Landlord and Tenant Act 1954, Part II — Landlords’ notice under section 25 — Whether notice valid in accordance with section 25(5) and the appropriate regulations — Forfeiture proceedings previously instituted by landlords based on alleged arrears of rent and breach of covenant — Effect of forfeiture proceedings on service of section 25 notice by landlords — Preliminary issues determined in landlords’ favour and possession order granted in separate action
in the present action, a husband and wife, were lessees of business premises
subject to Part II of the Landlord and Tenant Act 1954 — It was their fate to
be involved in no less than three sets of legal proceedings. The first set,
proceedings by the landlords for forfeiture of the lease on grounds of alleged
arrears of rent and breach of covenant, advanced through various stages and
were of some relevance to the present action, as will appear later — The second
set, the present action by the tenants, sought a declaration as to the
invalidity of a notice by the landlords under section 25 of the 1954 Act — The
third set was an action by the landlords for possession on the basis that the
tenants had made no application for a new tenancy within the prescribed time of
the service of the landlords’ notice under section 25 — It was conceded by the
tenants that they would have no defence to that action if the judge in the
present action were to decide against them on the preliminary issues which he
had been directed to determine — Both the second and the third proceedings were
now before the judge
preliminary issues, which had become of decisive importance, concerned a
challenge to the validity of the landlords’ section 25 notice — The tenants
asked for a declaration that the notice was invalid on the grounds (1) that it
failed to comply with the requirements of section 25(5) of the 1954 Act; (2)
that, in the alternative, the landlords were not entitled to serve the section
25 notice as they had already purported to forfeit the lease by the issue and
service of the writ in the forfeiture action (the first of the proceedings
mentioned above)
dealt with the second ground first as it raised the more fundamental challenge,
namely, whether the landlords were entitled to serve a notice under section 25
at all, as they had purported to forfeit the lease and thereby elected to
determine the tenancy — The tenants argued that the forfeiture proceedings
constituted an unequivocal election by the landlords to treat the lease as
forfeited — Although there was a ‘twilight period’ between the issue and
service of the forfeiture proceedings and the determination by the court, the
tenants submitted that the landlords were not entitled during this period to do
anything which presumed that the lease was still in existence — The judge
rejected this submission — A landlord in this position was not entitled to do
anything inconsistent with his intention to determine the lease but could do
that which was consistent with it — If another ground for determining the lease
became available he could rely on it, as that was not inconsistent with his
intention
issue was more difficult — The tenants’ submission here was as follows —
Section 25(5) provided that the landlord’s notice must require the tenant to
notify the landlord within the prescribed time ‘whether or not’ the tenant
would be willing to give up possession — Literally this meant that in order to
be valid such a notice had to require the tenant to serve a counternotice that
he was willing to give up possession, if that was his position, or that he was
unwilling to give up possession, if that was his position — A ‘positive notice’
or a ‘negative notice’ was required, as the case might be — Now in the present instance
the landlords, apparently following the prescribed form in the then current
edition of the Landlord and Tenant Act 1954 (Notices) Regulations, gave a
notice which required the tenant to serve a counternotice only if not willing
to give up possession (in fact the tenants did serve a counternotice stating
that they were not willing) — The tenants claimed that the landlords’ section
25 notice was invalid because it should have required the tenants to serve
either a positive or a negative counternotice as appropriate — After a detailed
consideration, including a review of different editions of the regulations and
a citation from the judgment of Brightman J in Re 14 Grafton Street, London W1,
the judge rejected the tenants’ argument, preferring a purposive to a literal
interpretation of section 25(5) — The service of a positive notice conferred no
benefit on a tenant (and might in fact involve a detriment) and no benefit of
any substantial nature on a landlord — The section 25 notice served in the
present case was therefore valid — The judge also upheld an alternative
submission by the landlords that, if the requirement to serve a positive notice
was to anyone’s benefit, it was to the landlords’ benefit and they were
entitled to waive the requirement: Kammins Ballrooms Co Ltd v Zenith
Investments (Torquay) Ltd was a sufficient authority
the judge determined that the landlords’ section 25 notice was not invalid on
either of the grounds alleged and made an order for possession in the other
case
The following cases are referred to in
this report.
14 Grafton Street, London W1, In re; De
Havilland (Antiques) Ltd
v Centrovincial Estates (Mayfair) Ltd [1971] Ch 935; [1971] 2 WLR 159;
[1971] 2 All ER 1; (1971) 22 P&CR 18
Kammins Ballrooms Co Ltd v Zenith Investments
(Torquay) Ltd [1971] AC 850; [1970] 3 WLR 287; [1970] 2 All ER 871; (1970)
22 P&CR 74; [1970] EGD 761; 216 EG 31, HL
Long Acre Securities Ltd v Electro Acoustic
Industries Ltd [1990] 1 EGLR 91; [1990] 06 EG 103
Peninsular Maritime Ltd v Padseal Ltd [1981]
EGD 423; (1981) 259 EG 860, [1981] 2 EGLR 43
Sevenarts Ltd v Busvine [1968] 1 WLR 1929;
[1969] 1 All ER 392
In this case there were two proceedings
before the judge, Judge Paul Baker QC, sitting as a judge of the High Court.
In the first he was trying, following a
direction given by Mervyn Davies J, preliminary issues in an action by the
plaintiffs, Mr and Mrs Baglarbasi, tenants of the first floor of 62-68 Rosebery
Avenue, London EC1, seeking declarations as to a notice under section 25 of the
Landlord and Tenant Act 1954 served by their landlords, the defendants,
Deedmethod Ltd. In the second proceedings the landlords were the plaintiffs and
claimed possession of the property on the ground that the defendant tenants had
not responded within the time prescribed to the section 25 notice by applying
for a new tenancy.
Edwin Johnson (instructed by Gasquet
Metcalfe & Godwin) appeared on behalf of Mr and Mrs Baglarbasi; Edward Cole
(instructed by Cannons) represented Deedmethod Ltd.
Giving judgment, JUDGE PAUL BAKER QC
said: In this case the plaintiffs, Mr and Mrs Baglarbasi, are the lessees of
the first floor of 62-68 Rosebery Avenue, London EC1. They hold under a lease
dated April 20 1983 under which the premises were demised to them for seven
years from September 29 1982, ie until Michaelmas 1989. They are premises in
which the plaintiffs carry on a business and hence the lease is subject to Part
II of the Landlord and Tenant Act 1954. The defendants, Deedmethod Ltd, are the
present landlords, the reversion subject to the lease being assigned to them on
some date in 1987.
Before me are two preliminary issues, but
they cannot really be understood without some account of the facts. These facts
are not in dispute and I think I can state them quite briefly.
On June 9 1988, which was over 12 months
before the lease was due to come to an end, the landlords, Deedmethod, issued a
writ and statement of claim in the Queen’s Bench Division for forfeiture based
on arrears of rent and breach of the covenant restricting alienation.
On March 8 1989 Deedmethod served a
notice under section 25 of the Landlord and Tenant Act 1954 to expire on
September 29 1989. Of course, by that time it was less than 12 months before
the term date and, therefore, such a notice could be served. The notice stated
that the landlords were not willing to grant a new lease. The grounds of
opposition were (b) and (c), which corresponded to the allegations in the
forfeiture action. Those grounds are:
(b)
that the tenant ought not to be granted a new tenancy in view of his
persistent delay in paying the rent which has become due; and
(c)
that the tenant ought not to be granted a new tenancy in view of other
substantial breaches by him in his obligations under the current tenancy or for
any other reason connected with the tenant’s use or . . .
I revert to the forfeiture action,
missing out a number of procedural steps which are not material for what I have
to decide. On April 14 1989 a defence and counterclaim were served, denying the
breaches of covenant alleged and claiming relief from forfeiture. As to rent
there was a dispute. The tenants alleged that, at an accounting date when the
landlords had claimed that the rent was in arrears, there was a small balance
due to the tenants. And that is the last procedural step which needs to be
noticed in relation to that action.
I come back to the section 25 notice. On
May 9 1989, which was within the two months, or at least no point is taken
about that, a counternotice was served by the plaintiffs saying that they were
not willing to give up possession. I must return to that notice a little later.
The effect of the service of the section 25 notice was that if the tenant
wished to apply for a new tenancy he had to do so within that four months. The
plaintiffs failed to apply for a new tenancy and therefore they are out of
court as regards applying for a new tenancy following on the landlords’ notice
under section 25.
What they did was, on October 6 1989, to
issue the writ in the Chancery Division, which is the main matter before me. In
that writ they asked, as para 1 of the relief, for a declaration that the
notice of March 8 1989 served on the plaintiffs by the defendants that pursuant
to section 25 of the Landlord and Tenant Act in order to determine that the
plaintiffs’ tenancy is invalid and of no effect in that (1) it failed to comply
with the requirements of section 25(5) of the Landlord and Tenant Act 1954 and,
further or alternatively, (2) the defendants were not entitled to serve the
said notice, having already purported to forfeit the said lease by the issue
and service of a writ of summons dated June 8 1988 in the Queen’s Bench
Division (the forfeiture action). Additionally, in the Chancery action, the
plaintiffs seek an injunction and damages.
There were interlocutory proceedings in
the Chancery action, which on October 10 1989 came before Mervyn Davies J, as
the motion judge. On that occasion — it was done by consent — Mervyn Davies J
directed that para 1 of the relief claimed be tried as a preliminary issue. So
that is the preliminary issue now before me.
Then, on November 29 1989, the third
proceedings were started; in this case by the landlords as plaintiffs. They
issued a writ and statement of claim against Mr and Mrs Baglarbasi in the
Chancery Division claiming possession on the basis that notice under section 25
had been duly served and no application for a new tenancy made within the
prescribed time. Finally, as regards that matter, it is conceded by the lessees
that there is no defence to that action if I am against the plaintiffs on the
preliminary issues in the earlier Chancery action.
Logically, I suppose, the second issue
should come first, that is whether they could bring proceedings at all —
whether the landlords could serve the notice under the 1954 Act, having already
purported to forfeit the lease and thereby elected to determine the lease. I
should say at this point that I have had most helpful argument from both
counsel, in written and also in oral form.
The way Mr Johnson, for the plaintiffs,
puts this is that:
The issue and service of forfeiture
proceedings by the landlord constitutes an unequivocal election by the landlord
to treat the lease as forfeited and at an end . . .
He goes on to say that the writ, for
forfeiture, therefore, amounts to an unequivocal election to treat it at an
end, but, of course, it cannot be at an end in all circumstances. There might
be a successful defence to the forfeiture proceedings which would arise if in
fact they were misconceived and there was in fact no breach; alternatively, the
tenants might get relief against forfeiture, in which case the lease would be
reinstated from the time of the forfeiture. So until there is judgment in the
forfeiture action there is a period, which Mr Johnson called a twilight period
and others have called a period, when the matter is in limbo.
As regards that, Mr Johnson submits that
this is the position:
Although the status of the lease in the
twilight period between issue and service of forfeiture proceedings, and
determination by the court of the proceedings and any application for relief . .
. is unclear, the position of the landlord in relation to the lease during this
period (‘the twilight period’) is clear. The landlord has elected to treat the
lease as at an end. Therefore the landlord is not entitled or able to do
anything in the twilight period which presumes that the lease is still in
existence. Accordingly the landlord is not entitled to serve a section 25
notice. A section 25 notice can only operate if there is a continuing lease in
existence. A landlord however who has elected to treat the lease as at an end
cannot effectively serve a section 25 notice because he is not entitled, by
virtue of his election to treat the lease as being at an end, to serve such a
notice.
With all respect to him, I think that is
putting it far too high against the landlord. I would put it this way: that the
landlord is not entitled to do anything which is inconsistent with his
intention to put an end to the lease and, accordingly, if another ground for
determining it becomes available he can rely on it, for that is not
inconsistent with his intention. If the lease ends before the forfeiture action
is determined, then it would seem to me that the landlord can seek possession
without bringing his forfeiture proceedings to judgment, simply on the basis
that the lease has determined by effluxion of time. Similarly, as it seems to
me, the purpose of the landlord’s notice under section 25 is to determine the
lease. When he comes within the time when he can serve a section 25 notice,
then he can serve the notice and determine the lease that way. That is not
inconsistent with his seeking to determine it by forfeiture. It is not that he
has elected to treat the lease as dead; he has elected to procure the
determination of the lease.
There has been some authority, mainly
dealing with the question what happens as regards the covenants of the lease
during this period. The case to which I have been referred in this connection
is Peninsular Maritime Ltd v Padseal Ltd (1981) 259 EG 860,
[1981] 2 EGLR 43. That is authority for the proposition that during this period
of limbo, after the landlord has served a writ for forfeiture but before the
matter is determined, the tenant can enforce the landlord’s covenants, as to
repair or, I think in the particular case, as to keeping a lift in working
order. Stephenson LJ, after saying that it is the service of a writ, not merely
the issue of it, which forfeits the lease, went on:
. . . such a service of a writ by a
landlord is equivalent to re-entry and does determine the lease, although the
references to Scarf v Jardine (1882) 7 App Cas 345 in the
judgments of the Master of the Rolls, Lord Denning, and Megaw LJ indicate that
they were not departing or intending to depart from what may be the truer view
that the service of a writ for possession by a landlord is an unequivocal
election by the landlord to determine a lease rather
as appears from p 434 of the report, was cited to their Lordships and they
expressed no opinion about it and certainly did not disapprove it. It is also
the case that no question of relief against forfeiture appears to have been
raised or considered in that case. In these circumstances I find it quite
impossible to regard that case as in any way cutting down or disapproving the
previous decision of this court in Driscoll and it may be that the
position is that a landlord who has unequivocally elected to determine a lease
by serving a writ and forfeiting it cannot himself rely on any covenants of the
lease in any shape or form, or any covenants in it, but the tenant who has not
elected to determine the lease can do so.
*Editor’s note: Driscoll v Church
Commissioners for England [1957] 1 QB 330.
I am not concerned to what extent the
landlord and the tenant respectively can rely on the tenant’s and landlord’s
covenants, but what I call attention to is the view of Stephenson LJ that the
truer view is that service of the writ is an unequivocal election by a landlord
to determine a lease rather than a determination of it. It supports my view
that the landlord is not entitled to do anything which is inconsistent with his
intention to determine the lease but can do that which is consistent with it.
On that short ground — and I feel no real hesitation about this — it seems to
me that that preliminary issue has to be answered in favour of the landlords.
The other preliminary issue is more
difficult and depends on a closer perusal of the statutory provisions. The
issue is whether the section 25 notice is invalid and of no effect in that it
fails to comply with the requirements of section 25(5). Section 25 of the
Landlord and Tenant Act 1954 is the section which deals with the requirements
for a landlord’s notice terminating a tenancy to which Part II of the 1954 Act
applies. Subsection (5) reads as follows:
A notice under this section shall not
have effect unless it requires the tenant, within two months after the giving
of the notice, to notify the landlord in writing whether or not, at the date of
termination, the tenant will be willing to give up possession of the property
comprised in the tenancy.
It would seem from the language that to
be valid a notice has to require the tenant to serve a counternotice that he is
willing to give up possession, if that is his position, or that he is
unwilling, if that is his position. Such counternotices have been called
respectively ‘positive notices’ and ‘negative counternotices’.
The notice served in this case was in the
prescribed form which was current at the date of the giving of it. The way it
deals with the requirement of section 25(5) is in para 4 and it says:
If you are not willing to give up
possession of the property comprised in the tenancy on the date stated in para
3, you must notify me/us in writing within two months after the giving of this
notice.
Therefore, one sees it is confined to the
giving of a negative notice. There is nothing in there which requires the
tenant to give a positive notice if that is the position which the tenant
wishes to take up.
There are notes in the form drawing the
tenant’s attention to matters which are of importance, and note 2 says:
Claiming a new tenancy
If you want to apply to the court for a
new tenancy you must (1) notify the landlord in writing not later than two
months after the giving of this notice that you are not willing to give up
possession of the property and (2) apply to the court not earlier than two
months nor later than four months after the giving of this notice . . .
Faced with that, Mr Johnson’s argument in
support of an answer to the preliminary issue that the notice is invalid has
the very great merit of simplicity. He says in his written submissions that:
Section 25(5) imposes an obligation on
the landlord to notify the tenant in his s25 notice that the tenant is required
to indicate in writing within two months after service of the notice whether or
not he is willing to give up possession of the premises comprised in his
tenancy. In other words the landlord’s s25 notice must require the tenant to
serve either a positive counter-notice or a negative
counter-notice. It is not sufficient for a landlord’s s25 notice to require the
tenant to notify the landlord in writing only if he is not willing to give up
possession of the premises comprised in his tenancy. In other words it is not
sufficient for the landlord’s s25 notice to require the tenant only to serve a
negative counter-notice. This does not comply with the requirements of s25(5).
The sanction for failure to comply with s25(5) is clearly stipulated; the
notice ‘shall not have effect’.
That relies on the literal construction.
It is a very powerful argument.
The contrary argument of Mr Cole rests, I
think, under two heads. First, he says, one should examine the purpose of the
provision. The giving of a positive counternotice confers no benefit on the
landlord and, moreover, if insisted upon, it can in some circumstances be
harmful to the tenant. Second, the requirement can be waived by the landlord,
he being the only party for whom there is any conceivable benefit. That is a
very rough summary of the very careful arguments in the written and oral
submissions which have been made.
I do not think it requires much
demonstration that the broad purpose of the Act was to benefit tenants. One
notices in the preamble that this Part of the Act is to enable tenants
occupying property for business, professional and certain other purposes to
obtain new tenancies in certain cases. I think the first section I need look at
is section 24(1):
A tenancy to which this Part of this Act
applies shall not come to an end unless terminated in accordance with the
provisions of this Part of this Act; and, subject to the provisions of section
29 of this Act, the tenant under such a tenancy may apply to the court for a
new tenancy — (a) if the landlord has given notice under section 25 of
this Act to terminate the tenancy . . . .
That is of course the case here.
Section 25, dealing with termination by
the landlord:
(1)
The landlord may terminate a tenancy to which this Part of this Act
applies by a notice given to the tenant in the prescribed form specifying the
date at which the tenancy is to come to an end [‘the date of termination’]: . .
.
Then:
(2)
Subject to the provisions of the next following subsection, a notice
under this section shall not have effect unless it is given not more than
twelve nor less than six months before the date of termination specified
therein.
Hence, of course, adverting to the other
part of the case, the time when the forfeiture proceedings were brought, a
section 25 notice could not have been given as it was more than 12 months
before the date of termination. I can omit subsections (3) and (4) which are
specific provisions as to the date of termination. I have already read the
crucial subsection (5). I should read subsection (6):
A notice under this section shall not
have effect unless it states whether the landlord will oppose an application to
the court under this Part of this Act for the grant of a new tenancy and, if
so, also states on which of the grounds mentioned in section 30 of this Act he
would do so.
In regard to a point that has been taken,
I should look at section 27 of the Act, ‘Termination by a tenant of a tenancy
for fixed term’:
(1)
Where the tenant under a tenancy to which this Part of this Act applies,
being a tenancy granted for a term of years certain, gives to the immediate
landlord, not later than three months before the date on which apart from this
Act the tenancy would come to an end by effluxion of time, a notice in writing
that the tenant does not desire the tenancy to be continued, section 24 of this
Act shall not have effect in relation to the tenancy unless the notice is given
before the tenant has been in occupation in right of the tenancy for one month.
(2)
A tenancy granted for a term of years certain which is continuing by
virtue of section 24 of this Act may be brought to an end on any quarter day by
not less than three months’ notice in writing given by the tenant to the
immediate landlord, whether the notice is given after the date on which apart
from this Act the tenancy would have come to an end or before that date, but
not before the tenant has been in occupation in right of the tenancy for one month.
So the tenant is given a simple method of
determining the tenancy which would otherwise continue under section 24 where
he does not seek to get a new tenancy.
Then section 29, which is the provisions
in applying to the court for a new tenancy:
(1)
Subject to the provisions of this Act, on an application under
subsection (1) of section 24 of this Act for a new tenancy the court shall make
an order for the grant of a tenancy comprising such property, at such rent and
on such other terms, as are hereinafter provided.
(2)
Where such an application is made in consequence of a notice given by
the landlord under section 25 of this Act, it shall not be entertained unless
the tenant has duly notified the landlord that he will not be willing at the
date of termination to give up possession of the property comprised in the
tenancy.
(3)
No application under subsection (1) of section 24 of this Act shall be
entertained unless it is made not less than two nor more than four months after
the giving of the landlord’s notice under section 25 of this Act or, as the
case may be, after the making of the tenant’s request for a new tenancy.
Then I should look at section 66,
provisions as to notices:
(1)
Any form of notice required by this Act to be prescribed shall be prescribed
by regulations made by the Lord Chancellor by statutory instrument.
(2)
Where the form of a notice to be served on persons of any description is
to be prescribed for any of the purposes of this Act, the form to be prescribed
shall include such an explanation of the relevant provisions of this Act as
appears to the Lord Chancellor requisite for informing persons of that
description of their rights and obligations under those provisions.
Finally, in this review of the statutory
and other material, I shall just refer briefly to the history of the prescribed
forms. It is in three
and 1963, there were prescribed forms, and at that stage the prescribed form
for the section 25 notice had this paragraph in it:
You are required within two months after
the giving of this notice to notify me in writing whether or not you would be
willing to give up possession of the premises on that date (see note 1).
One sees that that does literally follow
the provisions of section 25(5).
Then we come to the Landlord and Tenant
Act 1954 Part II (Notices) Regulations 1983 [SI 1983 no 133]. In clause 2(2) of
the regulations it says:
Any reference in these regulations to a
numbered form shall be construed as a reference to the form bearing that number
in Schedule 2 hereto, or to a form substantially to the like effect.
Turning to the form, it is the form that
has been used in this case and which I have already read out, together with the
explanatory note.
Finally, there are the Landlord and
Tenant Act 1954 Part II (Notices) Amendment Regulations 1989 [SI 1989 no 1548].
They supplied, among other things, a new form of the landlord’s notice to
terminate a business tenancy and went back to the paragraph which had been in
the original forms:
Within two months after the giving of
this notice, you must notify me/us in writing whether or not you are willing to
give up possession of the property comprised in the tenancy on the date stated
in para 3.
In the explanatory note to the entire
regulations, which is not part of the regulations, it was said that notices now
expressly require a tenant to notify the landlord whether he is willing to give
up possession of the property let to him as well as if he is unwilling to do
that. The specific note to the form was unchanged. It simply continued the
warning that the tenant must, if he is unwilling to give up possession, notify
the landlord of that unwillingness within two months. There was nothing in that
note there about any obligation to give a notice of willingness to give up
possession.
One case has been cited to me where
section 25(5) has been considered, In re 14 Grafton Street, London W1
[1971] Ch 935. It was a decision of Brightman J (as he then was). The tenant
there was willing to give up possession. He was served with a notice under
section 25 of the Landlord and Tenant Act 1954 on grounds which entitled the
tenant to compensation if he were denied a new lease. The tenant served a
counternotice that he was willing to give up possession. He thereby, as
Brightman J held, forfeited his right to compensation. Under the Act, as it
then stood, the only way to get compensation was to serve a notice of
unwillingness, then apply to the court for a new lease which he did not want.
That bizarre result has now been amended by statute: Law of Property Act 1969,
section 11. The interest of the case from our point of view is that the learned
judge held that, once having given a notice of willingness to give up
possession, the tenant could not withdraw it. To consider that, the learned
judge had to go into the purposes of the subsection. I first notice that, in
the argument on p 938, the learned judge asked: ‘What is the purpose of this
positive counternotice?’ and the answer
he got at that stage was: ‘It is to inform the landlord in advance of the steps
which the tenant proposes to take.’ The
judge dealt with this in his judgment at p 942F:
It appears to be the scheme of the Act
that a landlord’s notice under section 25 shall be followed by a notification
by the tenant either that he is willing or that he is not willing
to give up possession on the date of termination specified in the notice. For
convenience, I refer to such a notification by the tenant as a positive or a
negative counter notice, according to whether the tenant is or is not agreeable
to the landlord’s demand. A negative counter notice is a condition precedent to
an application by the tenant to the court (see section 29(2)). An application
by the tenant to the court was, prior to the Act of 1969, a condition precedent
to the tenants becoming entitled to compensation for disturbance. It is
therefore hard to see how it can ever have been to the tenant’s financial
advantage to serve a positive counter notice. Before the Act of 1969 the result
can only have been to deprive the tenant of the chance of obtaining
compensation. Indeed no counsel was able to suggest what practical function was
performed by the positive counter notice except an act of courtesy to the
landlord.
Then he deals with some other statutory
provisions and I think I can pick it up again at the foot of p 943:
In my view the purpose of section 25(5)
is to introduce an element of certainty into the relationship between the
landlord and tenant. A tenant is not bound to serve a negative counter notice
before the end of the two-month period allowed to him. He may pause for that
period of time while he makes up his mind. If, however, he does serve a
positive counter notice during the two-month period, I think that he must abide
by what he has done. If that were not the case, the positive counter notice
would serve no purpose whatever compared with the complete inaction, for in
either case the landlord would not know where he stood until the end of the
two-month period. If a positive counter notice is revocable the tenant serving
the same would be able to serve a negative counter notice right up to the end
of the two-month period. If on the other hand the tenant does nothing, he may
likewise serve a negative counter notice right up to the end of the two-month
period. It follows that a positive counter notice would be wholly devoid of any
function, even that of courtesy, if it were revocable at the will of the
tenant. I therefore conclude that a positive counter notice is irrevocable; and
that in this case the tenants ceased to be able to serve a negative counter
notice after October 13 1969 and that they then lost their right to apply to
the court for an order for the grant of a new tenancy. I have not overlooked
the fact that the Act of 1954 is not expressed to impose on the tenant an
obligation to serve a notice of either description within the two-month period.
All that the Act does is to impose on the landlord, as a condition of a valid
25 notice, the obligation of informing the tenant that he is required to serve
a notice, one way or the other, within the two-month period and to place the
tenant under a disability if he fails to serve a negative counter notice. In my
view however, it is a necessary implication from section 25(5) that a tenant is
under a statutory obligation to serve a notice one way or the other within the
two-month period, though I accept that there is no sanction imposed on him for
ignoring that obligation except his inability to apply to the court.
Of course Brightman J was not dealing
with the point that I have got as to the validity of the section 25 notice
itself. There was no doubt at that stage that the notice did comply with
section 25 because it was governed by the previous regulations, the pre-1983
regulations. Therefore the last part of his statement there, that there is a
binding statutory obligation, is obiter, entitled to the greatest
respect, but it was a dictum nevertheless. The analysis of Brightman J does
show how artificial is the requirement for the positive counternotice. In Re
14 Grafton Street there was in fact a positive detriment to the tenant in
serving a notice. No one has been able to identify any benefit to the tenant
from serving that notice.
In his submissions to me, Mr Johnson
endeavoured to identify the benefit where he says that:
. . . the section 25(5) requirement does
confer a benefit on the tenant. If the tenant fails to serve a negative counter
notice his application for a new tenancy ‘shall not be entertained’ . . . If he
fails to serve a positive counter notice this could have an adverse effect on
the tenant from the point of view of the determination of the existing tenancy.
A positive counter notice could function as a notice under section 27 of the
Act, thereby avoiding a liability to rent to the date of determination
specified in the section 25 notice . . .
And he refers to the case of Long Acre
Securities Ltd v Electro Acoustic Industries Ltd [1990] 1 EGLR 91*,
which was a case of a notice served expressly under section 27. I am quite
unable to accept the suggestion that, in any circumstances, a positive notice
envisaged by section 25(5) could do duty as section 27. It involves one in
immediate ambiguities. Does the tenant want to go out on the date set by the landlord’s
notice or the date set by section 27?
How is the landlord to know what the tenant wishes? I am quite unable to accept that, in some way
or other, it would determine the tenancy in the way that the notice given
expressly under section 27 would do. So there is no benefit to the tenant. Is
there any benefit to the landlord?
*Editor’s note: Also reported at [1990]
06 EG 103.
There is this: that if the positive
counternotice is given, he knows the tenant’s position as soon as it is given,
instead of having to wait for the two months when, if he has not got a negative
counternotice, he can, in any event, proceed on the basis that the tenant is
willing to give up possession. That is a very slight and slender benefit.
In his submissions to me a few minutes
ago, Mr Johnson said: ‘Well, these considerations are all very well, but the
language is clear; that you can only resort to a purposive construction where
there is some ambiguity. But just confining yourself to section 25(5), you find
there is no ambiguity, and therefore you do not begin to start on applying the
purposive construction.’
In my judgment, that is putting it too
high. Certainly if there is ambiguity, I agree, one may resort to a purposive
construction, but that is not the only occasion for a purposive construction.
You can look at the whole scheme of the provisions and see whether there really
is any sensible reason to serve a positive notice. More narrowly, if the
literal construction leads to futility or absurdity then one may depart from
the literal meaning and look at the purposive construction. When you arrive at
the conclusion that a positive notice confers no benefit at all on the tenant,
and indeed there is a distinct detriment through having the positive notice,
and equally no benefit to the landlord of any substantial nature at all, then
it seems to me that one can depart from the language. I would call attention to
section 25(6) of the Act, which is the converse case and deals with the
landlord’s position:
A notice under this section shall not
have effect unless it states whether the landlord would oppose an application
to the court under this Part of this Act for the grant of a new tenancy and, if
so, also states on which of the grounds mentioned in section thirty of this Act
he would do so.
That would seem, on the face of it, to
come into play only if the landlord is minded to oppose the application. The
relevant regulations in the prescribed form provide for the alternatives that
the landlord:
‘If you apply to the court under Part II
of the Landlord and Tenant Act 1954 . . . I will not oppose your application,’
or
‘If you apply to the court under Part II
of the Landlord and Tenant Act 1954 . . . will oppose it on the grounds mentioned
in paragraphs . . . .’
There is no ‘whether or not’ in
subsection (6), but that is a case where ‘whether or not’ would seem to have
been appropriate and certainly the prescribed form proceeds on that basis. Thus
it seems to me that one should not put too much weight on the presence of ‘or
not’ after ‘whether’ in subsection (5).
Just reverting to Brightman J’s decision,
I would, with the greatest respect, not accept that it is a necessary
implication in section 25(5) that a tenant is under a statutory obligation to
serve a notice one way or the other within the two-month period. Save in very
limited circumstances, eg the duty to give information in section 40, the Act
imposes no obligations expressly on a tenant who does not seek its benefits, so
it seems unnecessary to imply obligations.
I now come to the alternative submission
on the part of the landlords. If the requirement to serve a positive notice was
to anybody’s benefit it was to the landlord’s benefit and he is entitled to
waive the requirement.
The case on this is Kammins Ballrooms
Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850. The
question there was whether the landlord could waive the provision in section
29(3) that:
No application under subsection (1) of
section twenty-four of this Act shall be entertained unless it is made not less
than two nor more than four months after the giving of the landlord’s notice
under section twenty-five of this Act or, as the case may be, after the making
of the tenant’s request for a new tenancy.
In the particular case, the tenants
launched their application less than two months after the giving of the notice.
It was said the tenants were out of court, having made their application
prematurely, and the court had no jurisdiction to entertain it. The language
was too clear for that. However, the decision of the majority was that it could
be waived. It was held that the requirement was only procedural and
consequently the landlords could waive the requirement. Of course that is
dealing with a different provision than I have to consider, but there are a
number of dicta of their lordships about waiver generally.
Lord Diplock deals specifically with the
section I am concerned with, section 25, and he says at p 881:
In view of the detailed analysis to which
sections 25 and 26 have already been subject by your Lordships, I will not
rehearse their provisions for the procedure and the time-tables to be followed
by landlords who want to terminate tenancies and tenants who want new ones.
Suffice it to say that there are several provisions which say that a landlord’s
or a tenant’s notice, as the case may, ‘shall not have effect’ unless certain
specified requirements as to its contents or as to the time at which it is
given are fulfilled. These requirements are clearly imposed solely for the
benefit of the party to whom the notice is given, whether he be the landlord or
the tenant. It would seem inconsistent with the intention to encourage
agreement between the parties disclosed in the other section of Part II to
attribute to Parliament an intention to preclude the parties to a tenancy from
agreeing that a notice given by one of them should have effect notwithstanding
that the specified requirements were not fulfilled. And apart from this
distinctive feature of this particular statute, where in any Act which merely
regulates the rights and obligations of private parties inter se
requirements to be complied with by one of those parties are imposed for the
sole benefit of the other party, it would be inconsistent with their purpose if
the party intended to have benefited were not entitled to dispense with the
other party’s compliance in circumstances where it was in his own interest to
do so.
My attention has rightly been called to
the comment of Lord Diplock there that the ‘requirements are clearly imposed
solely for the benefit of the party to whom the notice is given’, and if I
adapt that literally to the case here, the requirement in section 25(5) to
serve a positive notice is imposed solely for the benefit of that party by whom
the notice is given. Lord Diplock did not have in mind the situation that has
arisen here, where there were requirements in section 25(5) which were for the
benefit of both parties; that is to say the requirement to serve a notice of
unwillingness is for the benefit of the tenant but the requirement to serve a
notice of willingness, if it is for the benefit of anyone, is for the benefit
of the landlord. What one gets from this is that generally these provisions can
be waived and the parties come to agreement; indeed the whole structure of the
Act, as Lord Reid noticed at p 860, was to encourage agreements between the
parties. In this case, if a landlord serves a notice which requires only that
there should be a negative notice and not a positive notice, then, as it seems
to me, the landlord can waive the requirement being for his sole benefit and
does so if he confines the notice to requiring the tenant to give a negative
notice. On this ground also I would find in favour of the landlords on this
preliminary issue. Before leaving the topic of waiver, I may notice Sevenarts
Ltd v Busvine [1968] 1 WLR 1929, which was referred to me for the
statement by Harman LJ at p 1933 that a notice under section 25 is not to have
effect under section 25(5) ‘unless it requires the tenant to give a
counternotice saying whether he will or will not give up possession’. It was
referred to me to show that Harman LJ was endorsing the statutory language.
However, I observe that later Harman LJ regarded the notice under section 25 as
‘in the nature of a plea’ (p 1934). It would seem that the section notice and
the counternotice are to be regarded as the initiation of the suit for the
grant of a new tenancy, which is then continued under the procedures laid down
in section 29. They are all procedural steps leading to the grant of a new
tenancy and can be waived, as they were in the Kammins case in relation
to procedural steps, specifically in section 29(3).
I found this a very difficult point and I
have been much assisted by the argument. Those are the conclusions to which I
have come and I shall accordingly have to return answers to the preliminary
issues that the notice of March 8 1989 is not invalid on either of the grounds
alleged. It will follow that, in the other case, I shall have to make an order
for possession.
The judge made an order for possession in
28 days and adjourned other claims in the possession action. In the present
proceedings he declared that the notice under section 25 was not invalid and
that the landlords were entitled to serve it notwithstanding the forfeiture
action. Costs were awarded in favour of the landlords.
