Landlord and Tenant Act 1954, Part II — Terms of new tenancy — Questions as to interim rent under section 24A of Act — Landlords’ appeal from part of decision of Mr T L G Cullen QC, sitting as deputy judge of the Chancery Division — Tenants in application for a new business tenancy had at first proposed a new term of 14 years at the then current rent of £13,500 per annum, reviewable after seven years — Landlords at that stage were proposing a term of 10 years at £25,000 per annum, with a five-year review — Then followed inconclusive negotiations extending over about two and a half years — Tenants, after receiving advice from their own experts that the rental value was of the order of £57,500, amended their application from 14 years at £13,500 to one year only at £57,500 — They wished to keep their options open while looking round for alternative premises — Landlords then, on advice from their experts, raised their proposed rent to £125,000 per annum — The deputy judge decided that the term should be 10 years, with an option for the tenants to determine the tenancy by six months’ notice served not more than one month after the commencement; and he fixed the initial rent at £106,000 — There was no appeal from the judge’s decision on these points, but the appellant landlords challenged his ruling in regard to the question of interim rent under section 24A, contending that he had exercised his discretion on wrong principles — The manner in which the judge dealt with this matter was as follows — He assessed the section 34 rental value under a tenancy from year to year at £80,000 and then, having had regard to the old rent of £13,500, reduced the £80,000 by 50%, also arriving at an interim rent of £40,000 — However, he did not determine an interim rent on this basis, but accepted instead an undertaking by the tenants to pay £25,000 per annum from July 7 1983 to March 31 1986 and thereafter £40,000 per annum until the commencement of the new tenancy — The explanation of the period of July 1983 to March 1986 was that, in the judge’s view, the tenants had been led to think during this period that the rent would not exceed £25,000 — Held by the Court of Appeal, after considering a number of authorities, that the judge’s reduction of 50% to arrive at the interim rent, although probably a larger reduction than some other judges would have approved, could not be faulted as wrong in principle — Held, however, that the course taken by the judge in accepting the undertaking to pay £25,000 per annum for a period of two years and nine months, although a commendable attempt to achieve justice, was not a proper exercise of his discretion under section 24A — The only choice open was to continue the old rent of £13,500 or to replace it by £40,000 — It was for the court now to exercise the discretion afresh and this would be done by deleting the undertaking and ordering the tenants to pay £40,000 during the whole of the relevant period — Appeal in part allowed — Per Nourse J: The purpose in section 24A of requiring regard to be had to the old rent was to cushion the tenant against shock
The following
cases are referred to in this report.
Bloomfield v Ashwright Ltd (1983) 266 EG 1095, [1983] 1 EGLR 82, CA
English
Exporters (London) Ltd v Eldonwall Ltd
[1973] Ch 415; [1973] 2 WLR 435; [1973] 1 All ER 726; (1972) 25 P&CR 379;
[1973] EGD 439; 225 EG 255 & 433
Halberstam v Tandalco Corporation NV [1985] 1 EGLR 90; (1984) 274 EG
393, CA
Janes
(Gowns) Ltd v Harlow Development Corporation
[1980] EGD 110; (1979) 253 EG 799, [1980] 1 EGLR 52
Ratners
(Jewellers) Ltd v Lemnoll Ltd (1980) 255 EG
987, [1980] 2 EGLR 65
This was an
appeal by the defendant landlords, Cabtell Investments Ltd, from the decision
of Mr T L G Cullen QC, sitting as a deputy judge, in an application by the
plaintiff tenants (the present respondents) for a new tenancy under Part II of
the Landlord and Tenant Act 1954. The decision of Mr Cullen was reported at
[1986] 2 EGLR 76; (1986) 280 EG 639. The premises concerned consisted of a
vehicle repair and service station in part of a basement underneath a block of
residential flats at 6 Hall Road, St John’s Wood, London NW8.
Michael Barnes
QC and E Prince (instructed by Druces & Attlee) appeared on behalf of the
appellants; David Neuberger QC (instructed by Howard Kennedy) represented the
respondents.
Giving the
first judgment at the invitation of FOX LJ, NOURSE LJ said: This is an appeal
from part of a decision of Mr Terence Cullen QC, sitting as a deputy judge of
the Chancery Division, given on June 30 1986 in proceedings for the grant of a
new tenancy of business premises under Part II of the Landlord and Tenant Act
1954. The learned deputy judge determined the length of the term, the rent
payable thereunder and some points on the form of the rent review provision,
and there is no appeal on any of those points. He also fixed the amount which
would be payable by way of interim rent, if one were determined. But on an
undertaking by the tenant to pay less than that amount, he declined to make
such a determination. Against his decision of those questions the landlord now
appeals.
The premises,
which are used for garaging, hiring, servicing and repairing motor vehicles are
underneath a block of residential flats known as 6 Hall Road, London NW8. By a
lease dated April 1 1969 they were demised by the defendant, Cabtell
Investments Ltd, to a predecessor in title of the plaintiff, Charles Follett
Ltd, for a term of 14 years from March 25 1969 at a yearly rent of £8,500,
reviewable after seven years. On that review the rent was agreed at £13,500 for
the second seven years of the term. In the same year the lease was assigned to
the plaintiff.
On July 8
1982, before the term had expired, the plaintiff made a request for the grant
of a new tenancy under section 26 of the 1954 Act in which it proposed a
14-year term from July 7 1983 at the current rent of £13,500, reviewable after
seven years. No counternotice having been served by the defendant, the
plaintiff issued an originating summons in the Chancery Division on November 5
1982, seeking the grant of a new tenancy on those terms.
By a summons
issued in the proceedings on March 11 1983 under section 24A of the Act, the
defendant applied for the determination of an interim rent while the
plaintiff’s tenancy was being continued
the defendant’s managing agents for the property swore an affidavit stating
that the defendant did not oppose the grant of a new tenancy but proposing that
the term should be one of 10 years at a rent of £25,000, reviewable after five
years.
Accordingly,
in April 1983, shortly after the expiry of the term granted by the lease, the
respective stances of the parties can be broadly stated as follows: it was
agreed that there should be a new tenancy starting on July 7 1983, but there
was disagreement both as to the length of the term and the rent. The plaintiff
said that the term ought to be 14 years; the defendant 10. As to rent, the
plaintiff said that the current rent of £13,500 ought to continue; the
defendant said it ought to be £25,000. There were then inconclusive
negotiations between the two sides, which extended over about two and a half
years.
The next step
in the proceedings was on October 13 1985, when the master gave directions,
including one for the exchange of experts’ reports, which were not in fact
exchanged until a day or two before the trial started in June 1986.
Before that,
in April 1986, the plaintiff was advised by its expert that the rental value of
the premises was of the order of £57,500. As the judge observed, that caused
some surprise to the plaintiff and perhaps some alarm. That was the figure
which was ultimately proposed in the report of the plaintiff’s expert at the
end of May, and it led to the plaintiff’s altering its application from one of
14 years at an initial rent of £13,500 to one for one year at a rent of
£57,500.
On the other
side, the defendant’s expert was of the view that the rent, instead of being
the £25,000 for which the defendant, through its managing agents, had been
contending not much more than three years previously, ought to be £125,000. No
explanation has been given for this enormous increase in the rent proposed by
the defendant, but the plaintiff has throughout contended that until April 1986
(when its own expert advised a figure of £57,500, or thereabouts) it was
reasonably entitled to assume that the initial rent would not be more than
£25,000.
After
considering the evidence, the learned deputy judge ordered that the term of the
new tenancy should subsist until July 1 1996, but with an option to the
plaintiff to determine it by six months’ notice in writing served not more than
one month after its commencement. His object in doing that, regard being had to
the fact that the new tenancy would normally start some four months after his
order was drawn up, was to give the plaintiff five months to find alternative
premises and a further six months to vacate. He also fixed the initial rent at
£106,000. As I have said, there is no appeal against his decision of either of
those questions, but the way in which the matter developed is of importance
with regard to the question of an interim rent.
The order for
the grant of a new tenancy was drawn up on August 2 1986. There having been no
appeal against that order, the new tenancy started on December 2 1986. On
December 19, within the one-month period, the plaintiff duly gave six months’
notice of determination. The new tenancy will therefore come to an end on June
19 1987.
The 1954 Act,
as originally enacted, did not give the court power to order the payment of an
interim rent. In other words, the old rent continued automatically during such
time as the tenancy was continued under section 24 of the Act. In 1969 a new
power was added by an amendment made by section 3(1) of the Law of Property Act
of that year. It is contained in section 24A of the Act, which is in these
terms:
(1) The landlord of a tenancy to which this Part
of this Act applies may —
(a) if he has given notice under section 25 of
this Act to terminate the tenancy; or
(b) if the tenant has made a request for a new
tenancy in accordance with section 26 of this Act;
apply to the
court to determine a rent which it would be reasonable for the tenant to pay
while the tenancy continues by virtue of section 24 of this Act, and the court
may determine a rent accordingly.
(2) a rent determined in proceedings under this
section shall be deemed to be the rent payable under the tenancy from the date
on which the proceedings were commenced or the date specified in the landlord’s
notice or the tenant’s request, whichever is the later.
(3) In determining a rent under this section the
court shall have regard to the rent payable under the terms of the tenancy, but
otherwise subsections (1) and (2) of section 34 of this Act shall apply to the
determination as they would apply to the determination of a rent under that
section if a new tenancy from year to year of the whole of the property
comprised in the tenancy were granted to the tenant by order of the court.
Section 34(1)
effectively provides that the rent payable under a tenancy granted by order of
the court shall in default of agreement be such as may be determined by the
court to be that at which, having regard to the terms of the tenancy (other
than those relating to rent) the holding might reasonably be expected to be let
in the open market by a willing lessor, certain standard matters being
disregarded.
There is a
large area of common ground between Mr Barnes for the defendant and Mr
Neuberger for the plaintiff as to the effect of these provisions in the
circumstances of this case. There is, in my view correctly, agreement on all of
the following points. First, the question whether an interim rent should be
determined is one for the discretion of the court. Second, if one is
determined, there is no discretion as to the period during which it is payable.
In the present case it will run from July 7 1983 (being the date specified for
the commencement of the new tenancy in the plaintiff’s request under section
26) until December 2 1986, being the date on which it actually commenced.
Third, in
fixing the interim rent, a start must be made with the section 34 market rental
value under a tenancy from year to year on the date when it starts to run, and some
regard must then be had to the old rent.
Fourth, if an
interim rent is determined, it can be determined only in the amount so fixed.
In other words, in respect of the interim period, the court can make one or other
of two orders: either that the old rent shall continue or that it shall be
replaced by a new one fixed in accordance with the provisions of section 24A.
It cannot order that some other rent shall be payable.
In the present
case the learned deputy judge, before deciding whether an interim rent should
be determined or not, proceeded to fix the amount which would be payable if one
were to be determined. Both sides are content with that approach to the matter
and have argued the appeal accordingly.
The learned
judge assessed the section 34 rental value of the premises under a tenancy from
year to year at £80,000. That figure is accepted on both sides. Having had
regard to the old rent of £13,500, he then reduced the £80,000 by 50% and
arrived at an interim rent of £40,000. The defendant claims that that reduction
was the product of an exercise of the learned judge’s discretion which was
plainly wrong or wrong in principle. That is the first question which arises on
this appeal.
The learned
judge then declined to determine an interim rent of £40,000, accepting instead
an undertaking by the plaintiff to pay £25,000 per annum from July 7 1983 until
March 31 1986, and thereafter £40,000 per annum until the commencement of the
new tenancy. Again, the defendant claims that here there was an exercise of the
learned judge’s discretion which was wrong in principle. That is the second
question which arises on this appeal.
The first
question requires us to consider the meaning and effect of the provision of
section 24A(3) that: ‘In determining a rent under this section the court shall
have regard to the rent payable under the terms of the tenancy . . .’, that is
to say the rent which would otherwise continue to be payable while the old
tenancy was continued under section 24.
Although that
provision has been applied in a number of reported cases, it has been fully
considered in only the first of them, English Exporters (London) Ltd v Eldonwall
Ltd [1973] Ch 415, a decision of Megarry J. There the learned judge
addressed himself first to the question whether an interim rent ought to be
determined or not. Having decided that it ought to be, he turned to the
question of quantum. He assessed the section 34 rental value under a tenancy
from year to year at £15,000. At p 433C he continued:
With that
point of departure, then, the question for the court is, with whatever aid it
can obtain from the evidence and having regard to the existing rent of £7,655,
what rent it would be reasonable for the tenant to pay during the interim
period in accordance with the statutory formula. It will be observed that the
statute is not expressed in terms of what rent ‘would be a reasonable rent’.
Such language would require a consideration of the interests of both landlord
and tenant. Instead, the wording looks to the tenant who pays the rent; the
rent is to be the ‘rent which it would be reasonable for the tenant to pay’.
The rent will be a rent under an existing tenancy which binds the tenant; he
must pay the rent and he has no escape from it such as he has under section 36
in the case of a new tenancy. In such circumstances, what interim rent ought to
be determined in the present case? What
is the effect on £15,000 of having regard to the existing rent of £7,655?
Megarry J then
dealt with a contention by the tenant that a rent half way between the two
figures would be appropriate, but his treatment of it was influenced by the
special feature that there the lease had been
general value.
At p 433H he
said:
I doubt if
the two elements of market rent and existing rent are intended to be given
equal weight. Section 24A (3) provides that section 34 ‘shall apply’ to the
determination in the manner stated, and merely requires the court to ‘have
regard’ to the existing rent. I think the process envisaged is not that of
striking a balance between two factors of equal weight, but is that of applying
one factor, namely, the market rent, and, where appropriate, suitably tempering
it by reference to the existing rent. On the facts before me, I do not think
that much of a case for tempering the market rent by any very substantial
amount has been made out; there is some case, but not much. What, then, is the
right figure, closer to the interim market rent of £15,000 than to the existing
rent of £7,655, that will duly reflect the intention of section 24A in relation
to the facts of this case? Doing the
best I can in this very difficult jurisdiction, I can only say that, for
reasons which defy any detailed analysis, I would, on the facts of this case,
fix the interim rent at £14,000 a year; and I therefore determine the rent
under section 24A at this figure. I would only add that, obvious though my
reasons for regretting the length of this judgment must be, part of the
responsibility may not unfairly be laid at the door of Parliament.
It will be
noted that the reduction in what Megarry J referred to as the ‘interim market
rent’ of £15,000 was 6.66%. I will adopt the same expression.
In Janes
(Gowns) Ltd v Harlow Development Corporation (1979) 253 EG 799,
[1980] 1 EGLR 52, Judge Finlay, sitting as a judge of the Chancery Division,
said that he collected from the judgment of Megarry J the conclusion that a
case can, in appropriate circumstances, be made out for tempering the market
rent by some amount. The reduction in the interim market rent there made was
10%.
In Ratners
(Jewellers) Ltd v Lemnoll Ltd (1980) 255 EG 987, [1980] 2 EGLR 65
Dillon J stated that the interplay of the two concepts involved in section 24A
(3) had given rise to difficulty in the past, but that he merely followed the
decision of Megarry J which had, by then, been approved by Goff LJ obiter
(with whom, on this point, Stephenson and Browne LJJ agreed) in Fawke v Viscount
Chelsea [1980] QB 441, at p 451. The reduction in the interim market rent
made by Dillon J was 10.63%.
Those are the
three cases to which we have been referred where a reduction in the interim
market rent was made.
We were also
referred to the decision of this court in Halberstam v Tandalco
Corporation NV (1984) 274 EG 393, where no reduction had been made at first
instance. At p 394 Robert Goff LJ (with whom Stephenson LJ agreed) said:
It is to be
observed that the Vice-Chancellor, in the Eldonwall case, did not state
that a ‘cushion’ had to be provided in every case; indeed, he made it plain (at
p 434 of the report) that the market rent was to be suitably tempered by
reference to the existing rent ‘where appropriate’.
He then
referred to the special circumstance that, because the landlord there had not
applied for the determination of an interim rent for some three years and nine
months after the tenant had applied for a new tenancy, the tenant had had the
benefit of the old rent, equivalent to only one-tenth of the new rent, for a
substantial period after the expiry of the contractual term of the old tenancy.
He held that the assistant recorder had, on the facts of that case, been
entitled to conclude that, having regard to the long delay, no ‘cushion’ was
appropriate.
Mr Neuberger
has been good enough to prepare a comparative analysis of the salient facts of
the three cases in which a reduction in the interim market rent was made. The
value of that exercise, as I see it, has been to demonstrate that the facts of
none of them were comparable with those with which we are here confronted. In
answering the first question for myself, I start by observing that the having
of a regard to the old rent is mandatory. It then becomes a matter for the
judge’s discretion to decide what, if any, consequences that regard ought to
have on the interim market rent. In some cases, as in Halberstam v Tandalco
Corporation NV, the judge may deem it appropriate that the consequences
shall be nil. In others, as in English Exporters (London) Ltd v Eldonwall
Ltd, Janes (Gowns) Ltd v Harlow Development Corporation and Ratners
(Jewellers) Ltd v Lemnoll Ltd, he may deem it appropriate that there
shall be a small reduction of something up to 10% or thereabouts.
The essential
question, as it now arises, is whether it was open to the learned judge in the
exercise of his discretion on the facts of the present case to deem it
appropriate that there should be a reduction of 50%, which (let it be said)
would necessarily produce an interim rent nearer to the old rent than the
interim market rent.
What was the
intention of Parliament in requiring regard to be had to the old rent? While sympathising with the pleas for
clarification which have been made by Megarry J and others, I think the
circumstances in which section 24A came into existence provide a reliable
answer to this question. By 1969 it had been demonstrated that a tenant, in
times of inflation, could readily spin out the steps prescribed by the 1954 Act
and the rules of court, so as unfairly to prolong the continuation of the old
rent under section 24. The defeat of such practices was the primary legislative
purpose of section 24A. At the same time it was recognised that, while
inflation benefits the tenant during the currency of a lease at an uninflated
rent, it exposes him to an inordinate shock if its consequences are visited on
him in full directly the lease has determined. The legislative purpose of the
requirement that regard should be had to the old rent was, where appropriate,
to cushion the tenant against that shock.
In English
Exporters (London) Ltd v Eldonwall Ltd Megarry J distinguished
between ‘a reasonable rent’ for which the statute does not provide, and ‘a rent
which it would be reasonable for the tenant to pay’, for which it does. He
thought that the former expression would have required a consideration of the
interests of both landlord and tenant, whereas the latter apparently would not
or, at all events, would not have required an equal concern for the interests
of the tenant. This evidently led him to doubt whether the two elements of the
interim market rent and the old rent were intended to be given equal weight and
to think that the process envisaged was that of applying the interim market
rent and, where appropriate ‘suitably tempering’ it by reference to the old
rent. I believe that it is a fair reading of his judgment to say that he seems
to have assumed that the exercise of suitably tempering the interim market rent
would not lead to any very significant reduction in it. With all respect to the
views of Megarry J, I am unable to see any material difference in consequences
between ‘a reasonable rent’ and ‘a rent which it would be reasonable for the
tenant to pay’. If anything, I might think that the requirement that, in
determining a rent which it would be reasonable for the tenant to pay, regard
should be had to the old rent would, of the two formulae, be the more
favourable to the interests of the tenant. But whether that be right or wrong,
I cannot see that there was intended to be any invariable rule that the interim
market rent should be given greater weight than the old rent or that regard to
the latter should only be capable of resulting in some marginal or not very
significant reduction.
If, as I
think, the purpose of the requirement is, where appropriate, to cushion the
tenant against the shock which I have described, it is not impossible to
conceive of circumstances in which it might well be thought that that object
could be achieved only by applying a reduction which was far from marginal, and
certainly significant. If Megarry J did indeed intend to propound an invariable
rule to the contrary, then I must express my respectful disagreement with his
view. Each case must depend on its own facts. That, I think, is the inescapable
result of Parliament having given no guidance as to the consequences which are
to flow from the mandatory regard to the old rent.
In the present
case the learned deputy judge, in reference to the defendant’s original
proposal that the new rent should be £25,000, rejected a submission by Mr
Neuberger that the plaintiff’s reasonable expectation before April 1986 that
the highest rent it would have to pay for its continued occupation would be
that figure and not £80,000 was a matter to which regard could be had under
section 24A (3). He said that having regard to that expectation was not having
regard to the old rent. Mr Neuberger has been given leave to repeat that
submission on this appeal without being required to put in a respondent’s
notice, but I need say only that I cannot improve on the clear and concise
answer which the learned judge gave to it.
The essence of
the learned judge’s decision on the first question is contained in a passage
beginning at p 11H of the transcript*, which immediately follows an observation
that in none of the earlier cases had the court laid down any principles or
guidelines, save that the interim market rent should be suitably tempered, and
that the percentage reductions have ranged from some 6% to slightly over 10%.
The learned judge continued:
In the present
case, the rent will be payable for over three years. Over that period, the
current rent would amount to some £40,000. The rent under the hypothetical
tenancy from year to year would total some £250,000. I bear in mind that the
current rent is a rent agreed on a rent review seven years before the relevant
date and is not one dating from many years back.
Given the
dramatic increase it seems to me that simply to make a 10%
judgment, if I am to have regard to it I should make a substantial deduction.
Normally the two factors would no doubt not be of equal weight; certainly the
first would not outweigh the second. Indeed Megarry J said as much in the English
Exporters case at p434H. However, in the peculiar circumstances of this
case I consider that I should deduct 50%. I therefore determine that if I am to
order an interim rent, it should be £40,000 per annum.
*Editor’s
note: See [1986] 2 EGLR 76 at p79E.
Mr Neuberger
frankly accepted that the 50% reduction applied by the learned judge could be
justified only in what he, Mr Neuberger, described as an exceptional case. That
I think must be so, if only for the reason already mentioned, that such a
reduction must necessarily produce an interim rent nearer to the old rent than
the interim market rent. However, having carefully considered the learned
judge’s treatment of this question as expressed in the passage which I have
quoted from his judgment and all the other circumstances of this case, I have
come to a clear conclusion that it is not open to this court to hold that he
exercised his discretion in a manner which was plainly wrong or wrong in
principle. It may very well be that other judges would have exercised their
discretion by applying a lesser reduction — perhaps one which was significantly
less. But this discretion belonged to this judge and it seems to me, in the
light of the considerations which I have endeavoured to express, that he
directed himself in a manner which was entirely correct. Certainly I would
agree that to make a 10% reduction, a mere £8,000, would be paying no more than
lip service to the old rent or, if you prefer it, not providing the plaintiff
with any real cushion at all. Having got to that stage, I am unable to see how
it can be said that it was plainly wrong, or wrong in principle, for him to go
as far as 50%. He was entitled to think that that was justified by the dramatic
increase in the interim market rent and the other peculiar circumstances of the
case, including, no doubt, the fact that the old rent had been agreed on a rent
review not much more than seven years beforehand.
For these
reasons I would decide the first question in favour of the plaintiff and
dismiss that part of the defendant’s appeal accordingly.
The second
question is one with which I can deal more briefly. Having recorded that the
defendant’s expert would, if he had been acting for it when its affidavit was
sworn on April 13 1983, have proposed a rent in the region of £100,000 for a
new 14-year lease, the learned judge continued as follows at p13B*:
Had the
landlord’s affidavit put that figure forward instead of £25,000 I have no doubt
whatsoever that the plaintiff would have acted differently. Instead it remained
in possession, and, until early April this year, it considered the most it
would have to pay for that possession would be £25,000 a year with the probability
that it would be less allowing for the discount for the hypothetical tenancy
from year to year. Instead, if I ordered an interim rent it would have to pay
£40,000 a year. It is right that had the tenant reacted by giving up possession
then it would have had to pay such an interim rent up to the time it gave up
possession. The tenant accepts that it would not be right that the landlord
should simply be left with the current rent for the period involved. The tenant
offers an undertaking to pay a rent of £25,000 per annum from July 7 1983 up to
March 31 1986, and thereafter to pay at the interim rent I have fixed, namely
£40,000 per annum. Given that undertaking I consider that the peculiar
circumstances here are such that it would be unjust to make the tenant pay
interim rent which I would otherwise have ordered.
*Editor’s
note: See [1986] 2 EGLR 76 at p79G.
By taking that
course, the learned judge was able to procure a result which he considered
reflected the justice of the case. It was of the essence of that view that the
plaintiff ought to pay a substantial rent, although not as much as the full
interim rent, for the first two years and nine months of the period. But the
judge than applied a sort of estoppel against the defendant during the period
when it was leading the plaintiff reasonably to think that the rent would not
exceed £25,000.
Meritorious
though that result would no doubt be, I am of the clear opinion that the
learned judge took a course which was not open to him in a proper exercise of
his discretion. As I have said, and as he himself recognised, he could have
made only one or other of two orders: either that the old rent of £13,500
should continue or that it should be replaced by one of £40,000. I do not see
how it can have been a proper exercise of his discretion for him to force on
the defendant, by accepting an undertaking from the plaintiff, a rent which he
could not have forced on it by making an order. In this instance I think that
the learned judge, however commendable his decision to achieve a just result
may have been, exercised his discretion in a manner which was wrong in
principle. That would mean that this court can and ought to exercise the
discretion afresh.
For guidance
on that final point I turn to passages from two of the judgments given in the
earlier cases. First, in English Exporters (London) Ltd v Eldonwall
Ltd [1973] Ch 415, Megarry J said at p 434G:
In those
circumstances, it seems to me that the court ought in this case to determine an
interim rent. The choice lies between leaving the tenants to pay their existing
rent, which is admittedly far below the value of what they are getting, and
requiring them to pay a rent which, by statutory definition, is the rent ‘which
it would be reasonable’ for the tenants to pay. In the absence of
considerations pointing to any different conclusion, why should the court
prefer the inadequate to the reasonable?
Without laying down any formal rule that the onus lies on the tenant to
show why the discretion should not be exercised, I would say that in most
normal cases the court’s discretion under section 24A ought to be exercised, in
that to do so will usually promote justice.
Second, in Bloomfield
v Ashwright Ltd (1984) 47 P & CR 78, at p 84, Lawton LJ (with whom
Dillon LJ agreed) said of a submission which had there been made by the
landlord’s counsel:
His
submission was, and no doubt it was well-founded, that the judge has a
discretion to order an interim rent. There may be circumstances when it would
be unjust to make a tenant pay an interim rent. I find it myself difficult to
imagine such circumstances but no doubt others with a more fertile imagination
than I have can do so.
I respectfully
agree with the views thus expressed by Megarry J and Lawton LJ. Moreover, it is
very clear to me that it would be unfair to the defendant and unjust to fasten
the defendant with a rent of £13,500 during the interim period. Indeed, the
learned judge clearly took the same view himself. As between the two
alternatives of £13,500 or £40,000 for the whole period, I am in no doubt that
the latter figure is to be preferred.
On these short
grounds I would decide the second question in favour of the defendant and allow
the appeal to that extent only. If these views prevail, I would propose that we
should vary the learned judge’s order by deleting the plaintiff’s undertaking
and ordering it to pay an interim rent of £40,000 during the whole of the
material period.
FOX J and SIR
DENYS BUCKLEY agreed and did not add anything.
The appeal
was allowed in part, the appellants to have half of the costs of the appeal.
