Landlord and Tenant Act 1954–Tenants’ originating summons claiming a new lease of business premises–Subsequent application by tenants for leave to discontinue proceedings–Whether order for discontinuance can operate from a date earlier than order–Date of discontinuance is date of order under Order 21, rule 3–No power to make order retrospective–Observations on contrast between High Court and county court rules
This was an
appeal by the plaintiff tenants, Covell Matthews & Partners, from an order
of Graham J giving the plaintiffs leave to discontinue their proceedings
claiming a new lease. The plaintiffs claimed that the judge had a discretion to
make the order operate retrospectively and that he should have exercised that
discretion. Graham J rejected this submission (see 241 EG 915, [1977] 1 EGLR
42). The plaintiffs’ interest in contending for a retrospective operation was
that it was likely to have a favourable effect on the rent which they remained
liable to pay.
Paul
Batterbury (instructed by May, May & Merrimans) appeared on behalf of the
appellants (plaintiffs); Michael Barnes (instructed by Theodore Goddard &
Co) represented the respondents (defendants).
Giving the
first judgment at the invitation of Buckley LJ, BRIDGE LJ said: This appeal
raises a novel and interesting point under the Landlord and Tenant Act 1954 and
under the Rules of the Supreme Court as they apply to certain proceedings under
that Act. I should like at the outset to express my indebtedness to learned
counsel on both sides for the help that they have given us in our task of
resolving the point.
The plaintiffs
(the tenants) appeal from an order of Graham J made on November 1 1976. The
form of the order, after reciting certain undertakings given by counsel on
behalf of the plaintiffs, was that the plaintiffs be at liberty to withdraw an
originating summons in which they had claimed a new lease of certain business
premises, ‘such withdrawal to take effect as from July 5 1976 (being the date agreed
for such purpose between the plaintiffs and the defendants should this court
accede to the said application) and that the same be withdrawn
accordingly.’ The language of the rule
of the Supreme Court under which the application had been made to the court
contemplates, in fact, not the withdrawal of the proceedings but their
discontinuance; but in my judgment nothing turns on this distinction of
language, and the order should be understood as if it had been an order giving
the plaintiffs leave to discontinue their proceedings begun by the originating
summons and that the said proceedings be discontinued accordingly. The reason
why the order is to take effect, not from the date when it was made but from an
earlier date, July 5 1976, was because the parties, as the order recites, had
made an agreement to that effect.
The points
which are raised in the appeal are, first, whether independently of any
agreement between the parties the court had power, as the tenants (as I shall
call them on this appeal) contend, to make an order for discontinuance
operating retrospectively from some earlier date than the date upon which the
order was made. Secondly, if the court had such a power the question arises
whether, in the exercise of its discretion in the circumstances of this case,
it was proper that the power should have been exercised, and if so, to what
earlier date the order for discontinuance should effectively have been
back-dated.
The history of
the matter begins in 1960, when the predecessors in title of the defendants in
these proceedings, whom I shall call the landlords, granted to the predecessors
in title of the present tenants a lease for 14 years of premises 7-11 Lexington
Street, London W1, at rentals rising during the period of the lease to a
maximum, which was the rent payable at any material time with which we are
concerned, of £5,600 a year. The contractual term granted by that lease was due
to expire on June 24 1973. Apart from any notice given pursuant to Part II of
the Landlord and Tenent Act 1954, the lease would of course have continued
under the provisions of that statute. But on December 21 1972 the landlords
served on the tenants, pursuant to section 25 of the Act of 1954 (which is very
familiar and to the provisions of which I need not refer), a notice to
terminate the tenancy on the contractual terminal date, namely, June 24 1973;
and in that notice the landlords indicated that they would not oppose an
application by the tenants for the grant of a new lease. In accordance with the
statute, on February 5 1973 the tenants duly served a counternotice intimating
their intention to apply for a new lease, and on March 13 1973 they duly made
their application in the appropriate form. The rateable value of the premises
being marginally in excess of the county court limit, which is £5,000, they
commenced their proceedings, claiming a new lease, in the Chancery Division in
the High Court and their proposal, as pleaded, was that they should be granted
a new lease for the term of seven years at the currently payable rent of £5,600
a year.
As soon as
that application was made, the provisions of section 64 of the Landlord and
Tenant Act 1954 came into operation; those provisions, as far as material for
present purposes, read as follows:
(1) In any case where–(a) a notice to terminate a
tenancy has been given under . . . Part II of this Act . . . and (b) an
application to the court has been made under the . . . said Part II . . . and
(c) apart from this section the effect of the notice or request would be to terminate
the tenancy before the expiration of the period of three months beginning with
the date on which the
be to terminate the tenancy at the expiration of the said period of three
months and not at any other time.
(2) The reference in paragraph (c) of subsection
(1) of this section to the date on which an application is finally disposed of
shall be construed as a reference to the earliest 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, except that if the application is withdrawn or any appeal is
abandoned the reference shall be construed as a reference to the date of the
withdrawal or abandonment.
Following the
issue of the tenants’ originating summons there were negotiations between the
parties which continued over the next two years. What we are told is that by
1975 the parties had come to terms, at all events in principle, as to the new
lease which should be granted to the tenants. The landlord’s contention is that
there was a concluded and binding contractual agreement reached between the
parties for the grant of such a new lease. The position presently taken up by
the tenants, however, is that any agreement reached in the course of those
negotiations was an agreement subject to contract, and accordingly one which
never became binding upon the tenants. The negotiations having come to an end
on this issue–or perhaps ‘broken down’ is a more accurate expression–what
happened in the event was that in or about December 1975 the tenants vacated
the premises, leaving sub-tenants in occupation of certain parts of them. We
are not concerned with the precise detail of that, although it may be important
to note that there were subtenants left when the tenants vacated the premises.
Some time
before the end of 1975, the tenants gave to the landlords a notice to terminate
the tenancy pursuant to section 27(2) of the statute. That subsection reads as
follows:
A tenancy
granted for a term of years certain which is continuing by virtue of section 24
of the 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.
The question
whether or not the notice given by the tenants pursuant to that subsection was
an effective notice is not before us for decision. Both parties invite us to
assume for the purposes of the present argument (and I proceed upon this assumption
without making any pronouncement on the question of whether it is right,
because it may be a difficult question) that the section 27 notice given, as it
was, long, long after the original terminal date specified in the landlords’
section 25 notice had passed, was ineffective to determine the tenancy pursuant
to the provisions of section 27(2).
Reverting to
the further history, it was on January 23 1976 that the tenants made
application pursuant to Order 21, rule 3 of the Rules of the Supreme Court for
leave to discontinue the proceedings begun by the originating summons. As we
shall see in a moment, when I turn to the provisions of the rules, there is no
doubt that in the High Court proceedings such as these, claiming a new lease by
way of originating summons in the Chancery Division, cannot be discontinued by
the applicant otherwise than pursuant to the leave of the court.
On February 12
1976 the landlords made an application to the court to determine an interim
rent pursuant to section 24A of the Act of 1954, to the provisions of which I
need not make detailed reference. Both applications, the tenants’ application
for leave to withdraw their proceedings and the landlords’ application for an
order determining interim rent, came before Master Cholmondeley-Clarke on March
26 1976. On the interim rent application he merely gave appropriate directions
and nothing turns upon that. On the application for leave to withdraw, the
master expressed himself as minded to grant that leave, but in accordance with
the well-established practice of the Chancery Division, when the landlords
intimated that they were not content to accept the order which the master was
minded to make, the master adjourned the matter to the judge.
The original
hearing before the judge was fixed for July 5 1976; in the event that date had
to be vacated primarily, as I understand it, for the benefit of the landlords,
and it was because there was a vacation of that date that the agreement was
made between the parties that if in the event the judge, on hearing the
application, were to grant the tenants’ application for leave to discontinue
their proceedings, any order made that the proceedings be discontinued should
be treated by agreement between the parties as if it had been made on the
original hearing date of July 5. In the event the matter came before Graham J
on October 20 1976 and he delivered his reserved judgment on the matter on
November 1 1976.
Both before
the master and before the judge the landlords were contending that no leave to
discontinue the proceedings should be granted–in other words that the tenants’
application should be refused–and the basis of that contention was, so it was
argued, that the issue as to whether there was a binding agreement between the
parties for the grant of a new lease ought to be decided as a preliminary point
in the proceedings commenced by the originating summons, notwithstanding that
the landlords also intimated that it was their intention, failing such decision,
that the alleged binding agreement between themselves and the tenants for the
grant of a new lease should be the subject of proceedings claiming an order of
specific performance. The main argument before Graham J turned upon the issue
so raised; on the issue so raised the learned judge came to a conclusion
favourable to the present appellants, the tenants, but as that issue does not
arise in this court, I need do no more than go straight to the learned judge’s
conclusion in the matter, in which he decided that leave to discontinue should
be granted, but should be granted on terms.
What he said,
having rehearsed the arguments between the parties, was this:
In my
judgment, therefore, I think that in principle, the master was correct in his
grant of leave to the tenant
I think that
means ‘in his intended grant’
to withdraw
their application of February 1973
That is an
erroneous date; it should be March 23 1973
for a new
tenancy and I hold that such leave should be given. At the same time, for the
landlords’ protection, the order being for leave to discontinue and not for
dismissal, the tenants should be put on terms: (1) Not to make any fresh
application for a new tenancy. This may in fact be academic in view of the time
which has elapsed since the first application, but such a term positively
safeguards the position. (2) The grant of leave should, as requested by Mr
Harper,
Mr Harper
being counsel for the landlords before the learned judge
be expressed
to be given without prejudice to the landlords’ contention that a binding
agreement has been reached between the parties, and without prejudice to the
effect of such an agreement if it is eventually decided that it is binding. (3)
An appropriate order for costs against the tenants should be made.
I pause at
that point to interject that, as Mr Barnes very properly concedes in the
argument before us, if at any earlier stage the landlords had intimated to the
tenants that they would be willing to agree to discontinuance of the tenants’
proceedings on the terms which the learned judge eventually imposed, it is an
almost irresistible inference that the tenants would readily have concurred in
the voluntary imposition of those terms.
On the
question which arises for our decision relating to the back-dating of the
discontinuance order, the matter was
had a discretion under the relevant rule of court to back-date his order if in
all the circumstances he thought it just to do so. Indeed, not only was this
view conceded by counsel then appearing on behalf of the landlords, but that
counsel positively advanced this proposition in support of the contention that
this provided the court with all the power it needed to meet an argument which
had been advanced on behalf of the tenants, that otherwise the tenants might
suffer hardship through the proceedings being unreasonably protracted by the
behaviour of the landlords resisting a tenants’ application for leave to
withdraw. It was on this footing, on the basis that he had an admitted
discretion as to whether or not the order should be made retrospective, and if
so to what extent, that the learned judge expressed his conclusion in these
terms: ‘In my judgment I consider that the normal rule in the absence of
avoidable delay or unusual circumstances should be that the date of the
judgment giving leave to withdraw is the date of withdrawal within the
section.’ Again I interpose to say that
if one were to follow the language of the relevant rule, to which I shall refer
shortly, the words ‘discontinue’ and ‘discontinuance’ would be more apt than
the words ‘withdraw’ and ‘withdrawal.’
In this court
the concession made and the arguments advanced on behalf of the landlords to
the effect that this is a matter within the jurisdiction of the court, namely
to make an order of discontinuance with retrospective effect, have been
withdrawn by a counternotice served by the landlords, and it is in these
circumstances that the primary question which we have to determine is whether
under the relevant rule there is indeed any discretion in the court to make an
order for discontinuance but to make it with retrospective effect. The
importance of the issue from the tenants’ point of view, and indeed from the
landlords’ point of view, is obvious. On Mr Barnes’ contention the date of
withdrawal within the meaning of section 64 of the Landlord and Tenant Act 1954
in a case where the party seeking to discontinue has to obtain the leave of the
court to do so can only mean the date when that leave was given. On the footing
that that is right, unless the order for discontinuance in this case can be
given retrospective effect to some date earlier than July 5 1976, then until a
date three months after that date, which would be October 5 1976, the tenants
remained liable to pay rent, not only at the original contractual rate but at
any rate which might be determined pursuant to the landlords’ application for
an interim rent under section 24A of the statute.
Before I turn
to the terms of the relevant rule of court, I should explain the fundamental
basis of Mr Batterbury’s argument, which he relies on both in support of what
he says should be the court’s inclination on the point of construction, and
also what he says should govern the court’s exercise of any discretion which it
may have; and that is this: in the county court, under the corresponding rules
which govern applications for new tenancies, which will be applications in
relation to all business premises having rateable values not exceeding £5,000,
no leave of the court is required by an applicant who desires to withdraw or
discontinue his proceedings; he can do so as of right pursuant to the
provisions of Order 18 of the county court rules. So, according to Mr
Batterbury, the argument runs thus: Parliament must, when it enacted section 64
of the Landlord and Tenant Act 1954, have contemplated that any tenant, having
instituted proceedings for a new lease, could discontinue those proceedings at
any time voluntarily and thereby limit his liability to continue paying rent
for the relevant premises to a period of three months after the date when he
does so. That is illustrated by the County Court Rules; it is a provision
comparable with, and parallel to, the provision to which I made reference earlier,
in section 27, which certainly gives a tenant a right to terminate his
statutory tenancy under the Act at any time before an application for the grant
of a new tenancy is made. I see the force of those contentions, and I approach
the matter of construction bearing them in mind. But what we have to construe
are the provisions of Order 21 of the Rules of the Supreme Court, to which I
now turn.
So far as it
is relevant for the purposes of this case, rule 2 provides in subrule (1):
The plaintiff
in an action begun by writ may, without the leave of the court, discontinue the
action, or withdraw any particular claim made by him therein, as against any or
all of the defendants at any time not later than 14 days after the service of
the defence on him or, if there are two or more defendants, of the defence last
served, by serving a notice to that effect on the defendant concerned.
I pause to
interpose that of course that provision has no application at any time to
proceedings begun by originating summons, as these proceedings were. I need not
read subrules (2) or (3); subrule (4) reads:
If all the
parties to an action
which I
interpose to say would include proceedings commenced by originating summons
consent, the
action may be withdrawn without the leave of the court at any time before trial
by producing
to the
appropriate person, who is then spelled out in the rule
a written
consent to the action being withdrawn signed by all the parties.
Then we come
to the crucial provision, which is rule 3:
(1) Except as provided by rule 2, a party may not
discontinue an action (whether begun by writ or otherwise) or counterclaim, or
withdraw any particular claim made by him therein, without the leave of the
court, and the court hearing an application for the grant of such leave may
order the action or counterclaim to be discontinued, or any particular claim
made therein to be struck out, as against any or all of the parties against
whom it is brought or made on such terms as to costs, the bringing of a
subsequent action or otherwise as it thinks just. (2) An application for the
grant of leave under this rule may be made by summons or motion or by notice
under Order 25, rule 7.
Then for
completion I had better read, although in my judgment nothing turns on it, the
provisions of rule 4:
Subject to
any terms imposed by the court in granting leave under rule 3, the fact that a
party has discontinued an action or counterclaim or withdrawn a particular
claim made by him therein shall not be a defence to a subsequent action for the
same, or substantially the same, cause of action.
Counsel on
both sides have developed interesting arguments directed at illuminating the
problem of construing this rule, based upon a consideration of other provisions
under the Rules of Court, or under a variety of statutes in which the court may
or may not, as the case may be, make orders with retrospective effect. Mr
Batterbury draws our attention to a number of instances where the court’s
orders may operate retroactively; Mr Barnes, on the other hand, draws analogies
with cases where no retroactive operation is permissible. I hope neither
counsel will think it discourteous on my part if I do not examine those
suggested analogies in detail; in the end it seems to me that this appeal turns
on what is really a very short point on the construction of the particular
language of Order 21, rule 3, in the context in which it is found, and more
particularly as applied to the situation which arises when an applicant for a
new lease who has commenced proceedings by originating summons in the Chancery
Division is seeking leave to discontinue those proceedings because he wishes,
for the purposes of avoiding further liability to pay rent, to withdraw his
proceedings within the meaning of section 64 of the Act at the earliest
possible date.
The first
thing I would say–and I doubt whether this was really in controversy at the end
of the argument–is that it seems to me clear beyond doubt that the date of
withdrawal, as that phrase is used in section 64 of the Act, can only mean in
relation to the withdrawal of proceedings by originating
proceedings be discontinued, subject always to any power of the court to make
such an order with retrospective effect. I reach that conclusion because until
an order has been made giving leave to the applicant to discontinue his
proceedings it must remain uncertain whether such leave will or will not be
granted. It is perfectly clear from authorities to which we have been referred
that the granting of leave to discontinue is no mere formality; that an
applicant for leave to discontinue may be put in a position, by the terms which
the court is minded to impose upon him as a condition of ordering
discontinuance of his proceedings, which will be so onerous that he would not
wish to accept them. Without going into the details, an illustration of that is
to be found in the recent decision of Whitford J, to which we were referred, in
Young Austen & Young Ltd v British Medical Association
reported in [1977] 1 WLR 881. Accordingly one must wait until the date when the
order was made before knowing whether the tenant’s attempt to withdraw his
proceedings will be successful or unsuccessful; it is quite impossible, subject
to the court’s power, if it has one, to make an order with retrospective
effect, to say that any other date than the date of the order is the effective
date of withdrawal. So we come to the central question of whether the order can
be back-dated and, as I say, it is in relation to that question that the
numerous analogies have been drawn to our attention.
If the order
is to be back-dated, the language of the rule which authorises the introduction
of such a provision into the order must be found, if anywhere, in the words ‘on
such terms as to costs, the bringing of a subsequent action or otherwise as it
thinks just.’ The first conclusion that
I have reached is that it is quite impossible to construe these words as giving
power to the court to order discontinuance with retrospective effect, for this
reason: the terms which are there contemplated are terms to be imposed on the
applicant–terms adverse to the applicant as a condition of granting him the
relief which he seeks. It is the applicant who is asking the court to grant him
leave to discontinue his proceedings; it is against the applicant that any
terms will operate if the court is minded to say: ‘Yes, we will grant you leave
to discontinue your proceedings, but only if you comply with the following
terms.’ To my mind it would be really
quite an astonishing interpretation of this language to say that a power to
impose terms upon an applicant as a condition of granting him certain relief
for which he is asking should extend to a power to impose onerous terms upon
the respondent, who is resisting the application.
But if that is
the wrong approach to the matter, I should still reach the same conclusion by
another route. If one pauses to consider what is the position which will have
been reached by the time the parties get before the master or, as it may be,
the judge, who is to make, if he is persuaded it is proper to do so, the
relevant order of discontinuance having granted the leave sought, it is this.
Up to that time the tenancy will have been continuing; up to that time whether
or not he has exercised the right, the tenant will have had the right to occupy
the premises; up to that time the tenant, and the tenant alone, in such
circumstances as are applicable here, will have been entitled to receive, and
will perhaps have received, the rent payable by the subtenants; up to that
time, other than by agreement with the tenants, the landlord will have had no
right to resume possession of the premises and will not have been in a position
to let them to anyone else; nor indeed will he have known until the time comes
when the court decides whether leave is to be granted or not, whether the
tenancy is to come to an end on the date when the order is made or is to
continue thereafter indefinitely. He will have been entitled to contemplate not
only that the tenancy will continue as it will have done up to the date when
the judge makes his order, but that it will continue in the ordinary way for
three months thereafter. In this situation, to my mind it would require the
strongest and clearest statutory language–and by ‘statutory’ I include, of
course, the language of the rules–to give the court a power retrospectively to
deprive the landlord of the rights which by then will have accrued to him.
For these two
reasons, if for no others, I have reached the conclusion that there is no power
conferred on the court by Order 21, rule 3 to make an order for the
discontinuance of proceedings such as these, or, so far as I can tell, of any
other proceedings (but it may not be of any importance in another context),
which will have operation retrospectively from a date earlier than the date on
which the order is made.
Having said
that, I remain conscious of the startling anomaly between the situation under
the High Court rules and the situation under the county court rules, to which
Mr Batterbury has drawn our attention. We have heard an interesting argument as
to how, if amendment is called for, the rules ought to be amended. Mr
Batterbury suggests that the High Court rules should be brought into conformity
with the county court rules; Mr Barnes, for the landlords, perhaps
understandably, suggests precisely the contrary. It does seem to me that this
may be a situation which has escaped the attention of the rule-makers who are
responsible for both sets of rules, and it may be that, now this case has
thrown the point up, the relevant rule committees, either severally or in
consultation with each other, will wish to consider whether any, and what,
amendment to the rules might be appropriate to remove the anomaly. But I
certainly do not regard it as any part of the task of this court to suggest
what, if any, amendment might be appropriate.
For the
reasons I have sought to explain, I would dismiss this appeal.
Agreeing that
the appeal should be dismissed for the reasons given by Bridge LJ, SIR DAVID
CAIRNS said: In addition to contending that the words ‘on such terms as to
costs, the bringing of a subsequent action or otherwise’ give jurisdiction to
backdate the order, Mr Batterbury on behalf of the tenants argued that there is
inherent jurisdiction in the High Court to backdate its orders. In my view
there is no such general jurisdiction. In some forms of order–for example, as
to periodical payments which have accrued due before the making of the order,
or as to the remission of such payments–there is a jurisdiction to backdate:
see the decision of this court in McDonald v McDonald [1964] P 1.
Other forms of order clearly could not be backdated. Two instances which occur
to me are: a money judgment, which clearly could not be backdated to an earlier
date so as to carry interest under the Judgments Act from that earlier date; or
a decree of divorce, which plainly could not be made to operate from a date
earlier than the order granting the decree.
The type of
order with which Order 21, rule 3 is concerned, seems to me to be obviously a
rule of such a character that it would be something of an absurdity to say that
it could be backdated, the effect of backdating being to say that an action
which had in fact been in existence up to the date of the order had ceased to
be in existence at some earlier date.
For those
reasons I agree to dismissing the appeal. Agreeing with both judgments BUCKLEY
LJ said: What cannot be done without leave clearly cannot be done unless and until
leave has been obtained. Consequently, it seems to me impossible that a tenant,
by making an application for leave to withdraw or discontinue his application
for a new tenancy under the Landlord and Tenant Act 1954 could, even in some
contingent manner, discontinue or withdraw his application merely by issuing a
summons for leave to do so.
The court can
of course kill an action by ordering its discontinuance, but our attention has
been drawn to no power conferred upon the court to direct not merely that the
action
than the date of the order. I am fully satisfied that the court has no inherent
jurisdiction to make any such order, and I do not think that any such power is
to be found in Order 21, rule 3. That rule does empower a court to whom
application is made to discontinue an action upon terms; but those terms must,
I agree; be terms which are imposed upon the applicant; it cannot refer to
terms imposed upon the respondent to the application.
For the
reasons which have been given by my brethren I agree that this appeal fails. It
seems to me that there are substantial grounds for thinking that consideration
should be given to the question whether in some way the relevant High Court and
county court rules should not be revised so as to make them accord with one
another in relation to withdrawal of an application for a new lease under the
Act of 1954. But that, as Lord Justice Bridge has said, is not a matter upon
which we could properly express any definite views, either as to whether
amendment of the rules should be made, or what form any amendment might take.
In those
circumstances the appeal will be dismissed.
The appeal
was dismissed with costs.
