor (or part of it)
has been occupied by a subtenant. The floor areas are as follows: basement 50
sq ft; ground floor 80 sq ft; first floor 201 sq ft; and top floor 186 sq ft.
Before the
assistant recorder, Mr Winbourne for the appellant proposed a rent of £4,000
for the new lease and an interim rent of £2,000, though he suggested that,
having regard to all the circumstances, the assistant recorder should fix the
interim rent at £1,750, which would be the same rent as that agreed by the
appellant with the predecessors in title of the respondents. For the
respondents, however, Mr Wakeling proposed a rent of £8,000 for the new lease
and an interim rent of £7,250. As I have recorded, the rent determined by the
assistant recorder was £6,500, which is not far above the mid-point between the
two rival rents proposed by the surveyors, and he determined the interim rent
of £5,200, which was considerably closer to that proposed by the respondents’
surveyor than that proposed by the appellant’s surveyor.
Much of the
argument between the surveyors turned on the evidence of comparable lettings
tendered by them. Owing to the
evidence of a truly comparable letting. Indeed, the assistant recorder
concluded that the premises were in truth incomparable. There was, he
considered, only one letting from which he could derive any useful guidance.
This related to premises at 233 Strand, opposite the Law Courts. Those
premises, which are also self-contained, consist of a five-storey building used
by travel agents as a branch/overflow booking office in addition to their main
premises in Fleet Street. The premises had been let to them under a 20-year
lease dated March 25 1982 at a rent of £13,000 per annum, subject to review
every fourth year. They have, however, one particular feature which
distinguishes them from the Gate House, which is that the ground floor takes
the form of a shop with a plate-glass window; this is used by the travel agents
as a booking office, where they receive members of the public. In considering
the letting of those premises as a comparable, the two surveyors were faced
with the difficulties that, first of all, different rents were not attributed
to each floor under the lease of 233 Strand; and second that, having regard to
the character of the ground floor of that building, a higher notional rent had
to be attributed to that floor. Their calculations were made no easier by the
fact that the figures for the floor area of each floor, originally produced by
Mr Wakeling, upon which Mr Winbourne not surprisingly worked, were subsequently
checked by Mr Wakeling and found to be inaccurate. In the end, however, the two
surveyors were more or less agreed on a figure of £30 per sq ft for the ground
floor, though Mr Wakeling had argued for £25 per sq ft for that floor.
Mr Wakeling’s
final devaluation of the rent of 233 Strand, based on £25 per sq ft for the
ground floor, read as follows:
|
Sq ft |
@ |
Total |
|
|
Third Floor |
148 |
£14.50 |
£2,146 |
|
Second Floor |
148 |
£16.00 |
£2,368 |
|
First Floor |
144 |
£17.50 |
£2,520 |
|
Ground Floor |
197 |
£25.00 |
£4,925 |
|
Basement |
238 |
£ 4.50 |
£1,071 |
|
£13,030 |
That total was rounded down to £13,000.
Mr Winbourne,
working on the earlier measurements produced by Mr Wakeling, had allowed £10.60
per sq ft for the three upper floors (producing a total of £5,145); £30 per sq
ft for the ground floor (producing £6,660); and £5 per sq ft for the basement
(producing £1,195), a total of £13,000.
Mr Wakeling’s
devaluation of the Gate House was founded to a considerable extent on the rent
which he attributed to the individual floors of 233 Strand. They were as
follows:
|
Sq ft |
@ |
Total |
|
|
Second Floor |
186 |
£16.00 |
£2,976 |
|
First Floor |
201 |
£17.50 |
£3,518 |
|
Ground Floor |
80 |
£17.50 |
£1,400 |
|
Basement |
50 |
£ 3.50 |
£ |
|
£8,069 |
That total was rounded down to £8,000.
Obviously, he
thereby attributed the same rental to the second floor of the Gate House as he
did to the second floor of no 233; and the same rental to the first and ground
floors of the Gate House as he did to the first floor of no 233. However, it is
plain that his figures of £16 and £17.50 respectively for the second and first floors
of no 233 required some adjustment in view of the fact that at the hearing it
was agreed that £30 rather than £25 per sq ft must be attributed to the ground
floor.
The assistant
recorder approached the matter as follows. He took the figure of £17.50 from Mr
Wakeling’s valuation of the first floor of no 233, and he applied that to the
first floor and ground floor of the Gate House; but he felt that it could not
be directly so applied, because it failed to take into account in particular
three factors: (1) that no 233 was on a main thoroughfare whereas the Gate
House was up a narrow alleyway; (2) that the accommodation in the Gate House is
awkward; and (3) that allowance had to be made for the adjustment to the rent
of the ground floor at no 233. He decided to discount Mr Wakeling’s figure of
£17.50 by 20%, producing a figure of £14 per sq ft for the first floor and
ground floor of the Gate House; he then did the same for the second floor,
reducing the figure of £16 per sq ft to £12.80. Together with the basement,
valued at £3.50 per sq ft, this produced a total rental of £6,489, which he
rounded up to £6,500. So that was the rental which he determined.
Mr Cowell, who
appeared for the appellant before this court, raised a large number of general
criticisms of the approach adopted by the learned assistant recorder; but he
concentrated on one main point. This was that, in his submission, the assistant
recorder failed to make sufficient allowance for the change in the valuation of
the ground floor of 233 the Strand from £25 to £30 per sq ft. Approaching the
matter on a strictly mathematical basis, he pointed out that the average rental
of the upper three floors of the Gate House, on the figures chosen by the
assistant recorder, was £13.54 per sq ft, whereas, if he had simply
recalculated the figures for no 233, allowing £30 per sq ft for the ground
floor instead of £25, that would of itself have reduced the average figure for
the upper floors of that building to £13.68 per sq ft. Accordingly, submitted
Mr Cowell, the assistant recorder had not done his sums properly. He could not,
in those circumstances, have made a proper allowance for the change in the rent
of the ground floor of no 233, for if he had done so, that would have left only
14p per sq ft to allow for the other matters he had to take into account, in
particular the difficult location and the inconvenient arrangement of the Gate
House.
Mr Wood has,
however, contested Mr Cowell’s mathematics. Instead of approaching the matter
as one of averages per sq ft, he has recalculated Mr Wakeling’s figures for 233
Strand, using a figure of £30 instead of £25 per sq ft for the ground floor.
This produced rents of £15.04 per sq ft for the first floor (instead of £17.50)
and £13.75 per sq ft for the second (instead of £16). He then applied those
figures to the Gate House, applying the figure of £15.04 to the ground and
first floors, and the figure of £13.75 to the second floor. On that basis, a
total rental for the Gate House emerges as £6,958.74. It followed that, by
making a total deduction of 20% as he did, and by producing a resultant figure
of £6,500, the assistant recorder in fact made a discount which (on this
strictly mathematical approach) left approximately £500 for the other matters
which he had to take into account. Indeed, I myself fear that the averages on
which Mr Cowell was working must in fact be misleading and that the origin of
that lies in the fact that he took into account in calculating his averages the
top floor of 233 Strand, which was immaterial, and so in the result he was not
comparing like with like.
That is of
itself sufficient to undermine Mr Cowell’s submission on this point. But in any
event I do not think that it is right to approach this matter on a strictly
mathematical basis. Indeed, I do not consider that the assistant recorder was
himself adopting a strictly mathematical approach. In the first place, he did
not regard 233 Strand as strictly comparable with the Gate House. Second, he
was not attempting an exact transposition of the figures from no 233 (figures
which were themselves notional as far as each floor was concerned) to the Gate
House; he was, as he said, doing the best he could. He was simply taking the
outstanding differences between the two properties into account and then
applying an obviously rough and ready percentage deduction to the figures
notionally attributed to the relevant upper floors of no 233, to achieve
broadly comparable figures for the Gate House. I do not think it is right to
dissect these figures mathematically, as Mr Cowell has sought to do in this
case. I accept Mr Wood’s broader submission, that inevitably valuation is as
much an art as a science, especially when considering so unusual a property as
the Gate House. I have no doubt that the assistant recorder, in assessing his
final figure of £6,500, stood back from it, looked at all the circumstances and
felt that it was, taking everything into account, appropriate. I do not feel
that we would be justified in interfering with his conclusion.
Mr Cowell’s
other principal criticism was directed towards the assistant recorder’s
determination of the interim rent at £5,200. As to that, he expressed himself
as follows, according to the agreed note of his judgment:
I now come to the interim rent. I have
in mind what the Act says: I will not spell out the details. Mr Winbourne
suggests £1,750 per annum and has made a number of suggestions as to what
should affect the interim rent, as set out in his report. There is the matter
of disrepair; there is a subtenancy; and I am asked to allow for the fact that
there is a threat of redevelopment — or lack of security, which might have
driven a man of less courage from the premises. Then I must have regard to the
terms of the previous lease. I do not take the old rent of £650 into
consideration by reason of the long delay in these proceedings. The court has
wide discretion: I have alluded to the state of the market, and I do take into
account that there has been a rise in the market since 1980. I have decided
that the best approach is by means of a deduction of a percentage. I deduct 20%
from the market rent, and that produces a figure of £5,200.
On this point
Mr Cowell first of all compared the figure of £5,250, fixed for a date which
was agreed to be December 9 1980, with the rent of £1,750 negotiated and agreed
by the appellant with the respondents’ predecessors in title in 1977. He commented
that the assistant recorder’s determination resulted in a very large rise in
rent over so short a period. He next submitted that the assistant recorder had
erred in principle in his approach. He submitted, on the basis of the analysis
of the Vice-Chancellor in English Exporters (London) Ltd v Eldonwall
Ltd [1973] Ch 415, in particular at pp 429 and 431 of the report, that the
task of the assistant recorder in determining the interim rent under section
24A of the Act of 1954 was to fix the rent for a hypothetical yearly tenancy on
the basis of the values existing when the interim period began to run — which
in the present case was when the proceedings were commenced, ie December 9
1980; and further that by virtue of section 24A(3) he had to have regard to the
rent payable under the old tenancy (here, £650 per annum) not only in so far as
such rent threw light on the market rent but also, and in any event, to allow
for some reduction in the interim rent to provide a cushion for the tenant, who
had no option but to pay whatever interim rent was fixed. In the present case,
he submitted, the assistant recorder had declined to take the old rent of £650
into consideration at all; and moreover, instead of fixing a market rent as at
December 9 1980, he had fixed the interim rent with reference to the market
rent in 1983, by making a discount from that rent.
I myself do
not consider those criticisms to be justified. It is to be observed that the
Vice-Chancellor, in the Eldonwall case, did not state that a ‘cushion’
had to be provided in every case; indeed, he made it plain (at p 434 of the
report) that the market rent was to be suitably tempered by reference to the
existing rent ‘where appropriate’. It is not to be forgotten that the appellant
had the benefit of the old rent of £650 per annum for a substantial period
after the expiry of the contractual term of the old tenancy in September 1976,
before the new interim rent became applicable in December 1980. In my judgment,
the assistant recorder was, on the facts of this case, entitled to conclude
that, having regard to the long delay in the proceedings (even though that
delay was due to no fault of the appellant), not only did the old rent provide
no guide to the market rent in December 1980 but also in all the circumstances
no ‘cushion’ was appropriate in this case. Furthermore, the assistant recorder
was, I consider, entitled to fix the interim rent at £5,200, as he did. He was
plainly doing his best to determine the interim rent at the relevant date, and
it is not without significance that he did so by applying a discount to the
market rent in 1983 which was over twice the discount proposed by the
respondents’ surveyor. I do not therefore think that it would be right to
interfere with his determination of the interim rent.
For these
reasons, I would dismiss the appeal.
Agreeing,
STEPHENSON LJ said: The assistant recorder was given the difficult task of
fixing the rent under a new tenancy and the interim rent under the continued
tenancy, in accordance with the notoriously difficult provisions of sections 34
and 24A of the Landlord and Tenant Act 1954, for a property which he rightly
described as ‘really incomparable, unique’. He did his best to learn what he
could from several properties put forward as comparables, in the light of the
predictably conflicting evidence of expert valuers. He reserved judgment,
preferred the evidence of the landlords’ expert and reached figures between
those contended for by the landlords and the tenant.
I can
understand, as did the assistant recorder, the tenant’s grievance that these
figures were higher than those which he thought he had agreed with the
landlords’ predecessors. Nevertheless, where such valuations as these have to
be made on hypotheses which produce notional figures, I do not think that this
court should put the parties to the delay and expense of a new trial unless the
figures estimated by the tribunal which has seen the property, and seen and
heard the expert evidence, are so obviously wrong that, as Order 59 r 11(2) of the
Rules of the Supreme Court puts it, ‘some substantial wrong or miscarriage has
been thereby occasioned’.
In my opinion,
no substantial wrong or miscarriage has been occasioned by such defects in the
assistant recorder’s reasoning as appear from the note of his judgment or from
Mr Cowell’s careful criticisms.
I would
accordingly uphold these figures, both for the interim rent and for the rent of
the new tenancy and, like my Lord, would dismiss the appeal.
The appeal
was dismissed with costs.
