Landlord and Tenant Act 1954, Part I — Appeal by tenant from county court judge’s decision on application by landlords to court to decide the terms of statutory tenancy following determination of long tenancy at low rent — County court judge in the exercise of his discretion under section 7 directed that the statutory tenancy should contain a complete prohibition of assigning, subletting, parting with possession or sharing the subject maisonette or any part thereof — The original lease from which the statutory tenancy was derived contained a covenant not to use maisonette otherwise than as a private residence in the occupation of one household only and also a covenant not to assign, underlet or part with possession of the maisonette or any part thereof without the previous written consent of the landlords, such consent not to be unreasonably withheld in the case of a respectable and responsible tenant or assignee — Court of Appeal drew attention to the fact that the discretion given to the court by section 7(1) of the 1954 Act was not qualified or restricted in any way, in contrast with section 35 in Part II of the Act, which provided that ‘in determining those terms the court shall have regard to the terms of the current tenancy and to all relevant circumstances’ — Under Part I the previous contractual terms did not necessarily govern the statutory terms — Held that the court would uphold the exercise of the judge’s discretion in so far as it related to the absolute prohibition of assigning, subletting and parting with possession of whole or part, but not his prohibition of sharing — The prohibition of sharing, which was not referred to in the original lease, was too restrictive and might inhibit ordinary hospitality to friends or relations — The court, in exercising the discretion itself, decided not to impose even a qualified covenant in restraint of sharing — The inconveniences of having to seek consent were too great to be consistent with justice and fairness
This was an
appeal by the tenant, Vittorio Schiazzano, from the decision of Judge McDonnell
at Westminster County Court on an originating application by the landlords,
Etablissement Commercial Kamira, to determine the terms of the tenant’s
statutory tenancy of a third- and fourth-floor maisonette at 5 Green Street,
London W1.
J Male
(instructed by Paisner & Co) appeared on behalf of the appellant; T Seymour
(instructed by Lawrence Jones & Co) represented the respondents.
Giving
judgment, CUMMING-BRUCE LJ said: Etablissement Commercial Kamira are the
assignees of the reversion dependent on the term created by a sublease made on
October 28 1957, whereby the third- and fourth-floor maisonette, 5 Green
Street, was demised to the respondent, Dr Vittorio Schiazzano, for a term of
years which expired by effluxion of time on June 21 1981. As the lease was a
long lease at a low rent within the provisions of Part I of the Landlord and
Tenant Act 1954, the tenancy created thereby was continued by virtue of section
3, and on October 25 1982 the applicants, the corporation to which I have
referred, served upon the respondent a notice proposing a statutory tenancy and
specifying April 27 1983 as the date upon which the long tenancy must come to
an end.
Dr Schiazzano
notified the applicants that he was not going to give up possession and as the
parties were unable to agree the terms of the statutory tenancy, which was to
come into force with effect from April 28 1983, the applicants issued an
originating application asking the court to decide what the terms should be.
There were a
number of issues between the parties upon the terms for which one or the other
were contending, and in the usual way a travelling draft came into existence,
drafted initially by the applicants’ solicitors, then amended by the tenant’s
solicitors in order to show wherein they disagreed and what they wanted,
followed by reamendment in blue by the landlords’ solicitors showing how much,
if at all, they accepted the proposals proposed by amendment by the tenant’s
solicitors.
By section 7
of the Landlord and Tenant Act 1954, where the parties cannot agree upon the
terms of the statutory tenancy which is to succeed the contractual tenancy, it
is provided by subsection (1) that the terms on which the tenant and any
successor to his statutory tenancy may retain possession of the dwelling-house
during that period, other than the amount of rent, shall be such as may be
agreed between the landlord and the tenant or determined by the court. It is to
be observed that by the drafting of that subsection Parliament has not imposed
any clog or restraint upon the discretion which the court has to exercise when
the court has to determine the terms which are not agreed. There are no words
in the subsection which indicate the considerations which the court has to
regard as material when determining how to exercise the discretion.
In that regard
section 7(1) of the Landlord and Tenant Act 1954 is to be contrasted with the
provisions in section 35 of the same Act. Section 7 appears in that bundle of
sections collected in Part I of the Act whereby Parliament enacted security of
tenure for certain residential tenants on termination of long tenancies at low
rents, which, prior to 1954, had been excluded from the ambit of the successive
Rent Acts which began in the year 1915. Section 35 by contrast is in Part II of
the same Act. The subject matter thereof is to afford security of tenure for
business, professional and other tenants. So the subject-matter of Part I,
which is concerned with residential tenants, manifestly gives rise to quite
different considerations from those which Parliament is likely to consider
relevant to the statutory security of tenure for business, professional and
other tenants. I do not doubt that that is the explanation of the difference in
language between section 35 in Part II and section 7(1) in Part I, because by
section 35 it is provided:
The terms of
a tenancy granted by order of a court under this Part of this Act (other than
terms as to the duration thereof, and as to the rent payable thereunder) shall
be such as may be agreed between the landlord and the tenant or as, in default
of such agreement, may be determined by the court; and in determining those
terms the court shall have regard to the terms of the current tenancy and to
all relevant circumstances.
Contrast
section 7(1), the terms shall be such as may be agreed between landlord and
tenant or determined by the court.
The learned
judge had first to decide the terms relating to repairs. He made his orders in
that regard. There is no appeal against that part of the learned judge’s order.
By his order he also dealt with the terms which should govern the occupation
and right of possession of the tenant. It is that part of the judge’s order
only with which this court is now concerned.
In the
travelling draft document the landlords’ solicitors had drafted subclause (v)
of clause 6, being the tenant’s covenants, in the following terms: ‘Not assign
or share or underlet or part with possession of the maisonette or any part
thereof in any way . . .’. On receipt of that proposed term the tenant’s
solicitor, redrafted that clause to read as follows: ‘Not assign or part with
possession of the maisonette or any part thereof without the previous written
consent of the landlord such consent not to be unreasonably withheld.’ They sent their amended form of subclause (v)
back to the landlords’ solicitors.
The landlords’
solicitors decided not to accept any of the tenant’s proposed revision, and so,
the parties not having agreed terms, the matter came before the learned county
court judge to settle the terms in accordance with the powers conferred by
section 7(1) upon the county court judge.
It is clear on
consideration of the language in section 7(1) that the learned judge has a
discretion, and the exercise of that discretion is a matter for judicial
decision without any statutory guidance as to the considerations that are
relevant, much less as to any considerations to which the court has to have
regard. The county court has therefore to determine the terms so as to do what
is fair and just to the best of the court’s ability to both parties.
When the
matter came before the learned judge, as it comes also before us, the
considerations relevant to the exercise of the judicial discretion had not been
considered in any reported authority, though we have the advantage of the
judgment of His Honour Judge Herbert delivered in the Westminster County Court
on February 1 1965, which we collect from an extremely brief note reported in
ESTATES GAZETTE for March 13 1965.* It
appears from that brief report that the way that the learned county court judge
approached the exercise of his discretion was as follows. He held that neither
statute nor authority (of which there was none) gave any direction with regard
to terms as to use or the extent to which covenants contained in the long lease
should be incorporated in the terms of the statutory tenancy. Whether such
covenants should be incorporated was therefore a matter of judicial discretion
to do what was fair between the parties, and the state of affairs as they
existed at the date of the hearing was of primary importance. The learned judge
on the facts of that case continued:
The house
being at the material time occupied as a single family residence, the tenant’s
intention to use it in the distant future as a source of income should be
disregarded, and the statutory tenancy should not incorporate any power to
divide or sublet.
*Editor’s
note: The case was Lagen’s Properties Ltd v Banding: See also [1965] EGD
69.
The learned
judge so held in spite of the fact, by the terms of the current lease, that
long lease was of a substantial dwelling-house with a right to divide and
sublet as three separate dwellings. Shortly before the expiry of that lease the
whole of the house was in fact converted to single-family occupation.
When the
learned judge came to deal with the only issue with which this court is
concerned, he expressed his decision in the following terms:
Now I come to
the next matter in dispute as to the terms, namely as to subletting or parting
with possession of part of the maisonette and, as both counsel recognise, it
may not be necessary to contain an express covenant against assigning or
underletting the whole of the maisonette because of course if this is a
statutory tenancy there is nothing to assign. And it may be that, if there were
an underletting of the whole, then the tenant, the respondent, would have no
defence to proceedings for possession on the grounds that he is no longer
occupying the premises as his home.
I interpolate,
with respect, there the learned judge was plainly right, because the statutory
right of the tenant under the statutory tenancy is a personal right and if the
tenant had unhanded himself of possession of the whole, he would have lost any
statutory right to be on the premises. The learned judge went on:
But it has
been urged upon me that there should be included provision entitling him to
sublet or part with possession of part of the premises with the written consent
of the landlords, such consent not to be unreasonably withheld.
Now it seems
to me that is not a desirable thing and might indeed be inconsistent with the
term in no (iv) of the tenant’s covenants not to use the maisonette otherwise
than as a private residential dwelling in the occupation of one household only.
But Mr Male drew my attention to the fact that there was a similar restriction
on user otherwise than as a private residential dwelling in the occupation of
one household only in no (8) of the tenant’s covenants in the old sublease and
that the immediately following covenant was not to assign underlet or part with
possession of the maisonette or any part thereof, nor to assign the benefit of
or part with this underlease without the previous written consent of the
landlord, such consent not to be unreasonably withheld in the case of a
respectable and responsible tenant or assignee, and then a proviso that
landlords might as a condition of consent to an assignment require the assignee
to enter into direct covenant with the landlords.
Now it seemed
to me that that argument, although superficially attractive, did not conclude
the matter because if the two covenants were to stand together then the tenant
might assign or underlet or part with the possession of the whole of the
maisonette to someone who was a respectable and responsible person and who
would use the maisonette as a private residential dwelling in the occupation of
one household only. And I cannot envisage any subletting or parting with
possession of part of the maisonette which would be consistent with compliance
with the user covenant. And so I shall direct that the statutory tenancy shall
contain the simple covenant not to assign or share or underlet or part with
possession of the maisonette or part thereof in any way whatsoever.
In the instant
case the learned judge addressed his attention specifically to the terms of the
contractual lease which set the contractual stage for the succeeding situation,
namely the statutory tenancy coming into existence pursuant to the 1954 Act.
The learned judge observed that by the tenant’s covenants in the underlease
dated October 1957 the lessee entered into a covenant by clause 2(8) not to use
the maisonette otherwise than as a private residential dwelling in the
occupation of one household only and not to use or permit the same to be used
for any trade, or business or profession whatsoever. By subclause (9) of the
same clause the tenant entered into a further covenant not to assign, underlet
or part with possession of the maisonette or any part thereof nor to assign the
benefit of or part with the underlease without the previous written consent of
the landlords, such consent not to be unreasonably withheld in the case of a
respectable and responsible tenant or assignee.
At first sight
there appears to be an inconsistency between the covenants entered into by the
lessee not to use the maisonette other than as a private residential dwelling
in the occupation of one household only and the provisions of the immediately
succeeding covenant which gave him the right to underlet or part with
possession of the maisonette or part thereof with the written consent of the
landlord, such consent not to be unreasonably withheld.
As a matter of
construction it is clearly right to discover and determine the intention of the
parties by reading the covenant in subclause (8) together with the terms of the
covenant in the immediately succeeding subclause (9). As Harman LJ expressed it
in this court in Dobbs v Linford [1953] 1 QB 48 at p 53:
The covenants
in a lease must be construed by reference to the covenants which follow or
precede them; thus where a covenant not to use otherwise than as a private
dwelling-house is followed by a covenant against subletting a part without
consent, you must construe the first by reference to the second; and that is
all that Jenkins LJ was really saying in the case of Downie v Turner [1951]
2 KB 112. It also follows, in my judgment, that where the covenant to use as a
private dwelling-house is followed by a covenant not to sublet the whole, the
inference is irresistible that there was no need in the second covenant to
provide against subletting of a part, because that was already provided for in
the covenant not to use otherwise than as a dwelling-house, scilicet, one
single dwelling-house.
The only
passage in the learned judge’s judgment which the appellants respectfully
criticise is this passage:
I cannot
envisage any subletting or parting with possession of part of the maisonette
which would be consistent with compliance with the user covenant.
Mr Male out of
the wealth of his ingenuity has suggested a hypothesis which in his submission
would have enabled the judge to envisage the subletting or parting with
possession which was consistent with compliance with the user covenant. More
particularly, he invited the court to consider this hypothesis. Supposing that
the tenant invited a student to come to the premises where he would enjoy the occupation
of a bedroom, also to be used as a study, but to live with the tenant for
practical purposes as part
probably the kitchen table — and sharing the amenities of the living-room,
retiring to sleep and to study to the room which he would solely occupy. That,
it is submitted, might be, according to the detailed effect, a situation in
which the tenant would part with part of the maisonette, namely the one room
which the student used as a bed-sitter, but it would be consistent with the use
of the maisonette as a private residential dwelling in the occupation of one
householder, because the student would have become part of the household of the
tenant.
By such an
illustration Mr Male invited this court to take the view that the learned judge
was wrong when he said that he could not envisage any subletting or parting
with possession of part of the maisonette which would be consistent with
compliance with the user covenant. He went on to submit that as a matter of
fairness, having regard to the terms of the lease of 1957 which specifically
prohibited the tenant wholly from parting with possession of the maisonette or
any part thereof without the previous written consent of the landlords, that
that having been the state of affairs which regulated the relations between
landlords and tenant in the antecedent 21 years, as a matter of fairness the
learned judge should have decided to incorporate in the lease the term for
which the tenant was contending in the exchanges of the travelling draft.
For my part I
approach the question of the way in which the statutory discretion should be
exercised very much in the way in which it was expressed by His Honour Judge
Herbert in 1965 in the Westminster County Court: in the exercise of the
judicial discretion the court had to do what was fair between the parties, and
the state of affairs as they existed at the date of the hearing is of primary
importance. One of the obviously material factors in that state of affairs is
the bundle of rights and obligations enjoyed or imposed by landlord and tenant
by the terms of the current lease. But Parliament has deliberately decided, as
may be concluded from the contrast between the terms of section 35 and section 7(1),
not to give the terms of the existing lease any priority in the list of
considerations which the court should, as a matter of common fairness, take
into account in order to determine how to exercise its discretion.
In the case of
a long lease entered into, as this one was in 1957, it does not appear
necessarily obvious that the terms that were appropriate on the grant of the
lease in 1957 for a term of 24 years will be the terms that are just and fair
between the parties when a contractual lease comes to an end and is succeeded
by a statutory lease granting to the tenant security of tenure for an unlimited
period, the limits of that period themselves depending on the statutory
prescriptions enacted by Parliament from time to time as to the determination
of the statutory tenancy. Thus looking at the history of the Rent Acts, at one
time the statutory tenancy ended with the death of a tenant. In the later
period statutory tenancy could be the subject of a succession from a statutory
tenant to specified members of the tenant’s family. So from the landlord’s
point of view he has no control once the contractual term has been succeeded by
a statutory tenancy over the term of the lease.
That is a
relevant consideration in considering whether it is just or fair to incorporate
in the statutory terms word for word the terms of the obligations settled by
the tenant in the previous contractual engagement. I would hold that there is
no ground for interfering with the way in which the learned judge decided to
prohibit any subtenancy or parting with possession. The statutory tenancy is
itself contemplated by Parliament as conferring personal rights on the tenant.
There may be situations in which fairness points to include a provision that
the tenant may have the right to sublet or part with possession of part of the
premises with the consent of the landlords, not to be unreasonably withheld,
but having regard to the history of the previous relationship between the
parties and the fact that some 24 years later the court had to decide what was
just and fair, I see no reason to hold that the judge wrongly exercised his
judicial discretion in deciding to exclude from the terms of the lease any
right to sublet or part with possession of part of the premises.
As to the
illustration that Mr Male gave us of one situation which could be contemplated
as a situation which the judge should have taken into account; it is an
illustration which to my mind would be sufficiently exceptional, unusual and
indeed unlikely. It would be wrong either to have regard to such a hypothesis
when the parties came to attempt to agree the terms of the lease or for the
judge to take that hypothesis into account in determining the terms of the
lease. For that reason I would uphold that part of the learned judge’s order in
which he prohibited subletting or parting with possession of any part of the
premises.
Then I come to
the decision of the judge to prohibit sharing of the premises. The situation
seems to me, with respect to the judge, to be rather different. The reasoning
of the judge appears to have been reasoning in which the judge focused his mind
entirely on the problem of user of a private residential dwelling in the
occupation of one household only. He contrasts the contractual right to
underlet or part with possession of the maisonette or any part thereof, or to
assign. Nowhere in that, which is the only relevant passage of the judge’s
judgment, is there any examination of the considerations relevant to the
question whether the tenant should have the right or alternatively be
prohibited from sharing the premises with another or other persons. The
explanation of that fact, at first sight surprising, is I think sufficiently
clear when one looks at the history of the travelling draft.
The landlords’
first proposals were ‘not assign or share or underlet or part with possession
of the maisonette or any part thereof’. The tenant’s solicitors by revision
deleted the words ‘or share or underlet’ and added the words ‘without the
previous written consent of the landlord such consent not to be unreasonably
withheld’. As far as I can judge, when the learned judge decided to reject the
proposed amendment proffered on behalf of the tenant, and to prefer the draft
first proffered by the landlords’ solicitors, he simply incorporated as the
term which he determined in the exercise of his judicial discretion the words
first proposed by the landlords’ solicitors, ‘Not assign or share or underlet
or part with possession of the maisonette or any part thereof.’
But the
considerations which moved the judge to decide to prohibit subletting or
parting with possession of part of the maisonette do not seem to me to be
material to a quite different question, which is whether the tenant should be
prohibited from sharing the maisonette. The strong reason against allowing the
tenant to sublet or part with possession of part of the premises, even with the
consent of the landlords, is the obvious risk that that is liable to involve
the reversioner on the termination of the statutory tenancy, because the Rent
Acts themselves provide that in certain situations upon the determination of
the tenancy a subtenant, where there is one, shall continue to enjoy the
subtenancy, but to do so in privity with the landlords, who had been the head
landlords and the grantors of the lease to the tenant. That seems to me, on the
facts of this case, a strong reason for the exercise of discretion in the way
in which the learned judge exercised it in relation to subletting or parting
with possession of part of the premises.
But when one
comes to consider the prohibition against sharing, the first question is, what
does it prohibit? Sharing is not a
precise concept. What may begin as what is regarded as ordinary hospitality to
a guest may gradually and by indefinable stages be recognised at a later date
as something which ordinary reasonable people would regard as sharing. If a
tenant is prohibited from sharing, he may be in great difficulty in deciding
when it is safe for him to offer ordinary hospitality to friends or relations.
He may have reason to be anxious, if he has extended hospitality to friends or
relations, as to whether the time may not have come when a court might take the
view that he was now sharing his maisonette. His guest may be eager to share the
expense of the maisonette. The tenant who is otherwise anxious to accept might
well be inhibited from doing so in case the court might find on the facts that
he has committed breach of covenant not to share. If he is only allowed to
share with the written consent of his landlord, a corporate body in
Liechtenstein, who at the moment, we are told, manage the maisonette through a
management agency in London, would he, before he invited anybody to stay in his
house, have to communicate with Liechtenstein or the managing agents and then
await their consent before extending the invitation to a friend or relation to
enjoy his hospitality for a determinate or indeterminate time.
In the hands
of a ruthless landlord eager to recover possession, I have no difficulty in
envisaging that a prohibition on sharing might be used as a weapon undermining
the security of tenure and the quiet enjoyment of the tenant.
From the
tenant’s point of view, I would have thought that fairness and justice suggests
that he should be free to share his maisonette with persons of his choice,
whatever those words may mean. From the point of view of the landlords, what is
the prejudice? It was submitted by Mr
Seymour that if people other than the tenant and his immediate family are
allowed to stay in the
position by secretly entering into a sublease or parting with possession of
part of the premises. That submission is fortified by the concern of the
landlords as to whether they would ever dare to accept rent if they knew that
the tenant was giving hospitality to someone who stayed in the maisonette,
because there is the risk that the tenant, once that situation was accepted,
might raise it in court proceedings for a waiver of a breach of covenant.
I am bound to
say that I take the view that anxieties about waiver are far fetched. There is
only a waiver if there is an acceptance of rent with full knowledge of the
subtenancy, parting with possession or whatever the breach of covenant alleged
may be. It seems to me that there would be no risk at all to the landlords of
the court holding that the acceptance of rent without knowledge of all the
relevant facts constituted a breach of covenant.
Mr Seymour
also referred to dangers which the landlords might encounter, having regard to
the terms of the headlease which they had decided to negotiate in 1977. I have
considered that submission, but I am unmoved by it.
On a balance
of the advantages and prejudices to be gained or suffered by landlords and
tenant respectively in relation to a prohibition on sharing, it seems to me
that on the material before the judge there was no good ground for prohibiting
sharing of the maisonette. No such covenant existed in the contractual lease
which regulated the relationship between landlords and tenant for 22 years.
Prohibition on sharing only came into the matter because it was included in the
draft covenant proffered to the tenant by the landlords’ solicitors when the
travelling draft started its journey.
I would hold
on the facts of this case that there is no reason in justice and fairness to
incorporate in the terms of the statutory lease a prohibition on sharing which
was not contemplated by the parties to the contractual lease when that was
entered into. For those reasons I would hold that this court is entitled, on a
review of the discretion of the learned judge, to review the exercise of his
discretion when he decided to prohibit sharing for the reason that there is
nothing in his ratio decidendi that is relevant to the introduction into
the terms of a prohibition on sharing. With respect to the learned judge it
seems to me at least doubtful whether he really addressed his mind
systematically to the relevant considerations.
Having decided
that the court is entitled to review the discretion of the learned judge, and
having decided that no good reason is shown by the learned judge for including
the prohibition on sharing, I would hold that the court should decide in that
regard to exercise the discretion itself and decide what term should be
incorporated under section 7(1) in relation to sharing. On the balance of the
relevant consideration I would hold that justice and fairness does not warrant
a prohibition on sharing. I would add that justice and fairness does not point
either to a qualified prohibition on sharing, that is to say prohibition on
sharing save with the consent of the landlords, such consent not to be
unreasonably withheld, because of the practical inconveniences in which the
tenant might be involved if it became necessary to make up his mind when he was
sharing and then to obtain consent before the sharing began and would be too
difficult to reconcile with a quiet life.
For those
reasons I would rule that the judge’s order be varied by deleting from the
relevant clause of the lease the words ‘or share’.
Agreeing with
the judgment delivered by Cumming-Bruce LJ, SIR DENYS BUCKLEY said: I put my
own position very shortly.
I see no
ground for interfering with the exercise by the learned trial judge of his
discretion to omit from clause 5(v) of the terms of the statutory tenancy in
this case any exception in respect of assigning, underletting or parting with
possession of the maisonette or any part thereof with the written consent of
the landlords, such consent not to be unreasonably withheld. The reason stated
by the learned judge in his judgment for so doing appears to me to justify his
exercising his discretion in this respect in the way in which he did.
That reason,
however, seems to have no bearing upon the question whether in clause 5(v) of
the terms there should be included a prohibition against sharing the
maisonette. No such prohibition is to be found in the antecedent underlease
dated October 28 1957. No argument about this aspect of the case seems to have
taken place before the learned judge. It is not apparent that he was ever asked
to apply his mind to this topic at all.
The genesis of
the words ‘or share’ in clause 5(v) was the draft proposed terms formulated by
the landlords’ legal advisers. These words were, among others, struck out by
the tenant’s legal advisers, but reinserted by the landlords’ advisers. It
would seem that the judge, having decided to exclude any reference to
transactions with the landlords’ written consent, simply adopted the clause as
originally drafted. The inclusion of the words ‘or share’ in the terms of the
statutory tenancy would impose a restriction on the tenant to which he was not
previously subject. It should, in my judgment, only be included in the terms of
the statutory tenancy if fairness to the landlords requires its inclusion. I
have not been satisfied that there is any ground for saying that this prohibition
should be included in fairness to the landlords.
I agree that
in these circumstances we should, in the exercise of our own discretion, delete
the words ‘or share’ from clause 5(v) of the terms, but in other respects we
should affirm the learned judge’s decision.
No order was
made for costs in the Court of Appeal and no variation of order for costs
below. Tenant’s application for leave to appeal to House of Lords was refused.
