Landlord and tenant – Injunction – Triable issue – High court granting injunction to permit respondent sublessee to remain in occupation of property – Appellant landlord appealing – Whether judge correctly concluding that just and convenient to grant injunction – Whether judge correctly concluding serious issued to be tried – Appeal dismissed
The appellant was the assignee of the headlease of Avondale Park Lodge from the Royal Borough of Kensington and Chelsea. The respondent held a sublease of the property which was successfully contracted out of Part II of the Landlord and Tenant Act 1954.
Clause 9 of the sublease appeared to render the sublease conditional on a deed of variation being procured in respect of the head lease which permitted the property to be used as a nursery by 14 December 2014.
No deed of variation as required by clause 9 was produced by the requisite date but the respondent went into possession of the property and began works for fitting it out as a nursery. It occupied the property as such until August 2022.
The appellant subsequently purported to forfeit the sub-lease by peaceable re-entry alleging non-payment of rent. The respondent sought a declaration as to the status of its tenure and an injunction preventing the appellant from interfering with its possession of the property.
The respondent was initially granted an interim injunction on an application without notice which was continued at an inter partes hearing. The judge held that: (i) clause 9 was clear and operated automatically on failure to produce the deed of variation by the stipulated date; (ii) there was a triable issue whether the respondent was a periodic tenant; (iii) there was a triable issue whether the appellant had waived its right to forfeit for rent arrears; and (iv) it was not possible to decide whether the respondent was estopped from asserting that the sublease had come to an end on an application for an interlocutory injunction: [2022] EWHC 2738 (Ch). The appellant appealed.
Held: The appeal was dismissed.
(1) Since the sublease was contracted out of Part II of the 1954 Act its termination was governed by the common law. There was no conceptual difficulty at common law in the grant of a term of years which determined on the happening of a particular event.
Clause 9 set out a condition and its consequence. Iyf the appellant did not produce to the respondent a certified copy of a completed deed of variation by 14 December 2014 the sublease “will be terminated immediately”. The word “immediately” left no room for some indeterminate intermediate period during which either party decided whether to terminate the sublease. From the perspective of both parties an immediate termination made commercial sense. It removed the threat of forfeiture of the appellant’s own lease; and relieved the respondent from a liability to pay rent for property that it could not use on the terms of the sublease.
(2) Once the sublease had automatically terminated, the respondent’s continued possession and payment of rent gave rise to a triable issue whether it was entitled to a periodic tenancy at common law. The terms of such a periodic tenancy were the same as those of the void lease, except where they were inconsistent with a periodic tenancy. Since the respondent occupied the property for the purposes of a business, a periodic tenancy would have attracted the protection of Part II of the 1954 Act: Prudential Assurance Co Ltd v London Residuary Body [1992] 2 EGLR 56 considered.
(3) As regards the estoppel by convention point relied on by the appellant, the common assumption upon which the estoppel was based had to be expressly shared between the parties. There had to be words or conduct which crossed the line between the parties from which the necessary sharing might be inferred. The expression of the common assumption by the party alleged to be estopped had to be such that he might properly be said to have assumed some element of responsibility for it.
The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter. That reliance must have occurred in connection with some subsequent mutual dealing between the parties. Some detriment must thereby have been suffered by the person alleging the estoppel or benefit conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position. It was not enough if both parties shared the same assumption but arrived at their conclusions independently: Tinkler v HMRC [2022] AC 886 and HMRC v Benchdollar [2009] EWHC 1310 (Ch) applied.
(4) Given that there was no challenge to the judge’s conclusion that: there was a triable issue whether there was an implied periodic tenancy once the respondent took possession and paid rent; it was common ground that the respondent occupied the property for the purposes of a business; a periodic tenancy attracted the protection of Part II of the 1954 Act; section 38(1) of the 1954 Act contained a general prohibition on contracting out of security of tenure; and the statutory procedure for contracting out did not apply to a periodic tenancy, the question was whether estoppel by convention deprived the respondent of security of tenure to which it would otherwise be entitled.
The court first had to consider whether there was “in fact an actual tenancy” to which Part II of the 1954 Act applied. If so, the statute overrode any estoppel. Therefore, if the respondent succeeded at trial in showing that an implied periodic tenancy arose from the taking of possession and subsequent payment and acceptance of rent, there was a strong argument that estoppel by convention could not override statutory security of tenure: Keen v Holland [1984] 1 EGLR 9 applied. Morrison Holdings Ltd v Manders Property (Wolverhampton) Ltd [1976] 1 EGLR 70 and Pointon York Group plc v Poulton [2006] 3 EGLR 37 considered.
This was a case in which it could be said that the parties made a mistake about the legal effect of the transaction into which they entered. But even if the appellant could overcome that problem, there would need to be an examination of whether, on the facts, the appellant’s mistaken assumption was in some way induced or affected by anything the respondent said or did. The judge was correct to conclude that there was a serious issue to be tried.
David Holland KC (instructed by Keystone Law LLP) appeared for the appellant; William Moffett (instructed by Hunters Law LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Avondale Park Ltd v Miss Delaney’s Nursery Schools Ltd
