Landlord and Tenant Act 1954, Part II — Appeals by landlords against decisions granting new tenancies to stamp dealers in the Stamp Centre or ‘Bourse’ in the Shell-Mex House complex, Strand — Landlords had originally opposed applications on the ground that they intended to occupy the premises for the purposes of their own business, but had to abandon this ground and only remaining issue was duration of new tenancies — County court judge ordered that ‘duration should be three years to commence with reference to the provisions of section 64’ — Section 64 problem — Court of Appeal commended and adopted the ‘admirable formula’, unfortunately overlooked by the profession, devised by Wynn-Parry J in Re No 88 High Road, Kilburn — Judge’s order varied to provide that the new tenancies should end on July 31 1983 — Date of expiry of tenancy should be certain even if the beginning is uncertain by reason of the operation of section 64 — ‘The duration of the new tenancy should always be expressed in this way’ — Various criticisms by landlords of judge’s exercise of discretion in determining the length of the tenancies rejected — Judge had balanced the inconvenience to the landlords against the effect on the tenants — Appeals dismissed, with variation of orders to accord with the Wynn-Parry principle
These were two
appeals raising the same points from decisions of Her Honour Judge Rowland sitting
at Westminster County Court. The sole issue was the determination of the
duration of tenancies granted pursuant to the provisions of the Landlord and
Tenant Act 1954. The tenants were respectively Michael Chipperfield and Warwick
& Warwick (Philately) Ltd and the landlords Shell UK Ltd in each case. The
appeals were by Shell UK Ltd. The premises in each case were in the Stamp
Centre or ‘Bourse’ at 84 Strand, London WC2.
John Colyer QC
and Matthew Horton (instructed by F D Duffield, of Shell UK Ltd) appeared on
behalf of the appellants; Derek Wood QC and Stephen Furst (instructed by A E
Hamlin & Co) represented the respondents.
Giving
judgment O’CONNOR J said: The judgment that I am about to read is the judgment
of the court. Unfortunately, Cumming-Bruce LJ cannot be here today. He has, of
course, read the judgment. On October 10 1980 we dismissed these appeals but
made a variation in the orders. We give our reasons.
In these cases
the landlords, Shell UK Ltd, appeal against orders made in the Westminster
County Court on February 26 1980 granting new tenancies of business premises to
the tenants, Michael Chipperfield and Warwick & Warwick (Philately) Ltd,
pursuant to the provisions of the Landlord and Tenant Act 1954. There is no
distinction between the two cases and the sole issue for determination in these
appeals is the duration of the new tenancies ordered.
The tenants
are stamp dealers and each occupied premises in what is known as the Stamp
Centre or Bourse at 84 Strand (hereafter I shall call it ‘the Bourse’) under
leases for seven years expiring on March 25 1978. The Bourse is located in an
old news cinema which had been carved out of the ground and first floors of
part of a large building, Cecil Chambers, itself part of the Shell-Mex House
complex owned and occupied by the landlords. Seventeen stalls had been built
around the walls of the auditorium of the cinema and leased off to stamp
dealers. The tenants each had one unit. Access to the Bourse from the street
was through what used to be the foyer of the cinema.
By the late
1970s this part of Strand had become the focal point of the stamp trade in
London. Opposite the Bourse on the other side of the street are Stanley Gibbons
and there are others in the immediate vicinity. There were eight or nine dealers
in the Bourse some of whom occupied more than one unit. At about the same time,
despite the size of Shell-Mex House (some 335,000 sq ft) the landlords were
cramped and needed more space for their staff. They applied for planning
permission to add a ninth floor to Shell-Mex House and decided to repossess, as
and when they could, some business tenancies. A decision had been taken by the
middle of 1977 to determine all the tenancies in the Bourse in March 1978 for
that was when the head lease to the cinema company under which they had been
created fell in. The area of the whole Bourse, less the foyer, is 2,100 sq ft;
this is doubled by the insertion or reinsertion of the first floor.
Before we
continue the narrative we find it useful to set out some propositions of law
which are well established and were accepted by experienced counsel appearing
in this case.
(1) A business tenancy within Part II of the
Landlord and Tenant Act 1954 does not come to an end on its contractual date;
it continues until a notice to determine it is given either by landlord or
tenant: section 24.
(2) A landlord may determine the tenancy by not
less than six
section 25.
(3) The tenant may ask for a new tenancy by
notice in accordance with section 26.
(4) If landlord and tenant agree for a new
tenancy the court is not involved and none of the provisions which have caused
difficulty in this case apply: section 28.
(5) Where an application is made to the court for
a new tenancy, the old tenancy does not come to an end until three months after
the date on which the application is finally disposed of: section 64(1). It is
made clear by section 64(2) that the three-month period is not to start until
the date by which the proceedings on the application (including any proceedings
on or in consequence of an appeal) have been determined and any time for
appealing or further appealing has expired.
(6) A landlord may oppose the grant of a new
tenancy on the grounds set out in section 30(1), and not otherwise. We shall
have to refer to this section later.
Section 33 of
the Act provides:
Where on an
application under this Part of this Act the court makes an order for the grant
of a new tenancy, the new tenancy shall be such tenancy as may be agreed
between the landlord and the tenant, or, in default of such agreement, shall be
such a tenancy as may be determined by the court to be reasonable in all the
circumstances, being, if it is a tenancy for a term of years certain, a tenancy
for a term not exceeding fourteen years, and shall begin on the coming to an
end of the current tenancy.
The effect of
this section when read with section 64 is that when the court of first instance
makes an order the date when the new tenancy is to begin is uncertain; it may
be postponed for a long time if there is an appeal to the Court of Appeal and
for even longer if there is an appeal to the House of Lords.
We return to
the narrative. In June 1977 the landlord served notices on the tenants
determining the tenancies on March 25 1978. The tenants gave notices asking for
new tenancies and the landlord gave notice of opposition on the ground that
they required the premises for use in connection with their own business — that
is, pursuant to paragraph (g) of section 30(1) which reads: ‘subject as
hereinafter provided, that on the termination of the current tenancy the
landlord intends to occupy the holding for the purposes, or partly for the
purposes, of a business to be carried on by him therein, or as his
residence.’ Section 30(2) provides that
a landlord may not oppose the grant of a new tenancy on ground (g) unless he
has been landlord for five years.
For the next
year or so the parties were in negotiation, but when they found that they could
not agree the matter was set down for hearing in the Westminster County Court
on May 21 1979. A few days before the hearing a spanner was thrown into the
works. There was another tenant in the Bourse, Cameo Stamps Ltd, who occupied
two units. They had been served with a notice to determine on March 25 1978.
They, too, had asked for a new tenancy and been given notice of opposition, but
in their case the landlords relied not only on the grounds in paragraph (g) of
section 30(1) but also on the grounds found in paragraph (f), which reads:
‘that on the termination of the current tenancy the landlord intends to
demolish or reconstruct the premises comprised in the holding or a substantial
part of those premises or to carry out substantial work of construction on the
holding or part thereof and that he could not reasonably do so without
obtaining possession of the holding.’
It will be
seen that this paragraph is not subject to section 30(2). We do not know why
the landlords chose to break tacks in this way and it does not matter. On May
17 1979 Cameo gave notice that they proposed to challenge the validity of the
notices served on them on various grounds which it is unnecessary to specify
here. They followed this up on May 18 with a request for a new tenancy
beginning on May 18 1980 pursuant to section 26(2) of the Act. On May 21 1979
there was a full day’s hearing of the instant cases, which were adjourned part
heard. On July 6 all the parties were before the court, including Cameo. The
landlords conceded that the notices served on Cameo were invalid. They had to
concede that as a result of the section 26 notice served by Cameo the earliest
that they could gain possession of the Bourse was May 1980. That concession cut
the ground from under their feet in the instant cases and they conceded that
they could not maintain their opposition to the grant of new tenancies to the
present tenants.
Thereafter the
hearing of the present cases continued, spread over a number of adjourned
hearings from September 20 to December 13 1979. The only issue relevant to the
present appeals was the duration of the new tenancies. The learned judge gave
judgment on February 26 1980. She decided this issue in these words: ‘Having
considered all aspects including the present leases, I have come to the
conclusion that the duration should be three years to commence with reference
to the provisions of section 64’.
The final
orders dated February 26 1980 gave effect to that decision. We were told that
orders in this form were not uncommon, but that the more usual order would have
been to say that ‘the duration of the new tenancy should be three years’. The
effect is exactly the same, for the addition to the words ‘to commence with reference
to the provisions of section 64’ merely spells out the position that arises
where the more usual order is made. The effect of such an order is that the
actual duration of the new tenancy is uncertain. The present case is a good
illustration. If there had been no appeal the new tenancies would have
commenced in July 1980, that is, time for giving notice of appeal plus three
months from February 26 1980. The bringing of the appeal deferred the date of
commencement to a date at least four and a half months beyond the date of
judgment in the Court of Appeal, that is, time for petitioning the House of
Lords for leave plus three months. If leave to appeal is given either by the
Court of Appeal or the House of Lords the commencement is further deferred to a
date three months beyond the date when judgment is given in the House of Lords.
The existence
of this problem was recognised as long ago as 1959 by Wynn-Parry J in the case
of Re No 88 High Road, Kilburn [1959] 1 WLR 279, and a solution was
found. That case was heard in February 1959. The landlords did not oppose the
grant of a new tenancy and the issues before the court were duration and rent.
Having construed the effect of sections 33 and 64 of the Act the learned judge
said at the top of p 284:
The result is,
therefore, that the new tenancy must begin at the earliest three months from
today, but its commencement will, of course, be further delayed if the tenants
(as they have every right to do) decide to test this matter before the Court of
Appeal.
I consider
that the result at which I am compelled to arrive is one which is unjust to the
landlord. But I cannot mitigate that injustice as regards rent, for the new
rent can only operate at the end of the period determined by section 64. I can,
however, intervene so far as the term of years is concerned, and I do not
propose to grant a term of 14 years, but to direct that, when the lease comes
to be executed — that is, when the matter is finally disposed of — the term of
the lease to be executed shall be for a term ending on June 24 1972.
It seems that
this admirable formula has been overlooked by the profession. The case was not
cited to the county court in the present cases. We think it is in the interest
of both landlord and tenant that the end date of the new tenancy should be
established when the order is made even though it is not possible to make sure
when it will start. The shorter the time the more important this is. We think
that the duration of the new tenancy should always be expressed in this way.
In the present
cases we think it apparent by her reference to section 64 that the learned
judge was intending to grant new tenancies of three years ending in July 1983.
Had there been no appeal that is what would have happened. It is for this
reason that when we dismissed the appeal on October 10 we varied the order as
to duration by ordering that the new tenancies should end on July 31 1983.
The duration
of a new tenancy determined by the court under section 33 of the Act is a
matter of discretion; it is for the judge to decide what is ‘reasonable in all
the circumstances’. This court will not interfere unless it is shown that the
learned judge in exercising her discretion has taken into consideration matters
which she ought not to have done and/or failed to take into consideration
matters which she ought to have done.
The landlords
contend that the circumstances of the present cases
grant new tenancies of no more than 12 months’ duration. They make a number of
criticisms of the judgment, introducing them by a submission that the learned
judge misapprehended the issues before her. They point to passages where, in
her judgment, she says that the landlords contended that the tenants should be
granted licences and not tenancies. It is common ground that this was never an
issue, indeed it could not have been. We think that the error arose as a result
of the evidence called on valuation. There was evidence that dealers such as
the tenants often preferred to occupy under licence and to pay as much as for a
tenancy. Be that as it may, the learned judge, having set up a contention that
had never been made, rejected it. When we look at her judgment as a whole we do
not find any grounds for saying that this mistake has influenced her thinking
on the matters which she had to consider in the exercise of her discretion.
We turn to the
substantive complaints which are found in the notice of appeal. In the first
place, the landlords say that the learned judge failed to take into account or
to give proper weight to the circumstances in which they consented to the grant
of new tenancies. The gravamen of this complaint is that it was only a
technical defect in their notices to Cameo which made it impossible for them to
oppose the grant of new tenancies to the tenants and that but for that they
would have opposed the grant successfully. They submit that this is a ‘near
miss’ case and rely on the decision of this court in Wig Creations Ltd v
Colour Film Services Ltd [1969] 20 P&CR 870. In that case the
tenants occupied two floors under separate leases each of 21 years’ duration,
in the one case from March 25 1947, in the other from March 25 1959. The
landlords, who occupied another floor in the building, bought the reversions on
March 1 1965, as they foresaw expansion of their own business. When the first
lease fell in, notices were given for March 1968. Although they wanted the
premises for their own business the landlords could not rely on paragraph (g)
of section 30(1) by reason of subsection (2), the five-year rule. The tenants,
who also wanted the floor for their business, asked for a new tenancy to expire
in March 1980, the same date as their lease of the other floor. The judge
granted a tenancy of three years; he took into account the five-year rule and
said that but for that factor he would have acceded to the tenants’ request.
The tenants appealed. Dismissing the appeal, Lord Denning MR said at p 874:
Section 33 is
in very wide terms. It empowers the court to do what is reasonable in all the
circumstances. Suppose a landlord bought five years ago, plus one day. He could
resist a new tenancy altogether on the ground that he wanted the place for his
own business. Suppose he buys it five years ago less one day. Should he be kept
out of the place for several years simply by the two-day difference? I think not. The policy of the Act is to give
a landlord (who has purchased more than five years ago) an absolute right to get
possession for his own business: leaving it to the court to do what is
reasonable if he has purchased less than five years. In doing what is
reasonable, the five-year period is a factor which it is permissible for the
judge to take into account. The weight of it is for him.
In the present
cases the landlords submit that, by a parity of reasoning, the duration of the
new tenancies should have been such as to enable them to get possession of the
Bourse by serving fresh notices to coincide more or less with the Cameo case.
They submit that the grant to July 1983 produces a leap-frogging situation
cutting the ground from under their feet in the Cameo case.
I do not think
that these complaints are well founded. The learned judge said at p 73:
Although the
landlords have failed in opposing a new tenancy they are entitled to have their
intentions and the evidence given in respect of their opposition taken into
consideration.
Then at p 74
she gave herself the following direction:
Dealing with
the issue of duration and other terms, where there is no agreement section 33
of the 1954 Act comes into operation. It provides discretion to grant terms
reasonable in all the circumstances and entitles me to take into consideration
all factors. It includes the grounds of opposition of landlords under section
30(1)(g), their intentions and plans and the hardships and needs of each party.
I must give proper protection to the tenants but not be unfair to the
landlords, nor allow the grant of a new tenancy to defeat development or reduce
the value of the building, and must weigh up and reasonably protect the
interests of both parties.
We can find
nothing wrong in this direction. It is true that there is no express reference
in the judgment to the possible effect on the future Cameo case, but she was
well aware of Cameo and in the end we do not think that it matters. If it was
reasonable in all the circumstances to grant new tenancies to these tenants up
to July 1983 then that exercise of discretion is not made unreasonable by the
fact that the result may be a factor for consideration if and when the Cameo
case comes before the court. Further, we do not think it right to conclude that
the learned judge had forgotten and thus paid no attention to the reason for
the landlords abandoning their opposition to the grant of new tenancies: she
recorded it accurately in her note of the proceedings before her on July 9
1979; she set it out in her judgment at pp 61-62. We think that the landlords
are driven to asserting that the grant of three years demonstrates that the
learned judge cannot have given any weight to this topic. To that assertion we
can only say that we do not agree. We think she had it in mind and that the
terms granted do not show that she must have disregarded it.
The landlords
contended that the learned judge wrongly allowed questions relating to planning
applications to influence her in determining the duration of the new tenancies.
She had heard evidence on these matters before the landlords abandoned their
opposition. She recited some of this in her judgment as part of the general
history but ended up by saying at p 68:
I do not
think it would be right to allow myself to be influenced by these factors. My
task is to take an objective view and to reach my conclusions in the light of
the requirements, needs and all the facts surrounding both parties. In the
circumstances I am unable to take the representations in the correspondence
(with the local planning authority) into account as affecting my judgment on
the duration of the tenancies.
We do not see
that she could have said fairer than that and we can find no substance in this
contention.
The landlords
complain that the learned judge was wrong to take into account an offer made by
the tenants to move up to the Strand end of the Bourse. This matter arose
towards the end of the hearing: the tenants and Cameo made the offer which, if
accepted, would have freed the greater part of the ground floor of the Bourse
to the landlords. It must be remembered that the landlords wanted the ground
floor for a hospitality area and proposed to insert a first floor for office
use. The scheme was investigated and the landlords rejected it; they were quite
entitled so to do. The learned judge said that she could take this matter into
account in determining duration. We think she was right. So this is quite
different from the cases which show that a tenant cannot attack a landlord’s
intention under paragraphs (f) and/or (g) by saying that he could achieve his
purpose in some other fashion. Here we are concerned with the exercise of
discretion under section 33. We think that this was a matter which the judge
could take into account in considering all the circumstances of these cases.
She was doing no more than looking at the effect on the landlords of the grant
of new tenancies. In the same way it seems to us that in comparing the relative
area of Shell-Mex House and the Bourse she was engaged in the same exercise.
The landlords
complain that, in considering the landlords’ avowed intention of leaving
Shell-Mex House because it had become too small for their requirements, she
ought to have recognised that the grant of three years would frustrate their
intentions to use this space for their own purposes. The fact is that the grant
of any term must necessarily prevent the landlords from implementing their
scheme to that extent. It is said that, as the judge was contemplating that the
landlords anticipated moving by 1985, the grant of new tenancies to July 1983
would completely frustrate their plans. We do not agree. All these dates were
necessarily speculative. The judge was balancing the inconvenience to the
landlords against the effect on the tenants. There was ample evidence that the
landlords’ plans were fluid. They themselves assert in the notice of appeal
that the judge ought to have found that there was no realistic prospect of
their moving out of Shell-Mex House before 1990. If that be the time-scale it
is idle to contend that the three-year terms must frustrate their intentions.
In the course
of her judgment, the learned judge said that there was no reason why the
landlords should not put in and occupy the proposed first floor in the Bourse.
This idea was not canvassed in the evidence and it appears for the first time
in the judgment. It may or may not be feasible but the judge ought not to have
speculated. The error is to our mind peripheral and in the context of the
judgment as a whole cannot have had any material effect upon the length of the
new terms which she decided to grant.
In the result,
we conclude that no good grounds have been established to show that the judge’s
discretion was not properly exercised.
The appeals
were dismissed with costs. The orders below were varied by deleting the words
‘three years to commence with reference to the provisions of section 64 of the
Landlord and Tenant Act 1927’ and substituting the words ‘a term expiring on
the 31st day of July 1983’.
