Landlord and Tenant Act 1954, section 23(1) — Tenants’ appeal against order by county court judge striking out their application for a new tenancy on the ground that on the expiry of their lease and thereafter they were not in occupation of the premises — The facts were that the premises had been occupied and the business had been carried on there since 1983 by limited companies, one of which had gone into liquidation and had been succeeded by another — The tenants owned all the shares in the latter company and therefore controlled it — The county court judge on these facts decided that at the material dates the premises were not occupied by the tenants for the purpose of a business carried on by them within the meaning of section 23(1) of the 1954 Act — It was submitted on behalf of the tenants that the company, which they controlled, was a mere vehicle or alter ego through which the business was carried on by them — Some dicta in Pegler v Craven were cited in support of this submission — It was also argued that the amendment to section 30 of the 1954 Act made by section 6 of the Law of Property Act 1969, in the interest of landlords with controlling interests in companies, following the case of Tunstall v Steigmann, suggested that tenants with a
This was an
appeal by tenants, Alfredo Cristina and Rita Cristina, from a decision of Judge
Fife at Bromley County Court striking out the tenants’ application for a new
tenancy of premises at 20 Montpelier Vale, London SE3, of which the landlord
was the respondent, David Edward Seear.
I L Albutt
(instructed by Waterhouse & Co) appeared on behalf of the appellants;
Joanne Moss (instructed by Freed Stone Goodman) represented the respondent.
Giving
judgment, PURCHAS LJ said: This is an appeal from an order made by His Honour
Judge Fife on July 16 1984 striking out the appellants’ (tenants’) application
for a new tenancy under the provisions of the Landlord and Tenant Act 1954. The
relevant lease was dated January 14 1963. It provided for a term of 21 years to
run from September 29 1962, and was made between the respondent’s predecessor
in title, Arthur Moull Seear, and an Arthur Henry Stowers, from whom eventually
the appellants received an assignment of the lease.
Under the
provisions of the Act the landlords served the appropriate notice, and the
tenants then served their notice under the provisions of sections 24 and 26 of
the Act.
The appeal
raises a short point of interpretation under section 23 of the Act, which
provides:
Tenancies
to which Part II applies
(1) Subject to the provisions of this Act, this
Part of this Act applies to any tenancy where the property comprised in the
tenancy is or includes premises which are occupied by the tenant and are so
occupied for the purposes of a business carried on by him or for those and
other purposes.
The critical
words are ‘the purposes of a business carried on by him’.
In this case
certain events happened to which it is necessary to refer quite shortly. The
application with which the court is concerned was made by the landlord to
strike out on the ground that the tenants, on the expiry of the lease at the
end of September 1983 and since then, are and were not in occupation of the
premises for the purposes of a business within the provisions to which I have
just referred.
The facts as
found by the learned judge are as follows, and I quote from his admirably
succinct judgment:
Stated
briefly the facts are that on February 3
presumably
1983
a limited
company Goldspear was formed for the purpose of conducting the business at 20
Montpelier Vale
they are the
premises in question
previously
being conducted by the Cristinas
they are the
tenants
in
partnership. That company went into liquidation on 20 12 83. Meantime on July
27 1983 Swainmist Ltd was formed. The registered office of the company was at
20 Montpelier Vale. Since then the company at 20 Montpelier Vale appears to be
running the business at that address from that date.
Those are the
introductory facts with which the case is concerned, and I refer to only a few
additional matters which are relevant.
Goldspear was
put into liquidation on a creditor’s petition in December 1983. The learned
judge had evidence before him that that had occurred and was one of the matters
to which he was clearly entitled to have regard when considering the position
in law as between the tenants under the lease and the company occupying the
premises and carrying on the business.
This appeal
has been skilfully and attractively argued by Mr Albutt on behalf of the
appellants. He relies upon some expressions in this court in an earlier case
indicating the possibility that a limited company could in some way be the alter
ego or manager or agent of a tenant provided that tenant was the owner of
all or nearly all the shares of the company. Those remarks were made in Pegler
v Craven [1952] 2 QB 69 and I must return to that case shortly.
Before I
return to the findings of the learned judge, I should first refer to one
particular clause in the lease merely for the purpose of recording that it is
now conceded by Mr Albutt that it is irrelevant. Clause 2(12) provided for an
assignment by a tenant of the lease, and it was a covenant not to assign,
underlet or part with possession on the usual terms without the written consent
of the lessor, but the proviso reads as follows:
Provided that
the Lessor may require the proposed assignee to enter into direct covenants
with the Lessor and perform and observe all the covenants and conditions herein
contained and on the Lessee’s part to be observed and performed and provided
further that any limited company of which the Lessee shall be a director and
major shareholder may carry on business at the demised premises.
The learned
judge adverted to that clause and considered it, but Mr Albutt frankly
recognises before us that it does not assist in the consideration as to whether
or not, as a matter of interpretation, section 23(1) of the Act extended to
protect the tenants in relation to the business being carried on by the limited
company.
The learned
judge, by reference to that clause, returned to the question of the
requirements of the Act in these words:
I do not see
that the proviso to Clause 2(12) can alter the fact that the Act requires a
tenant to be in possession and carrying on the business. The proviso in 2(12)
is a diminution of the duty not to alienate without consent . . . It means that
the landlord cannot invoke the clause for forfeiture if a company is carrying
on a business there. Otherwise but for the proviso there would be a breach of
the first part of Clause 2(12). I therefore conclude that on September 29 1983
20 Montpelier Vale was not occupied by Mr and Mrs Cristina for the purposes of
a business carried on by them.
That is a
finding of fact by the learned judge which, in my judgment, is quite
fundamental to this appeal and, in view of the evidence to which I have
adverted, cannot successfully be challenged by Mr Albutt, although he has
valiantly attempted to do so.
Summarised, Mr
Albutt’s submissions were as follows. The two tenants (Mr and Mrs Cristina)
owned all the shares of the company and had the control which would result from
that position. Therefore, said Mr Albutt, the basis of the decision in Tunstall
v Steigmann [1962] 2 QB 593 did not affect this case, because the
reality of the position was that the business was in fact the business of the
tenants, who were using a vehicle in the form of a company to carry on their
business, and the fact that the company had been formed really was neither here
nor there. Whether one uses the expression ‘alter ego’, which, with
respect to some previous judgments, I find some difficulty in doing, or whether
one says that in reality the company was merely the agent or manager of the
tenants matters not. One cannot ignore the fact that when the creditor’s
petition was filed, albeit some months after the end of the tenancy but during
the continued occupation by the tenants, the liquidation so far as one knows
pursued a normal course. Such a process, with respect to the able arguments of
Mr Albutt, seems in my judgment to be quite alien to the concept that the
companies were mere managers of the business for which in fact the tenants held
themselves immediately, and not merely vicariously, liable. However, that is
merely dealing with the attack made by Mr Albutt on the finding of the learned
judge which, as I have already said, I find it difficult to criticise.
The second
point upon which Mr Albutt relies is related to the amendments to the Landlord
and Tenant Act 1954 effected by section 6 of the Law of Property Act 1969. That
section added a further subsection to section 30 of the Act of 1954, which
itself detailed specific circumstances under which a landlord could oppose a
tenant’s application for a new lease. It is not necessary in this judgment to
go into the details of that section. The basis of the submission is as follows.
In Tunstall v Steigmann the court was dealing with an objection
by the landlord to an application for a new tenancy. Put very shortly, the
landlord intended to use the premises for business to be conducted by a limited
company of which he was a controlling shareholder. The court held that,
notwithstanding the fact that he had a controlling interest in the company and
effectively controlled it, the company was still a separate legal entity and
that therefore the landlord could not say under the terms of section 30, as it
then existed, that he required the premises for a business to be carried on by
him. The argument was put forward by counsel for the landlord, Mr Bramall,
along very much the same lines as those proposed mutatis mutandis on
behalf of the tenant in this case by Mr Albutt, and I read only two passages from
the judgment of Willmer LJ. He said at p 603:
Mr Bramall,
in an attractive and forceful argument, has sought to support the judge’s view
on a number of grounds. First, he says that construing the language of the
subsection in accordance with the ordinary meaning of the words used, the
landlord here did intend to occupy the holding for the purposes of a business
to be carried on by her. The business was in substance her business, the
company being a mere piece of mechanism to enable the landlord’s business to be
carried on. This, it is said, was the reality; and we
rather than at its form.
Willmer LJ
disposes of this argument at the bottom of p 604 and the top of p 605:
I have certainly
felt the force of the argument on behalf of the landlord; but in the end I am
satisfied that it cannot prevail. There is no escape from the fact that a
company is a legal entity entirely separate from its corporators — see Salomon
v Salomon & Co [1897] AC 22. Here the landlord and her company are
entirely separate entities. This is no matter of form; it is a matter of
substance and reality. Each can sue and be sued in its own right; indeed, there
is nothing to prevent the one from suing the other.
Mr Albutt has
said that, as a result of that decision and particularly with some comments
made in the judgments as to what was described as ‘the bizarre results’, which
are mentioned towards the end of Willmer LJ’s judgment, Parliament enacted the
provisions included in section 6 of the Law of Property Act 1969. Mr Albutt
attempts to deduce from that that the intention of Parliament should be that
the tenant should be treated in the like manner.
I regret that
I am unable to accede to that submission. If anything was to be inferred from
the enactment in 1969, it must in my judgment militate to the contrary, that if
Parliament had intended to equate the position of the tenant with the landlord
in this respect then one is entitled to consider that it would probably have
taken some express step to achieve that. In the end, we are forced back on the
construction of the Act and the authority of Tunstall v Steigmann
in so far as it deals with the question of the position of a tenant in
occupation for the purposes of his business, and that authority remains
unaffected by any subsequent legislation.
It is
necessary only for me to refer very shortly to the earlier case of Pegler
v Craven because of two remarks made in the judgment there. It is
perhaps not necessary for me to cite verbatim the two comments, which were
obiter in any event, which merely reserve for future decision a position in
which a limited company was wholly owned from the point of view of equity
shareholding by the tenant. That possibility was adverted to both by Jenkins LJ
and by Lord Evershed MR in their respective judgments. Perhaps I should just
refer to the latter’s comment because it is particularly relied on by Mr
Albutt. Lord Evershed said at p 79:
It may be
that in some circumstances it could be said that a company in actual occupation
was but the alter ego of the tenant. It is possible that such a
conclusion might be arrived at in some cases; but it cannot, in my judgment, be
arrived at in this case; for, as my brother has pointed out, the company here
cannot be said to be a mere alter ego of the applicant Pegler. Though
the company’s right to occupy the premises is in law no doubt precarious, still
it is not a wholly controlled company, and I think it is impossible, therefore,
to accede to either of the arguments . . .
With great
respect to the distinguished judges who made those comments, in the light of
the subsequent decision in Tunstall v Steigmann I find that I am
bound by the judgments of this court which are directly in point in this case. Particularly
where the trial judge has found as a fact that the tenants were not in
occupation for the purposes of a business carried on by them, it seems to me
extremely difficult that that finding can be circumvented as a matter of law
and interpretation on the argument so attractively proposed by Mr Albutt.
For these
reasons, therefore, I have come to the conclusion that the learned judge was
right in forming the conclusion that the tenants here did not bring themselves
within the provisions of section 23(1) and therefore were not entitled to apply
for a new tenancy under section 24, as they purported to do on March 14 1983.
The application to strike out on the grounds that they were not on the expiry
of the lease or thereafter in occupation of the premises was correctly acceded
to by the learned judge, and his decision cannot be upset on this appeal.
For those
reasons this appeal fails.
ROBERT GOFF LJ
agreed and did not add anything.
The appeal
was dismissed with costs.
