Tenancy — Notice of termination — Landlord intending to demolish or reconstruct premises — Landlord deferring redevelopment plans — Landlord withdrawing opposition to new tenancy — Tenant seeking declaration that compensation still payable on quitting holding — Whether landlord’s counterclaim to avoid paying statutory compensation abuse of process — Application allowed
The claimant and defendant were, respectively, the tenant and landlord of commercial premises under a business tenancy within Part II of the Landlord and Tenant Act 1954. The defendant served a notice on the claimant, under section 25 of the Act, to end the tenancy. The notice stated that the defendant was opposed to the grant of a new tenancy and that, were the claimant to apply to the court for a new tenancy, the defendant would oppose the application on the ground that it intended to demolish, or reconstruct, the premises when the current tenancy came to an end, as allowed under section 30(1)(f).
However, after serving the notice, the defendant decided to defer its redevelopment plans. It informed the claimant that it would not oppose a new tenancy and set out its terms for a new lease. The claimant decided to vacate the premises in any event and sought a declaration that, upon quitting the holding, it would be entitled to payment of statutory compensation under section 37 of the Act.
The defendant counterclaimed arguing, inter alia, that, in the circumstances, it had no alternative but to apply, under section 29(2) of the Act (as amended by the Regulatory Reform (Business Tenancies)(England and Wales) Order 2003), for an order that the tenancy be determined without a new one being granted. However, since it conceded that it could not show that it intended to redevelop the property, the court was bound, pursuant to section 29(4)(b), to make an order for the grant of a new tenancy and for the prior termination of the current tenancy.
The claimant applied to have the counterclaim struck out on the ground that it amounted to an abuse of process. The defendant was attempting to use the right conferred by section 29(2) in order to deprive the claimant of the compensation to which it was entitled on the basis that the issuing of the application would take the case outside the grounds for compensation.
Held: The application was allowed.
The purported application by the defendant under section 29(2) was a blatant abuse of process since it had started and continued with litigation that it had no intention of concluding and this could not be countenanced by the court: Grovit v Doctor [1997] 1 WLR 640 considered.
Section 29(2) entitled a landlord to apply to the court for the termination of a tenancy without the grant of a new tenancy. However, in the present case, the defendant had already changed its mind prior to making the section 29(2) application. It had admitted that it did not want to, and could not, establish the grounds for such an order, and the section could not sensibly be read as compelling the court to order a new tenancy even if the tenant did not want one. It had not been intended for a landlord to bring a section 29(2) application in order to settle the terms of a new tenancy.
An application that was so defective that it had been struck out as an abuse of process could not be treated as an application within section 37(1C) so as to deprive a tenant of its right to compensation: Sun Life Assurance plc v Thales Tracs Lt (formerly Racal Tracs Ltd) [2001] EWCA Civ 704; [2001] 2 EGLR 57; [2001] 34 EG 100 considered.
David Holland (instructed by Black Graff) appeared for the claimant; Mark Stephens (instructed by Bains & Co) appeared for the defendant.
Eileen O’Grady, barrister