“The trial,” said Lewison LJ in Fage UK Ltd v Chobhani UK Ltd [2014] EWCA Civ 5 “is not a dress rehearsal. It is the first and last night of the show”.
It could not have been spelled out more clearly. Yet litigants continue to scrimp on evidence. This can be a fatal false economy because the past few years have seen parties win and lose in litigation concerning the Landlord and Tenant Act 1954 solely because one party – the loser in every sense – has failed to produce sufficient evidence or has produced the wrong evidence or the right evidence in the wrong way.
It is impossible to understate the importance of evidence in 1954 Act cases, because it is the evidence – the relevant documents relied on by witness of fact and experts – through which landlords and tenants can prove their intentions, their needs, their potential detriment and, above all, their bona fides to the court. Where one party wishes to depart from the terms of the old lease they must show the court evidence as to why that is appropriate. Where the landlord wants to redevelop the site, it must show the court evidence that supports its objective and subjective, unconditional intention.
The evidence, in other words, is the script of the show. Without it there is only bare bones.
But even though – because the date for proving the case is the date of the hearing so that parties can, and will, plug any evidential gap as the case builds to trial – there are still too many shows where the curtain opens only for the play to be missing crucial passages of necessary screenplay.
Insufficient evidence
In Man Ltd v Back Inn Time Diner Ltd [2023] EWHC 363 (Ch), a 1954 Act ground (f)-opposed renewal, the landlord arrived at court unable to demonstrate it could objectively redevelop. There was a chequered planning history (including land outside the landlord’s control), under appeal at the time of trial and, until the landlord’s skeleton argument was filed, nothing to show financial ability to proceed with the scheme. The landlord attempted to introduce bank statements during the trial, but the trial judge refused to allow reliance on them at such a late stage. In the window between trial and judgment, the planning appeal was successful, but the judge felt that was irrelevant. On appeal, the judge reminded the parties that “intention is not proved ‘if the person professing it has too many hurdles to overcome, or too little control of events’ (Cunliffe v Goodman [1950] 2 KB 237)”. It is unsurprising, with the haphazard production of evidence, that the landlord failed to show it could get near overcoming the hurdles or controlling the events that would allow for redevelopment.
Insufficient evidence was the recurring theme in the unopposed renewal between BMW (UK) Ltd v K Group Holdings Ltd [2023] (County Court at Central London, unreported, 28 July 2023), specifically concerning the possibility of a landlord break right. The landlord wanted a break right so that at some point in the future it could occupy the Park Lane car showroom for the purposes of the family business. However, it failed to evidence what occupation and diversification of the business would look like and the court felt “imprecise and unclear possibilities not evidenced by anything other than some vaguely referenced meetings or discussions” did not satisfy the well-trodden tests. There was nothing produced by the company supporting the venture, or even detail of who within the business would be involved. The landlord argued that it would be a waste of time to formulate such a suite of evidence if the break right was not given, but unfortunately for it, that is not how the 1954 Act works.
The court did observe that the proposals seemed more a response to the tenant’s rental proposition than an actual intention, which perhaps explains why KGH could not advance better evidence of future plans, if those plans were potentially never going to exist.
Both cases remind us that a successful argument requires real evidence to support it. And, in a lease renewal, that evidence needs to be proactively provided, even if it is at risk, to displace the tenant’s right to a renewal lease.
The wrong evidence
Sometimes that real evidence can have unexpected consequences and turn out to be the wrong evidence.
In S Franses Ltd v Cavendish Hotel (London) Ltd [2018] UKSC 62; [2019] EGLR 4, the landlord had designed a comprehensive redevelopment and produced evidence to show that it could carry out the scheme: so far, so good. However, when pushed, its lead witness confirmed that the scheme had been contrived purely to satisfy ground (f) and would not be pursued if Franses left voluntarily. What followed was an expensive rework of the traditional test via the Supreme Court, so that landlords must now also show there is no conditionality to their intention.
A similar denouement was suffered by the landlord in HPUT Trustee No 1 Ltd & HPUT Trustee No 2 Ltd v Boots UK Ltd (County Court at Central London, unreported, 24 May 2021). Sensible evidence was submitted by both parties supporting their respective positioning on tenant break and rental. Boots wanted flexibility across its portfolio, with break rights to avoid being shackled to costly real estate given economic and market uncertainty, and a lower rent than the landlord was seeking. The landlord, in pursuit of a higher rent, gave evidence which described professional optimism for the market and high demand for retail real estate in the area. The court ordered the inclusion of a three-year break, citing the landlord’s own optimism in the market as the reason the landlord would suffer no injustice or detriment in giving the tenant the flexibility it so openly desired.
The right evidence, recycled later in the plot beyond the party’s original intention, can be fatal.
The impact of wider evidence
The redevelopment test was back under the spotlight in B&M Retail Ltd v HSBC Bank Pension Trust Ltd [2023] PLSCS 56. The 1954 Act process had commenced during Covid and, as a result of lockdown, the landlord missed the tenant’s section 26 request, served its own section 25 notice and then missed the opportunity to serve the necessary counternotice to proceed with ground (f).
HSBC was keen to redevelop the property and then grant a new lease to Aldi. An agreement for lease and a supplemental agreement had been entered into to give effect to this, and that was held out as the star in HSBC’s evidence regarding intention. At the time of trial, HSBC had not secured planning and the parties’ respective experts gave evidence on the likelihood of planning being achieved. Interestingly, HSBC had applied for planning later than required under the AFL, despite needing it under the AFL and also as evidence in the proceedings, but this did not concern the court. The court preferred HSBC’s expert analysis of the likelihood of planning, which contrasts with the experience in Man Ltd.
The court was concerned that B&M could not evidence the steps it had taken to source alternative accommodation (should it be unsuccessful) but did appreciate (from both parties’ evidence) that space of this ilk was rare in the locality. However, sparsity was not a sufficient reason to prevent HSBC redeveloping the space for Aldi and getting the benefit of a more lucrative, and longer, lease in return.
The court would “only upset a landlord’s redevelopment ambitions if there is a major factor which points the other way”. Convinced there should be no delay, the court ordered a renewal lease which HSBC could break immediately. If this case sits at odds with the protective policy of the 1954 Act, it will no doubt be up for further debate, with an appeal waiting in the wings.
We saw whispers of something similar in Cornerstone Telecommunications Infrastructure Ltd v University of Arts London [2020] UKUT 248 (LC); [2020] EGLR 36, where the Upper Tribunal had to address the balance between the prejudice a site provider obligated to give vacant possession under a separate contract would face compared to the benefit to the public of the site hosting electronic communications equipment in the context of the Electronic Communications Code. The tribunal in that instance felt the risk to the site provider if the operator did not leave was too great a prejudice to ignore. While the two regimes are very different, it is interesting to see the evidential heft a third-party obligation carries.
Finale
Litigation requires enormous investment from those involved. Not just the financial cost of pursuing a case to trial, but a huge emotional and reputational investment. As reminded by Lewison LJ you only get one shot at it. Experts, lawyers, clients, everyone of the players involved needs to get it right first time. The impact of scrimping on producing evidence (documentary, factual or expert) cannot be corrected on appeal. The key to success? Providing the right evidence, in good time and tackling any evidential gaps as appropriate because, as we all know, the show must go on.
Top tips for evidence in lease renewals
- Undertake disclosure as early as possible
- Provide all relevant documents in good time
- Keep providing those documents
- Call witnesses who understand the property side of the business
- Consider very early on what experts you might require
- Engage those experts in the full dispute
- Consider your position in the round, cross checking arguments from one limb against another
Kate New is a property disputes partner at Foot Anstey
