Business tenancy–Adjoining premises let by same landlords to different tenants on tenancies expiring at different dates–Tenancies come into the hands of the same assignee, who underlets by a single instrument–Held, on construction of that document, that there was a single underlease which the landlords could terminate only when the later date of expiry fell due–Possibility of hardship to landlords must be accepted
These
proceedings were three summonses between the same parties in which, in effect,
the court was asked to decide as a preliminary issue which of three notices
served on the plaintiffs, Dodson Bull Carpet Co Ltd, by the defendants, the
Corporation of the City of London, to terminate their interest or interests in
No 6 and certain parts of 5 Old Bailey, London EC, was good and which bad. The
quantum of compensation payable was stated to depend on the answer.
Mr M Essayan
(instructed by Thomas Cooper & Stibbard) appeared for the plaintiffs, and
Mr M J Segal (instructed by the Comptroller and City Solicitor) represented the
defendants.
Giving
judgment, GOFF J said that on April 18 1968 the Linoleum Co, being then
entitled to possession of 6 Old Bailey under a long lease from the defendants
for 80 years from Christmas 1894, and to certain parts of 5 Old Bailey under
two underleases from Hope Brothers Ltd, granted the plaintiffs an underlease of
those parts of No 5 and the whole of No 6. By that instrument the parts of No 5
were demised for a term of five years less seven days from September 29 1967,
which accordingly expired on September 22 1972, and No 6 was demised for a term
of 7 1/4 years from September 29 1967, expiring on December 18 1974. Hope
Brothers Ltd were lessees of the defendants, to whom on June 13 1972 they
surrendered their lease. The Linoleum Co’s underleases of the parts of No 5
determined on September 28 1978, and that company, not being in occupation, did
not enjoy the protection of the Landlord and Tenant Act 1954; the plaintiffs,
on the other hand, were in occupation both of No 6 and of the parts of No 5,
and were protected when their interest in the parts of No 5 expired on
September 22 1972. On October 10 1972 the defendants served notice on the
plaintiffs under section 25 of the Act of 1954 with the intention of terminating
the tenancy of the parts of No 5. At that time there had been a severance of
the reversion, since the plaintiffs were now direct tenants of the defendants
of the parts of No 5, so that the defendants were their landlords within the
definition in section 44 of the Act and also the competent landlords within
Schedule 6; but the Linoleum Co were still the plaintiffs’ landlords in respect
of No 6 under the 80-year term expiring at Christmas 1974, and as that had
still over two years to run the Linoleum Co were the landlords within section
44 and also the competent landlords within Schedule 6. On May 16 1974 the
defendants served notice on the plaintiffs under section 25 with the intention
of determining the underlease of No 6 at Christmas 1974, and as a precautionary
measure they gave notice on the same day as to both Nos 5 and 6. The position
was then altered, because the long lease of No 6 had less than 14 months
unexpired, so that the Linoleum Co had ceased to be landlords within the
meaning of the Act, and the defendants, though not the immediate reversioners,
had become the plaintiffs’ landlords within the statutory definition. There
were three separate proceedings between the parties on these facts, and all
three had been adjourned to him (Goff J) on the preliminary question only as to
the validity of the notices. The point had been argued on No 5, because the
decision on that would determine the other two cases. The plaintiffs objected
that the notice was bad because it related to part only of the demised
premises, in other words to No 5, and not also to No 6.
The first
question, therefore, was whether the lease of April 18 1968 created one tenancy
of both premises or separate tenancies of each. He (his Lordship) had suggested
in the course of the argument that this might be a question of law, and that
where there were two properties demised by the same instrument for different
terms, at all events if also at different rents, that was not capable of
operating as a single tenancy. Neither counsel could find any authority in
point on this question. He (Goff J) thought that the issue was one not simply
of law but of construction, and counsel for the defendants had been content to
rest his case on this basis only. The first fact which was helpful to him (counsel)
was that there were different terms, on the one hand for No 6, and on the other
for the parts of No 5. The second was that there were different rents fixed at
the start of the lease for each set of premises, though upon expiry of the
interest in the parts of No 5 the rent for No 6 was increased to an amount
equal to the aggregate of the two original rents. Counsel for the defendants
also relied on the fact that there were different repairing covenants for the
two parts of the demised property, one much more onerous than the other and one
tied to a special arbitrative provision. Two strong indications in favour of
the plaintiffs’ construction, by contrast, were that the two rents were clearly
correlated, because of the provision increasing the rent of No 6 on expiry of
the interest in the parts of No 5, and that by clause 6 (i) there was a single
indivisible proviso for re-entry. He (his Lordship) found this second
indication irresistible. To his mind, looking at the document of April 18 1968
as a whole, and as a matter of construction, this was clearly a single tenancy
of Nos 5 and 6, and not two tenancies. Counsel for the defendants had sought to
escape these difficulties by saying that the draftsman had intended to create
two separate tenancies but had used and very imperfectly adapted a form
appropriate to a single one. That was far too speculative, and he (Goff J)
could not on any such ground violate what appeared to him to be the plain
meaning of the words used. Alternatively, counsel for the defendants had
submitted that there might be a case for rectification, but nobody had ever
asked for that, nor was there any evidence to establish a case for it. There
must accordingly be held to be but one tenancy of Nos 5 and 6.
It was
accepted that a landlord could not serve notice to terminate in respect of part
only of the premises comprised in the relevant tenancy, and this meant that the
notice served in respect of No 5 alone was bad, subject to one possibility,
which was that the defendants could rely on section 140 of the Law of Property
Act 1925. That section allowed apportionment of conditions on a severance of
the reversion. To bring the case within it, however, the defendants had to show
that their right to serve notice to terminate under the Act fell within the
words ‘condition or right of re-entry, and every other condition contained in
the lease.’ It was clear from the
language of the Act of 1954 that a notice to terminate was to be distinguished
from a notice to quit. It was not given under any provision contained in the
lease, and it determined not the contractual tenancy but only the statutory
continuation of the tenancy; and even then, only subject to the provisions of
the Act, under which there might be further interim continuation pending agreement
or the court’s decision on the question of a new lease. The defendants asked
him (his Lordship) to do violence to the language of section 140 because there
might be hardship if a person granted two wholly separate leases which fell
into the same hands, and then an underlease was granted of the whole, the
effect of which was to sever the reversion for a period during which he would
be unable to serve notice as to one part of the property. But the Act of 1925
was not the Act which caused the hardship, even if hardship were otherwise a
relevant consideration. Accordingly he (Goff J) had reached the conclusion that
the No 5 notice was invalid, which meant that the No 6 one was, too; it was,
however, accepted that in these circumstances the No 5 and No 6 combined notice
was good, and the questions raised in the three summonses would be answered
accordingly.
