Landlord and Tenant Act 1954, Part II — Application for new tenancy — Whether plaintiff tenants had throughout the relevant period been occupying the same premises for the purpose of a business carried on by them, as required by section 23 of the Act — Whether the ‘thread of continuity’ of business occupation had been broken — Preliminary issue — Plaintiff company was one of the Aspinall Group concerned with the running of gaming establishments and casinos — The premises in question in this case had been used as a gaming club until 1984, carrying on this activity in pursuance of a licence under the Gaming Act 1986 — Such licences were granted by magistrates only after consent had been given by the Gaming Board — The gaming activity had ceased on the subject premises, and they had ceased to be physically occupied, in 1984, because the Aspinall Group wished to run a gaming club in a more attractive building in a different London area and for that purpose required a gaming licence — This could be obtained only by the surrender of the licence covering the subject premises — It was, however, and remained, the intention to reopen these premises as a gaming club as soon as a new lease under the 1954 Act and a fresh licence could be obtained — The attitude of the Gaming Board was that a certificate of consent leading to a licence could be considered only if a new lease were available — Proceedings under the Act for a new lease were started in 1986
judge, after considering all the circumstances and a number of authorities,
including I&H Caplan Ltd v Caplan (No 2), Morrisons Holdings Ltd v Manders Property
(Wolverhampton) Ltd and Hancock & Willis v GMS Syndicate Ltd, that in
the present case the ‘thread of continuity’ had been broken — The tenants in
1984 had a clear commercial choice; they exercised it and they then ceased to
carry on the business and had not carried it on since — The intention to reopen
was not enough — It could not be argued that they must be given a new lease in
order to improve their standing with the Gaming Board — The plaintiffs had not
satisfied section 23 — Plaintiffs’ summons dismissed
The following
cases are referred to in this report.
Caplan
(I&H) Ltd v Caplan (No 2) [1963] 1 WLR
1247; [1963] 2 All ER 930
Hancock
& Willis v GMS Syndicate [1983] EGD 114;
(1983) 265 EG 473, [1983] 1 EGLR 70, CA
Morrisons
Holdings Ltd v Manders Property (Wolverhampton)
Ltd [1976] 1 WLR 533; [1976] 2 All ER 205; (1975) 32 P&CR 218; 238 EG
715, [1976] 1 EGLR 70, CA
Teasdale v Walker [1958] 1 WLR 1076; [1958] 3 All ER 307; [1958] EGD
118; (1958) 172 EG 297, CA
This was an
originating summons by the plaintiffs, Aspinall Finance Ltd, to resolve a
preliminary issue arising out of their application for a new lease under Part
II of the Landlord and Tenant Act 1954 of premises at 1 Hans Street, Chelsea,
London SW1. The issue was as to whether the plaintiffs had throughout the
relevant times been occupying the subject premises for the purposes of a
business carried on by them within the meaning of section 23 of the 1954 Act.
The defendant was the landlord, Viscount Chelsea.
David
Neuberger QC (instructed by Herbert Smith) appeared on behalf of the
plaintiffs; A E Radevsky (instructed by Lee & Pembertons) represented the
defendant.
Giving
judgment, JUDGE PAUL BAKER QC said: I have before me a preliminary issue
arising out of an application by the plaintiffs, Aspinall Finance Ltd, for a
new lease under the Landlord and Tenant Act 1954, Part II. To qualify for such
a new lease, among other conditions, the tenants have to bring themselves
within section 23(1) of the Act, which reads:
Subject to
the provisions of this Act, this Part of this Act applies to 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 for those and other purposes.
The question I
have to resolve is whether, at the material time, these premises were occupied
by this tenant, and were so occupied for the purposes of a business carried on
by it.
The issue was
formulated by Master Dyson in his order of March 10 1988 as follows:
(1) Whether, on a true interpretation of the
above-mentioned Act, and in the events which happened, the plaintiffs must
establish that they have been occupying the above-mentioned premises for the
purposes of a business carried on by them within the meaning of section 23 (a)
at all times since the commencement of the proceedings herein, (b) at all times
since the 29th September 1986, and (c) for some other and, if so what, period,
the period so determined being hereafter referred to as ‘the relevant period’.
As the evidence
emerged, it became clear that there was no question to be resolved on that part
of the preliminary issue. The status quo here did not change between the
commencement of the proceedings, which was some date in July 1986, and
September 29 1986, which was the contractual date of termination of the lease;
and that status has continued right up to the present time.
Then:
(2) Whether the plaintiffs have throughout the
relevant period been occupying the same premises for the purposes of a business
carried on by them within the meaning of section 23.
That is the
issue to be resolved, as I have said.
The address of
the premises is at 1 Hans Street, SW1 in Chelsea. They front on Hans Street and
have a return frontage on Sloane Street. It consists of a building comprising a
basement and four upper floors. The lease in question was dated August 13 1953 and
made between Lord Cadogan and the Cadogan Settled Estates as the lessors and
Victor Masraf as the lessee. They were demised at a rent of £100 a year for a
term of 33 years and one half of another year, to be computed from March 25
1953. Therefore, that term expired, subject to any extension under the Act, on
September 29 1986.
The only part
of the covenants to which I need refer is the tenant’s covenant relating to
user, which is:
Not to use or
permit the demised premises or any part thereof to be used otherwise than as to
the Basement Ground Floor First Floor and one room on the second floor for a
non-residential club and as to the remainder of the demised premises as private
dwelling rooms in one occupation only as the lessee’s private residence.
At some
subsequent period, that was varied in this sense, that the entirety of the
premises was turned over to use as a non-residential club.
On May 13 1977
that lease was assigned to a Mr John Aspinall, and on September 21 1979 it was
assigned to the plaintiff company. It then had some other name, but later it
changed its name to its present name, Aspinall Finance Ltd.
That company
was part of a group of companies with which Mr Aspinall and other gentlemen
were then associated. There is a holding company called Aspinall Holdings plc,
of which this company and another company called Aspinall Curzon Ltd, which I
shall have to mention shortly, are wholly-owned subsidiaries.
The interests
of Mr Aspinall and his associates and the companies lie in the running of
gaming establishments and casinos.
On March 24
1986, during the last year of the term, notice under section 25 of the Act of
1954 was served to expire on September 29 1986. That notice specified that the
then landlord, Viscount Chelsea, would not oppose the grant of a new lease
under the Act. That was followed in due course on July 23 1986 by the
plaintiffs’ application for a new tenancy.
These
premises, from some date after Mr Aspinall became interested in them until
1984, were used as a gaming club. Now for that activity to be lawfully carried
on, the lessee or other person carrying on the club has to procure a licence
under the Gaming Act 1986, and those licences are granted by the licensing
authority, being the same as the licensing authority for the licensing of
bookmakers and betting shops and so forth. That function is discharged by the
justices in the relevant petty sessional division. A licence cannot be applied
for effectively until the applicant has procured a consent from the Gaming
Board. Statutory provisions establish the Gaming Board, and the provisions in
the Act relating to the grant of consents and licences are to be found in
Schedule 2 to the Gaming Act 1968.
Mr Aspinall,
or one of his companies, obtained a licence in respect of these premises — necessarily
it meant that they had previously
and continued to do so until April 1984. The reason why it stopped at that
stage I must now go into.
Some time in
1981 the Aspinall Group of Companies had acquired a gaming club in Curzon
Street in Mayfair which was, from their point of view, a much more attractive
building and position for the purposes of their business. They had difficulty
in obtaining a licence for that club. The precise nature of those difficulties
I need not go into, but merely to state the outcome, which was that eventually
in 1983 they obtained from the licensing authority a licence, but only on the
condition that the licence relating to the Hans Street premises was
surrendered.
The Aspinall
Group accepted the licence on those terms, closed down Hans Street and
transferred their activities to the Curzon Street premises, and they did that
through the medium of Aspinall Curzon Ltd, to which I made a brief reference a
moment ago. They have, as far as I understand it, been carrying on that
business ever since in Curzon Street. So they gave up the licence relating to
Hans Street. There was never any question of their being deprived of the
licence through a breach of its terms or through the way they carried on the
clubs; there was no suggestion of that. They had been carrying on, evidently to
the satisfaction of the authorities, a reputable business in Hans Street.
Now their
intentions with regard to the Hans Street premises I can take from the
affidavit of December 15 1986 sworn by Mr Grunpeter. Mr Grunpeter is the
managing director of Aspinall Curzon Ltd, the operating company in Curzon
Street, and he is also a group executive of Aspinall Holdings plc. In para 5 of
his affidavit he said:
At that time,
that is when the gaming club operation moved out of the premises to Curzon
Street, it was the intention of the plaintiff to reopen the premises as a
gaming club. That intention has never changed. Accordingly, Aspinall Cadogan
Ltd, a member of The Aspinall Holdings Plc Group of Companies, has applied for
a certificate of consent from the Gaming Board, which is a condition for a
licensing application to the local magistrates. This application is still
outstanding and is not proceeding pending the grant of a new lease of the
premises. At the moment, the Gaming Board has indicated that it is not prepared
formally to consider its position as to the grant of a certificate in respect
of the premises until the plaintiff has a new lease of the premises. From my
experience in the field of gaming clubs in London, in which I have been
involved for some eight years, I consider that there is a good prospect of
obtaining a gaming licence in respect of the premises if and when the plaintiff
obtains a new lease thereof. In these circumstances, it is certainly true that
the premises are not, and have not been since April 1984, physically used as a
gaming club. However, for all that period it has been, and indeed is, the
plaintiffs’ intention to reopen the premises as a gaming club as soon as a new
lease and a gaming licence are obtained.
Following the
vacation of the Hans Street premises an application was made to the local
authority for a reduction of rates on the basis that the premises were empty.
That was on January 9 1985.
Pursuant to
that intention to which Mr Grunpeter deposed, an application on November 28
1985 was made to the Gaming Board for a consent on which to found the
application for the licence. I do not propose to go through the intermediate
stages of that application. I think I can come to a letter from the Gaming
Board dated April 24 1986. The board said this with reference to the leasing
arrangements:
What the
Board would really like to see would be a signed and sealed Heads of Agreement
or Agreement for Lease between The Aspinall Cadogan Ltd and the landlords and
if appropriate superior landlords under which all parties agree to the
assignment of the lease. If Cadogan Estates Ltd are not a party to the
agreement and permission is required from them, they would have to provide a
formal licence permitting the grant of the assignment.
Then the next
paragraph but one:
Possible
interview. As you are aware, it is the Board’s usual policy to interview
consent applications before determining an application. I cannot say when your
clients will be called to an interview, but I shall write to you about this in
due course.
It was a letter
to the solicitors of the plaintiffs.
Those
solicitors replied to the letter on May 9 1986, saying, inter alia:
The lease of
1 Hans Street was assigned to Aspinall’s Club Ltd some time ago when you may
recall the gaming licence was transferred from Mr Aspinall to Aspinall’s Club
Ltd. Aspinall’s Club Ltd is a member of the Aspinall Group of Companies and
last year changed its name to Aspinall Finance Ltd. It is the intention to
negotiate a new lease in the name of another group company currently Aspinall
Cadogan Ltd. In case you do not have it, I enclose a copy of the assignment of
the lease to Aspinall’s Club Ltd.
The final
letter that has been shown to me from the board is of June 2 1986:
I have
received a letter dated May 19 from Mr Leathers of The Aspinall Cadogan Ltd and
Mr Franklin of Aspinall Finance Ltd saying that a new lease on 1 Hans Street is
being negotiated between Cadogan Estates Ltd and The Aspinall Cadogan Ltd. A
copy of this letter was sent to you. However, since negotiations for this new
lease have not yet been completed we will not be able to interview your clients
on June 12 1986 as we had provisionally agreed. When the leasing arrangements
are completed and the Board have seen and are satisfied with the new lease, we
will fix a new date for the interview.
So that is the
position of the board. They will not move further in the matter until a new
lease has been obtained. There has been no suggestion to me that that attitude
of the board is other than one that they could properly take. So that is where
that rests. That was June 1986, and shortly thereafter is the first of the
relevant dates, July 1986. At that time the premises were not in good repair in
conformity with the covenants to repair and, more important, they were empty.
I think those
are the facts as far as I need refer to them. So, therefore, are the premises
being occupied by the plaintiffs for the purposes of their business and were
they so occupied during the latter part of 1986 when the application was made
and also when the lease ended?
On the face of
it, they have not been occupied during that period, or since, nor were they
occupied for some time before for the purposes of the business, that is to say
ever since April 1984 until the present day.
The mere fact
that the tenant is not occupying at the relevant date is not conclusive.
Tenants do not have to occupy and carry on business for every hour of every
day. Some breaks are inevitable. At the smallest level, the premises may be
closed for the night for business. They may be closed for a longer period while
repairs can be carried out. They may be closed in order that the tenant and his
staff can have a holiday. They may be closed because the business is a seasonal
one. So one gets businesses that are only open in the summer months and are
closed throughout all the winter months.
In all those
types of case it can be said that the tenants are occupying for business
purposes, even though when the application is made or when the lease ends, or
both, falls within a period of closure.
The test which
has been adopted is whether the thread of continuity of business user continues
or whether it has been broken, to take a metaphorical expression, which I think
was coined by Cross J (as he then was) in the case of I&H Caplan Ltd
v Caplan (No 2) [1963] 1 WLR 1247. The facts there were somewhat
unusual. At the time when the application for a new lease was made and for some
time thereafter the tenants were undoubtedly in occupation of the premises for
the purposes of their business, which was some sort of retail business, I
think. The landlords opposed the grant of a new lease on one of the statutory
grounds, and at the trial of that issue it was held that the landlord had
established that ground. The consequence of that was that the lease would in
due course come to an end. It would continue under the operation of section 64
of the Act until after the conclusion of the proceedings, but it would in due
course come to an end. The tenants did two things. First of all, as was their
right, they appealed against the order, and second they went out of occupation.
Within a year, the appeal came on in the Court of Appeal and was allowed, the
effect of which was that the landlords’ ground was not established, whereupon
the tenants went back in.
It is in the
light of those circumstances that the learned judge came to consider the
matter, because then the landlords said that the thread of continuity had been
broken. Cross J said this at p 1260:
I think it is
quite clear that a tenant does not lose the protection of this Act simply by
ceasing physically to occupy the premises. They may well continue to be
occupied for the purposes of the business although they are de facto empty for
some period of time. One rather obvious example would be if there was a need
for urgent structural repairs and the tenants had to go out of physical
occupation in order to enable them to be effected. Another example would be
that which the Court of Appeal had to deal with in Teasdale v Walker
[1958] 1 WLR 1076. That was a case where premises were only occupied during
seasonal periods: they were closed and empty in the winter and only used in the
summer. On the other hand, as the Court of Appeal pointed out in Teasdale
v Walker, a mere intention to resume occupation if you get a new tenancy
will not preserve the continuity of business user if the thread has once been
definitely broken. I think I must observe, however, that in Teasdale v Walker
the discontinuance of business occupation was before the tenant applied to the
court for a new tenancy. She had let someone else occupy it for business
purposes. He had gone out of occupation and given her back the key and the
premises were empty when the summons was issued. In those circumstances the
Court of Appeal considered that her expressed intention to start again herself,
if and when she got a new tenancy, was not enough.
Just breaking
off at that point for a moment, both counsel have relied on that passage as
assisting their argument (and I am much indebted to both of them) in that the
landlords’ counsel has called my attention to the fact that the learned judge
says ‘a mere intention to resume occupation if you got a new tenancy will not
preserve the continuity of business user if the thread has once been definitely
broken’. If one applies that literally to the present circumstances, it must
appear that the thread is broken in a far more dramatic way in this case than
in the Caplan case. Mr Neuberger, on the other hand, for the tenants,
points out that one has got to read that in the light of the particular facts
that in Teasdale v Walker there was not only a discontinuance of
the business by the tenant but also an allowing of someone else to occupy it
with another business, and that is a factor which is quite absent in this case.
Cross J went
on to consider the rather special facts in that case and dealt with
hypothetical cases where a tenant, placed as the tenant in Caplan was,
with an adverse decision of a court which might or might not be overturned on
appeal, went out to preserve his goodwill, and referred to various arguments.
Then he said:
I appreciate
the force of those arguments but all these cases, of course, are cases of
degree, depending on their own particular facts. The facts here are most
unusual, and I think this is a distinctly borderline case, but on the whole I
have come to the conclusion that the thread of continuity, to use the words of
the Court of Appeal in the case of Teasdale v Walker, was not
broken in this case.
I think it
right to say that in the Caplan case, unlike this, the tenant was acting
as he did under much greater threat of compulsion than this. It is true to say
that he went out voluntarily after the first hearing, but he was in an
extremely difficult position not of his own making.
This case is
clearly distinguishable from the Caplan case, and indeed no one has
suggested to me that the Caplan case is conclusive of the one I have to
deal with. What I get out of it, I think, is that one has obviously to look at
all the facts, the time that the business has not been carried on, the
intention to resume and the reason why the business is not being carried on,
whether the reasons were forced on the tenant or whether the tenant voluntarily
went out. All those are factors, none of which is conclusive, to enable the
judge to decide whether, going back to the language of the section, the
premises ‘are occupied for the purposes of a business’.
That approach
I think is underlined by the other two authorities to which I was referred,
being Morrisons Holdings Ltd v Manders Property (Wolverhampton) Ltd
[1976] 1 WLR 533, and Hancock & Willis v GMS Syndicate Ltd
(1982) 265 EG 473, [1983] 1 EGLR 70.
In Morrisons
Holdings Ltd the reason why the tenant was not trading at the material date
was because the premises had been severely damaged by fire, and there was no
suggestion that the tenant through his own fault had caused the fire or
anything of that nature. The Court of Appeal, reversing the trial judge, held
that in those circumstances the thread of continuity was not broken. I do not
dwell further on the facts, because they are obviously far from the facts here,
but Scarman LJ (as he then was) put it this way at p 540, letter B, after
having referred to the Caplan case:
I would put
it in my own words as follows: in order to apply for a new tenancy under the
Act a tenant must show either that he is continuing in occupation of the
premises for the purposes of a business carried on by him, or, if events over
which he has no control have led him to absent himself from the premises, if he
continues to exert and claim his right to occupancy. This is a question which
did not arise in terms in Caplan, where there was a temporary absence of
the tenant which the judge held did not interrupt the continuity of his
occupation in the circumstances of that case. However, the temporary absence in
Caplan which did not destroy the continuity of occupation was absence at
the volition of the tenant. In the present case the absenting by the tenants of
themselves from the premises after the devastating fire was not their choice,
but was brought about by the state of the premises created by the fire, which
was none of the tenants’ making.
Then Sir
Gordon Willmer, another member of the court, had this to say about it on p 542:
So fas as the
law is concerned, I think it can be taken as axiomatic that in order to be in
occupation one does not have to be physically present every second of every
minute of every hour of every day. All of us remain in occupation, for
instance, of our houses even while we are away doing our day’s work. It
follows, therefore, that occupation necessarily must include an element of
intention as well as a physical element. If I leave my premises and emigrate to
the United States of America with no intention of returning, it can well be
said that I no longer remain in occupation. But if as a shopkeeper I close my
shop for a fortnight in the summer to enable my staff to have a holiday, I
apprehend that no one would contend that during that fortnight I ceased to be
in occupation of my shop.
If one applied
the test of Scarman LJ there, clearly the tenants here would be out, because
the test is that the tenant must show either that he is continuing in
occupation of the premises for the purposes of a business carried on by him or
that events over which he has no control have led him to absent himself from
the premises.
Clearly at the
relevant date they were not continuing in occupation of the premises for the
purposes of a business, but equally it could not be said that events over which
they have no control have led them to absent themselves from the premises. In
1984 the tenants had a clear choice either to continue in the premises or to go
to the new premises, and they elected of their own choice to go to those
premises.
It has been
pointed out to me that that test has to be read in the light of the facts which
presented themselves to the Court of Appeal then and that clearly the tenants
had been driven out of the premises by the fire, and it may be suggested that
Scarman LJ has defined the test a little too narrowly and has not really dealt
with cases where the tenant has gone out of his own volition, but having to
choose between a number of alternatives has chosen that alternative which is
the least damaging.
Nevertheless,
I find that, if I may respectfully say so, a very useful way of approaching
this case, and it seems to me here, first, that the tenants are not occupying
(and that really cannot be gainsaid) and, second, although, as I accept, they
have an intention or desire to reoccupy for the purposes of their business,
that is not an intention which they are in a position to carry out. Looking at
the facts as a whole, I find that the thread has been broken. I feel no doubt
about it. I do not regard this as a borderline case, as Cross J did in the Caplan
case. This was a case where in 1984 the tenants had a clear commercial choice;
they exercised it, and the upshot was that they ceased to carry on business
here and have not carried it on since. I accept that they would like to carry
on business there, but the evidence shows that they are not able to do so. The
Gaming Board will not consider their application until they have got a new
lease. That, as it seems to me, is not sufficient. One cannot reason from that
that therefore they must be given a new lease in order that they can improve
their standing with the Gaming Board. The landlords are entitled to say that
though they may have the intention, the evidence shows that that is not an
intention which can be given effect to because of circumstances which now are
beyond their control but which initially they have brought on themselves by
making this choice.
In those
circumstances, as it seems to me, I have to make the declaration that the
plaintiffs have not been throughout the relevant period occupying the premises
for the purposes of a business within the meaning of section 23.
The
plaintiffs’ summons was dismissed with costs, leave to appeal given if
necessary.
