Landlord and tenant — Alterations — Covenant to repair — Lease granted for term of 1,000 years — Covenant to erect and maintain specific buildings — Tenant proposing to demolish those buildings — Whether breach of repairing covenant — Effect of covenant to yield up buildings in repair — Whether tenant estopped from changing use
In 1958, the first claimant was granted a lease of land belonging to the defendant university for a term of 1,000 years at a rent of £1 pa. The tenant was a non-profit-making body, whose object was to promote research into glass manufacturing and glassware. The lease required the tenant to erect, and then to keep in repair, office buildings and a laboratory, which were to be yielded up at the end of the term. The lease had been granted at a time when close research co-operation between the university and the first claimant was anticipated. However, over time, the first claimant’s requirements began to alter; it ceased activities on the site and assigned the lease to the second claimant. The landlord refused consent to an application for consent to replace the laboratory and other buildings, and to utilise the replacement buildings without any contractual restriction on their use. The claimants sought declarations that it would be lawful for the second claimant to demolish the buildings. The landlord contended that demolition was forbidden by the terms of the lease or by estoppel; a covenant to repair carried with it a duty not to destroy the subject matter of the covenant.
Held: The claim was allowed. On the proper construction of the lease, the parties had not intended that the tenant should be obliged to keep in repair for 1,000 years the very same building that had first been erected. The repairing covenants contained in the lease contemplated that other buildings might be erected during the term. Although the covenant to yield up referred to the original buildings, the overall commercial context required an interpretation that did not prohibit demolition. The terms of the lease did not in fact prohibit the demolition and reconstruction of the buildings nor their use for residential purposes. On the evidence, the landlord could not rely upon an estoppel: the ingredients of estoppel by convention were not present in this case. Even if demolition had constituted a breach of the lease or had been the subject of an estoppel, an injunction would not have been granted to prevent it: Doherty v Allman (1878) 3 App Cas 709 applied.
The following cases are referred to in this report.
Doe d Dalton v Jones (1832) 4 B&Ad 126
Doherty v Allman (1878) 3 App Cas 709; 39 LT 129; 26 WR 513, HL
Gange v Lockwood (1860) 2 F&F 115
Hannon v 169 Queen’s Gate Ltd [2000] 1 EGLR 40; [2000] 09 EG 179
Hillingdon London Borough Council v ARC Ltd (No 2) [2000] 3 EGLR 97; [2000] RVR 283
Hyman v Rose; Rose v Spicer [1912] AC 623, HL; [1911] 2 KB 234, CA
India v India Steamship Co Ltd (The Indian Endurance and The Indian Grace)(No 2) [1998] AC 878; [1997] 3 WLR 818; [1997] 4 All ER 380; [1998] 1 Lloyd’s Rep 1, HL
Jones v Commerzbank AG sub nom Commerzbank AG v Price-Jones [2003] EWCA Civ 1663; (2003) 147 SJLB 1397
Keen v Holland [1984] 1 WLR 251; [1984] 1 All ER 75; (1984) 47 P&CR 639; [1984] 1 EGLR 9; [1984] EGD 9; 269 EG 1043, CA
This was a claim by the claimants, British Glass Manufacturers’ Confederation and NHE (Northumberland) Ltd, for declaratory relief in proceedings against the defendant, the University of Sheffield.
Jonathan Brock QC and Andrew Davies (instructed by HLW, of Sheffield) appeared for the claimants; Paul de la Piquerie (instructed by Keeble Hawson, of Sheffield) represented the defendant.
Giving judgment, Lewison J said:
[1] On 24 June 1958, the University of Sheffield demised to the British Glass Industry Research Association premises at Northumberland Road, Sheffield, for a term of 1,000 years from 29 September 1957 at an annual rent of £1. The association has since changed its name to the British Glass Manufacturers’ Confederation. It is a non-profit-making body, whose object is to promote research into glass manufacturing and glassware.
[2] The lease contained the following (among other) tenant’s covenants:
2(iii) Forthwith to erect upon the demised premises a laboratory and office building with sewers and drains thereto in accordance with plans elevations and sections to be approved by the Landlord
…
2(v) Well and substantially to repair and at all times during the continuance of the term to keep in repair the said laboratory and office building to be erected on the land hereby demised and all sewers or drains in or under the said land and |page:41| all other buildings and erections which at any time during the said term may be upon any part of the land hereby demised
2(vi) At the end or other sooner determination of the said term peaceably to surrender up to the landlords the land hereby demised together with the said laboratory and office building and other buildings and erections well and substantially repaired in accordance with the covenant hereinbefore contained
…
2(ix) Forthwith to insure the same and to keep the said laboratory and office building and all other buildings or erections which during the said term may be upon the land hereby demised insured from loss or damage by fire to the full value thereof…
2(x) As often as the said laboratory and office building or other buildings or erections on the land hereby demised shall be destroyed or damaged as aforesaid forthwith to rebuild and reinstate the same under the direction and to the satisfaction of the surveyor for the time being of the landlords it being hereby agreed that all moneys to be received by virtue of any such insurance as aforesaid shall be applied so far as the same shall extend in so rebuilding and reinstating the said laboratory and office building or other buildings or erections and in the case the same shall be insufficient for that purpose then the tenants shall make up the deficiency out of their own moneys
[3] The tenant seeks a declaration that, subject to planning and general law, it or its assigns are entitled to replace the laboratory and office building currently on the land with other buildings, and may use those other buildings without any contractual restriction on their use. The landlord counterclaims for the following relief:
(i) a declaration that the total demolition of the laboratory and offices currently on the site would be a breach of the tenant’s covenant to repair;
(ii) an injunction restraining the tenant from demolishing those buildings;
(iii) a declaration that the tenant is estopped from using the demised property for a purpose other than research laboratories and ancillary offices; and
(iv) an injunction restraining the tenant from redeveloping the buildings comprised in the demised property by their demolition and the redevelopment of the site by the erection of residential accommodation.
[4] The University of Sheffield has had a department of glass technology since 1915. For many years, it was the only centre for co-operative research for the glass industry. The research, or much of it, was paid for by the glass industry. Members of that industry formed a supervisory body called “the delegacy”, which took part in the management of the department. The association was formed in 1955. It had two original purposes:
(i) to take over the responsibility of the delegacy; and
(ii) to set up a research association under the aegis of the Department of Scientific and Industrial Research.
[5] In 1957, the university offered the association the site at Northumberland Road. The association had previously been housed on a site at Elmfield, close to the university itself, and the Northumberland Road site was adjacent to it. It was zoned, in planning terms, for university development. The university and the association worked in close co-operation, and doubtless expected that close co-operation to continue. This, and the fact that the association was to bear most of the cost of erecting the buildings on the site, may explain the grant of such a long lease at a nominal rent. Laboratories and associated offices were constructed in 1958 and opened by Lord Halifax in June 1959. They are now some 45 years old. By late 2001, the association had decided that they were no longer suitable for its purposes, and decided to relocate. It conducted an informal bidding process, in which the university participated unsuccessfully. The association has now assigned its lease to NHE (Northumberland) Ltd, which has been joined to these proceedings as the second claimant. It proposes to demolish the existing buildings and to redevelop the site. The issue for me, put shortly, is whether the lease or an estoppel forbids this.
[6] It is worth noting, at this point, not only the covenants that the lease contains but also covenants that it does not contain. It does not contain: |page:42|
(i) a restriction on the permitted use of the buildings on the site (apart from a general covenant not to cause annoyance or disturbance to the landlord or to any neighbours);
(ii) a restriction on alterations (whether structural or non-structural); or
(iii) a restriction on alienation (although, in view of section 19(1)(b) of the Landlord and Tenant Act 1927, this omission is not surprising).
[7] In order to prevent the demolition of the existing buildings, the landlord relies upon the repairing covenant. The argument is that a covenant to repair carries with it a duty not to destroy the subject matter of the covenant. The principle is usually traced to Willis J’s direction to the jury in Gange v Lockwood (1860) 2 F&F 115, in which he said:
A covenant to repair, uphold and maintain or keep in good repair raises a duty not to destroy the demised premises and the pulling them down, wholly or partly, is a breach of such covenant.
[8] Mr Paul de la Piquerie advances this submission as a general rule of the construction of repairing covenants. In Hannon v 169 Queen’s Gate Ltd [2000] 1 EGLR 40, Mr Bernard Livesey QC, sitting as a judge of the Chancery Division, said that the logic behind the principle was “suspect”, and that the principle “is faintly absurd nowadays”. But, in my judgment, the principle thus expressed is not an absolute rule of law. It is a conclusion reached as a question of construction of the lease. In other cases, judges have considered other covenants contained in the lease in question and have reached a contrary conclusion. In Doe d Dalton v Jones (1832) 4 B&Ad 126, the lease contained a tenant’s covenant to repair the premises “together with such buildings improvements and additions whatsoever as at any time during the said term should be erected set up or made by him”. The property in question was a dwelling-house, and the term of the lease was 40 years. The tenant took down part of the front of the house and converted the lower part into a shop and exhibition room for pictures. He removed the old windows and put in larger shop windows. He stopped up an old door and put in a new one. It was held that no breach of covenant had been committed. Parke B said that the lease:
contemplates “improvements” and “additions” and only provides against non-repair, which is permissive waste. Under such a lease can it be said that a valuable house was to be kept in precisely the same condition for forty years?
[9] In Rose v Spicer [1911] 2 KB 234, a lease of a piece of ground had been granted for 99 years. The tenant covenanted to erect a chapel or place of religious worship. The lease contained a covenant by the tenant that he would “well and substantially repair support uphold maintain… amend and keep the said demised chapel offices buildings and premises… in good and substantial and tenantable repair”. The tenant also covenanted not to “alter or vary the front elevation of the said demised chapel offices buildings and premises” without the landlord’s consent. The chapel ceased to be used for worship in 1909. In 1910, the lease was assigned to Hyman and Rosenthal, who wished to turn the chapel into a cinema. In order to do so, they removed some ornamental iron railings, opened a new door in the west wall, constructed two new internal staircases, and made other internal alterations. A majority of the Court of Appeal held that these alterations amounted to a breach of the repairing covenant. As Fletcher Moulton LJ put it, at p247:
Had the railings or the staircases or the gallery fallen out of repair a notice to repair them must have been obeyed by the lessees on pain of forfeiture. How can it be gravely suggested then that their actual removal and destruction is not a substantial breach of the covenant to repair and maintain?
[10] Buckley LJ dissented. He pointed first to the covenant to yield up the premises “with all “improvements”. He said that the word “improvements” was important. Then he pointed out that use as a cinema was not forbidden by the lease, and commented, at p254:
For the purposes of user for any trade not being a forbidden trade the lessees could, I think, reasonably arrange and equip the interior of the building as they thought proper. Had the building become a draper’s shop they might have put in counters; had it been let to an insurance company they might have put in partitions and glass screens, and so on, by way of sub-division. |page:42|
[11] Next, he turned to the covenant against alterations. He said that since it prohibited only alterations to the west wall, it could be inferred that other alterations were permitted. His ultimate conclusion was that whether alterations amounted to a breach of covenant or waste was a question of degree.
[12] The tenant appealed to the House of Lords: Hyman v Rose [1912] AC 623. Lord Loreburn LC, with whom the other law lords agreed, said that he agreed with the judgment of Buckley LJ. The decision of the majority was reversed. Mr de la Piquerie, who appears for the university, says that the reversal of the majority was limited to the question of the terms upon which relief against forfeiture was to be granted. He points to Lord Loreburn’s statement that there were admitted breaches of covenant. However, it is not easy to discern from the report what those breaches were. I suspect that the answer is that Mrs Rose, the reversioner, served a notice to repair on Mr Spicer in July 1910, and began her action for possession against him on his failure to comply with the notice. The assignees, Hyman and Rosenthal, did not take possession until December 1910, by which time the forfeiture had taken place, and they put the premises into repair: see the facts at [1911] 2 KB 237. But I think that Mr de la Piquerie’s reading is too narrow a reading, and does not give full weight to Lord Loreburn’s express approval of Buckley LJ’s dissenting judgment. Lord Loreburn said that the real issue was whether the alterations amounted to a breach of the covenant, and he said expressly that, in his view, they could be carried out “without breach of covenant and without waste”. This was the opposite conclusion to that of the majority in the Court of Appeal. For Lord Loreburn, the “governing consideration” was the extent of the uses permitted under the lease. But even if Mr de la Piquerie is right, whether the lease forbids alterations is a question of construction of the lease, and not an absolute rule of law.
[13] Like all questions of construction, the question in the present case turns on what the terms of the lease, read in context, would convey to a reasonable reader. Do they lead the reasonable reader to conclude that the parties had intended that the tenant should be obliged to keep in repair for 1,000 years the very same buildings that it had first erected? Or do they lead him to conclude that the parties intended that the tenant should keep in repair the buildings on the site, whatever they happened to be? First, apart from estoppel, it is common ground that the lease contains no restriction on the use to which the property can be put. If, therefore, the tenant wished to use the existing buildings for residential use, and obtained planning permission to do so, there is nothing in the lease to stop it. In such a case, in conformity with the principle set out by Buckley LJ, and approved by the House of Lords, a right to adapt the property for that purpose would be implied. Second, the term of the lease is 1,000 years. The period of use contemplated by the parties was as long a period as separated them from Anglo-Saxon England. Apart from a handful of parish churches, there can be no buildings in the country still in use in their original form after 1,000 years. Add to that the parties’ original contemplation, that the buildings to be erected were to be used for cutting-edge scientific research, and it becomes highly improbable that they expected, let alone agreed, that the buildings would remain unaltered for the term of the lease.
[14] Although the court nowadays places great weight upon the context and commercial purpose of any contract, it is still important to pay close attention to the words. In Jones v Commerzbank AG [2003] EWCA Civ 1663*, Mummery LJ said:
I agree with Mr Hollander that the Deputy Judge paid insufficient attention to the actual language of the documents. He placed far too much reliance on what, in the surrounding circumstances, would have been the sensible commercial agreement between the parties. In the result he constructed from the context alone a contract that the parties in their respective situations might have made. In doing so he has not construed the language of the two letters in which the terms of the contract were in fact formally expressed. Of course, the context of a contract matters as an aid to construction, but it should not be used to construct a contract which does not properly reflect the language employed in formal contractual documents.
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* Editor’s note: Reported at (2003) 147 SJLB 1397
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[15] Clause 2(iii) itself is unequivocal about what is to be constructed: a laboratory and office building. But the other covenants are not. The repairing covenant in clause 2(v) speaks not only of the “said laboratory and office building” but also of “all other buildings and erections which at any time during the said term may be upon any part of the land hereby demised”. Not only does this contemplate buildings other than the laboratory and office building but it also contemplates that those other buildings may be on any part of the land. “Any” part of the land would include that part of the land upon which the laboratory and office building had previously been constructed. The remaining relevant covenants all speak of the laboratory and office building and “other buildings” or “all other buildings”. Thus, in my judgment, detailed linguistic consideration of the words of the lease also leads to the conclusion that the parties contemplated that different buildings might be erected during the term. The landlord’s strongest linguistic point is that the covenant to yield up in clause 2(vi) requires the tenant to yield up the land “together with the said laboratory and office building and all other buildings and erections”. Thus, on the face of it, there is an absolute covenant to yield up the laboratory and office building. If the tenant were to demolish that building, he would have put it out of his power to perform that covenant. However, it seems to me to be highly improbable that the parties would have set any store by the landlord receiving back, at the end of the lease, a laboratory and office that, by then, would be 1,000 years old. Mr de la Piquerie was also inclined to accept that there might come a time when the buildings had reached the end of their useful life, at which point the tenant would be entitled to demolish them without breach of covenant. Thus, even on his construction, the covenant is not absolute. Mr Jonathan Brock QC has referred me to cases in which the word “and” has been read disjunctively. These are not cases of the word “and” meaning “or”, but cases where, from the context and the terms of the document, the court is able to conclude that something has gone wrong with the language. The present case is a case where, in my judgment, the overall commercial context drives one to the conclusion that something has gone wrong with the language and that the word “and” should be read as “or”. I think, also, that I am entitled to take into account the absence of a prohibition on alterations, even though such covenants in leases had been common for a century or more. In my judgment, therefore, the terms of the lease do not prohibit the demolition and reconstruction of the buildings comprised in the lease, or their use for residential purposes.
[16] Mr de la Piquerie argued that even if some form of alteration were permitted, wholesale demolition was not. He relied upon passages in Hyman that suggested that the question was one of degree. But these remarks were made in the context of waste, and not in the context of the construction of the covenant. The university does not advance a case based upon the tort of waste, and, in my judgment, these passages do not assist it on construction.
[17] In the alternative, the landlord argues that the tenant is estopped from denying that the demised property should be used for laboratory research and ancillary offices. The species of estoppel relied upon is estoppel by convention.
[18] In support of this contention, the landlord relies on the evidence of Mr Urquhart, who was the bursar of the university between 1952 and 1966. He was the university’s representative in the original transaction. He says:
I note from reading the lease that there is no clause restricting use of the site. The reason for this was that, as mentioned in paragraph 9, the site was zoned for University development in the City plan and this gave adequate protection to the University by restricting use to research and academic purposes. I am sure that this was clearly understood by all parties at the time of the lease.
[19] The landlord also relies upon the evidence of Professor Newton, who was one of the association’s representatives in the original transaction. He says: |page:43|
As I recall there was no discussion on covenants in the lease but I can categorically say that all parties understood that the site would always be used for research purposes. If I had been asked at the time what my understanding was of the use that the site could be put to, I would have answered that [the association] would use the site for the indefinite future for the use of the glass industry and that it would revert back to the University should [the association] become defunct. It would have been inconceivable to me that the site could have been used for any other purpose.
[20] In my judgment, this evidence does not establish an estoppel. First, in order to establish an estoppel, the landlord would have to show that the parties assumed that there were restrictive use covenants contained in the lease. Yet, Mr Urquhart’s evidence shows clearly that he understood that there were no such restrictions because the university thought (wrongly as it turned out) that it was adequately protected by planning legislation. The omission of covenants was, on this evidence, deliberate. Professor Newton’s understanding seems to involve a form of reverter to the university upon cessation of laboratory use, which would be necessary to make the supposed restriction on use commercially acceptable. Yet, Mr Urquhart had no such understanding. So, no common assumption has been demonstrated. Second, Professor Newton says that there was no discussion of the covenants of the lease. Nor does Mr Urquhart give evidence of any such discussions. So, there is no evidence of any communication between the two parties. Mr de la Piquerie invited me to infer that there must have been such discussions, but, in my judgment, the evidence points the other way. In India v India Steamship Co Ltd (The Indian Endurance and The Indian Grace)(No 2) [1998] AC 878, Lord Steyn said, at p913F, that, in order to raise an estoppel:
It is not enough that each of two parties acts on an assumption not communicated to the other.
[21] Likewise, in Hillingdon London Borough Council v ARC Ltd (No 2) [2000] 3 EGLR 97, Arden J, sitting in the Court of Appeal, said, at p104K:
A shared assumption is not, on the authorities, sufficient to establish an estoppel unless it is communicated.
[22] Third, the estoppel relied upon seems to me to be entry into the lease itself in the belief that it had a particular legal effect. This, in my judgment, goes beyond the limits of estoppel by convention. In Keen v Holland [1984] 1 WLR 251*, Oliver LJ said, at p261F:
This is not strictly a case of the parties having established, by their construction of their agreement or their apprehension of its legal effect, a conventional basis upon which they have regulated their subsequent dealings as in the Amalgamated Investment case [1982] QB 84. The dealing alleged to give rise to the estoppel is the entry into the agreement itself in the belief that it would produce a particular legal result. In fact, for reasons which had nothing to do with the defendant, the plaintiffs got it wrong: and what Miss Williamson appears to us to be contending for is a much wider conventional estoppel than has yet been established by any authority, namely, that where parties are shown to have had a common view about the legal effect of a contract into which they have entered and it is established that one of them would not to the other’s knowledge have entered into it if he had appreciated its true legal effect, they are, without more, estopped from asserting that the effect is otherwise than they originally supposed.
So broad a proposition cannot be deducted from the actual decision in the Amalgamated Investment case and although it may be supported on the basis of the very wide proposition of Lord Denning MR in the Amalgamated Investment case referred to above, it cannot, in our judgment, be right.
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* Editor’s note: Also reported at [1984] 1 EGLR 9
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[23] In my judgment, therefore, the landlord fails to establish any of the ingredients of an estoppel by convention. I might also add that Mr Smith, the university’s director of facilities and estate management, was unaware of the existence of the supposed convention, until the possibility of its existence was pointed out to him by the university’s lawyers, and he could not point to anything that the university had done in reliance upon it.
[24] Even if I were wrong, either about the construction of the lease or about the application of estoppel, I would not have granted an injunction. Whether an injunction should be granted to restrain the making of improvements carried out in breach of a covenant to repair was considered by the House of Lords in Doherty v Allman (1878) 3 App Cas 709. The House of Lords assumed that the improvements that the tenant proposed to carry out would be a breach of the covenant to repair (although some of their lordships had considerable doubt about the correctness of the assumption). Lord O’Hagan said, at p726:
but when, in a case of this sort, we are asked to exercise our discretionary jurisdiction, it surely is material to see that the interest of the individual who is only to come into possession of the premises at the end of 900 years is infinitesimally small compared with the interest of the man who is the tenant, and who, with his successors, is to hold the premises all that time, upon whom the effect of our exercise of this jurisdiction would be to tie up his hands, to destroy their property, and to inflict great damage upon them during the course of these many centuries that are yet to come. I think, that being so, we have only to say this in addition, that it is scarcely a matter of possible controversy here whether or no this change is a beneficial change. We have most conclusive evidence that the change will be beneficial. We have the most clear evidence that, as the matter stands, this old dilapidated store has become useless, I presume, to any human being. Circumstances have changed; the necessity for a store of that kind has ceased, and the result has been that the store, if it be allowed to continue in its present condition because the parties are compelled to leave it in its present condition till the end of this term of 999 years, the whole premises will be utterly valueless; whereas, upon the other side, if you substitute for this store the houses which are contemplated you double, you treble the security of the landlord, and give him, or whoever may live at the end of the term of 999 years, certainly not an injured property but an improved one. Therefore, inasmuch as the waste, if waste there be, is ameliorating waste, and the injury to the property produced by the waste is not merely trivial but absolutely non-existent, it appears to me that upon that ground the judgment of the Court below may very fairly be maintained.
[25] In my judgment, that reasoning is directly applicable to the present case. I also take into account the fact that, when the university participated in the informal bidding process, it made it clear that its own intention as regards the property was to demolish it and build a centre for sports medicine. This may not be the university’s current position, but it is impossible to conclude that the university has any real desire to preserve the existing buildings as buildings. In my judgment, this is not an appropriate case for the grant of an injunction.
[26] I conclude, therefore, that the claimants are entitled to succeed on the claim, and that the counterclaim must be dismissed.
Claim allowed.
