Landlord and tenant — Landlord and Tenant Act 1954 — Whether operator of market entitled to protection of the 1954 Act — Whether landlord entitled to oppose the tenant’s application for a new tenancy under section 30(1)(f)
By a lease
dated April 2 1974 the plaintiff, Graysim Holdings Ltd, is the tenant of
Wallasey Market, holding a term of 21 years from September 21 1970: the
defendant, P&O Property Holdings Ltd, is the owner of the freehold
reversion to the lease. By a notice dated November 28 1990 the defendant served
the plaintiff with a notice to terminate the lease on September 29 1991 stating
that it would oppose any application to the court for the grant of a new
tenancy on the grounds contained in section 30(1)(a) and (f) of
the 1954 Act. On December 12 1990 the plaintiff served on the defendant a
counternotice stating it would not be willing to give up possession of the
premises. The plaintiff acquired the premises as a shell and fitted them out as
a market hall constructing stands along the walls and two rows of stalls down
the centre there being 35 stalls in all. Each stall is fitted with a roller
blind and a stall-holder may secure his own stall with his own padlock and key.
Certain facilities and services are provided by the plaintiff for the benefit
of the stall-holders. The trading hours of the market hall are from 9am to
5.50pm Monday to Saturday and the individual traders have no access either to
the hall or to their stalls outside those hours. The plaintiff also provides
lighting and heating and lays on electricity supplies to individual stalls and
provides a market superintendent, who performs a number of services, maintains
discipline among traders, and provides other supervisory duties. The stall-holders
pay a set weekly charge and a service charge to the plaintiff. Four
stall-holders have contracts with the plaintiff in the form of a lease; eight
stall-holders have an agreement described on its face as a licence, but which
has all the characteristics of a lease; 14 stall-holders have contracts on the
basis of a more modern form of licence described as a ‘Licence Agreement’ and
two stall-holders have an ‘interim form’ of licence for a period of 12 months.
Before the court there were three questions for its determination: (1) whether
the plaintiff’s tenancy of Wallasey
the affirmative, (2) what, in relation to that tenancy, is the extent of ‘the
holding’ for the purposes of the Act; and (3) whether the defendant may oppose
the plaintiff’s application for a new tenancy under section 30(1)(f) of
the Act.
circumstances the traders undoubtedly have exclusive possession of their
stalls. Under section 23 of the 1954 Act it was sufficient for the plaintiff to
occupy a part only of the premises. The plaintiff did not occupy any of the
stalls because as a matter of ordinary language the stalls were occupied by the
individual stall-holders; accordingly the stalls do not form part of ‘the
holding’ for the purposes of section 23(3) of the Act. It could not be said
that the plaintiff occupied the common parts of the market hall because they
were not occupied for the purposes of any business. It followed that the
plaintiff’s tenancy was not protected and came to an end on September 29 1991.
judgment, that the plaintiff’s tenancy is protected in whole or in part, and
construing the parcels clause of the lease, the premises for the purposes of
section 30(1)(f) includes the whole of one wall of the demised premises.
The ground specified in section 30(1)(f) was made out. The defendant’s
plans included the removal of part of the north wall which could be properly
described as demolition work, the south wall will have to be reconstructed. The
removal of the existing interior of the market hall can be described as an
exercise in demolition followed by a reconstruction of a substantial part of
the premises. The works proposed were very extensive resulting in a brand new
market hall. It would be very impracticable for the proposed works to be
carried out piecemeal and the work will in all probability take eight weeks
during which it would not be possible for the plaintiff to make any use
whatever of the holding. This amounts to circumstances constituting an
interference to a substantial extent and for a substantial time with the use of
the holding for the purposes of the business carried out by the plaintiff, and
accordingly it was not entitled to the protection afforded by section 31A of
the 1954 Act.
The following
cases are referred to in this report.
Ashburn
Anstalt v Arnold (No 2) [1989] 1 Ch 1;
[1988] 2 WLR 706; [1988] 2 All ER 147; (1988) 55 P&CR 137; [1988] 1 EGLR
64; [1988] 23 EG 128, CA
Bagettes
Ltd v G P Estates Ltd [1956] Ch 290; [1956]
2 WLR 773; [1956] 1 All ER 729; (1956) 167 EG 249, CA
Bewlay
(Tobacconists) Ltd v British Bata Shoe Co Ltd
[1959] 1 WLR 45; [1958] 3 All ER 652, CA
Boyer
(William) & Sons Ltd v Adams (1975) 32
P&CR 89
Cadle
(Percy E) & Co Ltd v Jacmarch Properties Ltd
[1957] 1 QB 323; [1957] 2 WLR 80; [1957] 1 All ER 148, CA
Cerex
Jewels Ltd v Peachey Property Corporation plc
(1986) 52 P&CR 127; [1986] 2 EGLR 65; 279 EG 971, CA
Decca
Navigator Co Ltd v Greater London Council [1974]
1 WLR 748; [1974] 1 All ER 1178, CA
Groveside
Properties Ltd v Westminster Medical School
(1983) 47 P&CR 507; 267 EG 593, [1983] 2 EGLR 68, CA
Hancock
& Willis v GMS Syndicate Ltd [1983] EGD
114; (1982) 265 EG 473, [1983] 1 EGLR 70, CA
Heath v Drown [1973] AC 498; [1972] 2 WLR 1306; [1972] 2 All ER
561, HL
Joel v Swaddle [1957] 1 WLR 1094; [1957] 3 All ER 325, CA
Lee- Verhulst (Investments) Ltd v Harwood Trust
[1973] QB 204; [1972] 3 WLR 772; [1972] 3 All ER 619; (1972) 24 P&CR 346;
[1973] EGD 467; 225 EG 793, CA
Narcissi v Wolfe [1960] Ch 10; [1959] 3 WLR 431; [1959] 3 All ER 71
Price v Esso Petroleum Co Ltd [1980] EGD 147; (1980) 255 EG 243,
[1980] 2 EGLR 58
Redfern v Reeves (1978) 37 P&CR 364; 247 EG 991, [1978] 2 EGLR
52, CA
Ross Auto
Wash Ltd v Herbert (1978) 250 EG 971, [1979]
1 EGLR 95
Street v Mountford [1985] AC 809; [1985] 2 WLR 877: [1985] 2 All ER
289; [1985] 1 EGLR 128; (1985) 274 EG 821, HL
Trans-Britannia
Properties Ltd v Darby Properties Ltd [1986]
1 EGLR 151; (1986) 278 EG 1254, CA
Wandsworth
London Borough Council v Singh (1991) 62
P&CR 219; 89 LGR 729; [1991] 2 EGLR 75; [1991] 33 EG 90, CA
This was the
hearing of three preliminary questions in proceedings by the plaintiff, Graysim
Holdings Ltd, against the plaintiff, P&O Property Holdings Ltd, for the
grant of a new tenancy under the Landlord and Tenant Act 1954.
Albert Charles
Sparrow QC and Patrick Powell (instructed by A Banks & Co) appeared for the
plaintiff; David Neuberger QC and Nicholas Harrison (instructed by Carter
Lemon) represented the defendant.
Giving
judgment, MR A S GRABINER QC said: This case is about a covered and
enclosed market hall in Merseyside. There are two issues. First, is the
plaintiff entitled to any protection under the Landlord and Tenant Act 1954,
Part II? Second, assuming an affirmative
answer to the first issue, is the landlord entitled to oppose the tenant’s
application for a new tenancy of the premises on the ground specified in
section 30(1)(f) of the 1954 Act?
The plaintiff, Graysim Holdings Ltd (‘Graysim’), carries on business as
an operator of markets. It is the holding company of a group of companies with
an annual turnover of £3.5m. Graysim has been in business for 25 years and
operates 23 markets at various locations in England and Scotland.
The defendant,
P&O Property Holdings Ltd (‘P&O’) is a wholly-owned subsidiary of
P&O Steam Navigation Company (‘the company’). P&O recently completed
the redevelopment of virtually the whole of a shopping precinct, formerly known
as Liscard Shopping Centres Ltd and now known as the Cherry Tree Centre. P&O
Shopping Centres is also wholly owned by the company and manages its specialist
covered shopping centres portfolio, which includes the Cherry Tree Centre. The
only part of the precinct which has not been redeveloped is the market hall
known as Wallasey Market.
By a lease
dated April 2 1974 Wallasey Properties Ltd as lessors demised Wallasey Market
to Graysim Properties Ltd as lessees for a term of 21 years from September 29
1970. Graysim is now the tenant of Wallasey Market and the freehold reversion
is vested in P&O.
On November 28
1990 P&O served Graysim with a notice to terminate the lease on September
29 1991. The notice stated that P&O would oppose an application to the
court for the grant of a new tenancy on the grounds contained in section 30(1)(a)
and (f) of the 1954 Act. On December 12 1990, Graysim served on P&O
a counternotice stating that it would not be willing to give up possession of
the premises on the date of termination. It is common ground that the notice
and counternotice comply with the requirements of the 1954 Act. It is also
common ground that the relevant cutoff date is September 29 1991 so that if the
1954 Act did not apply at that date Graysim’s tenancy could not continue.
There are
three questions which I have to decide. They are conveniently set out in the
order which was made on November 12 1991 by Master Cholmondeley Clarke:
(i) Whether [Graysim’s] tenancy of [Wallasey
Market] is protected by Part II of the Landlord and Tenant Act 1954, and
continues under the provisions of the said Act:
If the answer
to paragraph (i) is in the affirmative:
(ii) What, in relation to [Graysim’s] said
tenancy, is the extent of ‘the holding’ (as defined by section 23(3) of the
said Act) for the purposes of the said Act; and
(iii) Whether [Graysim] is entitled to a new
tenancy of the said premises or whether [P&O] may oppose [Graysim’s]
application for a new tenancy on the ground specified in section 30(1)(f)
of the said Act.
For
completeness I should say that P&O no longer relies on the ground set out
in section 30(1)(a) of the 1954 Act.
By agreement
between parties the hearing of this case was split into two self-contained
parts so that questions (i) and (ii) were dealt with together in the first part
and question (iii) in the second part. This judgment deals with both parts.
Part I
(Questions (i) and (ii))
The facts
Clause 2(13)
of the lease provides:
That the
demised premises shall not at any time during the term hereby granted be used
or occupied otherwise than as a general market or for any purpose or in any
manner inconsistent with such use or occupation nor so as to be a nuisance
annoyance or damage to or in any way interfere with the quiet and comfort of
the Lessors or the tenants or occupiers of any other shops offices or premises
in the Shopping Precinct . . . of which the demised premises form part of any
adjoining or neighbouring building and to use and occupy the demised premises
during the whole of the term hereby granted and not to allow the same to remain
unoccupied and to keep the same open for customers during the normal shopping
hours of the neighbourhood.
Graysim
acquired the premises as a shell and fitted them out as a market hall. It built
stalls along the walls and two rows of stalls down the centre; there are 35
stalls. Aisles run between the stalls. The stalls are fixed and are of wooden
construction. They consist of studs to which partitioning has been attached.
The stalls are fitted with roller blinds which are so designed that at the end
of a day’s trading they can be secured by the trade padlocking the blind to the
counter or some other part of the stall. Some of the security-minded
stall-holders have more elaborate systems, but the essential point is that each
trader secures his own stall with his own padlock and key.
Certain
facilities and services are provided by Graysim for the benefit of
stall-holders. There are lavatories which are intended to be exclusively for
the use of stall-holders. There are bin rooms for disposal of rubbish from the
market. There is also a market superintendent, Mr Jameson, who is employed by
Graysim. He uses a small room in one corner of the market hall as his office.
The gas heating controls for the market hall are situated in this room.
Wallasey
Market was created more than 20 years ago. The installations are old and in
part quite dilapidated. The floor is badly worn in places. In her evidence one
of the stall-holders, Mrs Eddins, was very critical of the state of the
lavatories which have been unusable for significant periods of time in recent
years. In physical terms Wallasey Market has seen better times and
representatives of both parties as well as stall-holders gave evidence to the
effect that it is badly in need of refurbishment. In view of some of the
arguments, which were advanced in relation to the second part of this judgment,
I should make it plain that my use of the word ‘refurbishment’ is merely
descriptive and I have not used it as a term of art.
The trading
hours of the market hall are from 9.00 am to 5.30 pm Monday to Saturday, and it
is Mr Jameson’s responsibility to open the hall by unlocking it in the morning
and locking it at night. Individual traders have no access either to the hall
or to their stalls outside trading hours unless accompanied by Mr Jameson.
According to
Mr Harvey, the managing director of Graysim, an important feature of Graysim’s
responsibilities as operator consists of the careful selection of traders so as
to ensure a good mix of goods in the market. This, in turn, encourages the
public to use the market and to make it successful. Mr Harvey said that it was
a matter of great importance that traders should be open for business when the
market opens and that they should keep open during ordinary trading hours.
In his
affidavit Mr Harvey also said:
All the traders
at Wallasey Market know that it is the custom that if they do not open by 9.30
in the morning Mr Jameson will use bolt cutters on their padlocks and will open
their stalls and leave them open.
I do not
accept the evidence in that passage. It was not supported by any other witness.
Indeed, Mr Jameson said he had never had occasion to open the stall of any
trader without authority. Under cross-examination Mr Harvey could recall no
occasion when any such thing had ever happened at Wallasey Market. Moreover,
none of the contractual documentation as between Graysim and the traders
supports the proposition that even apart from custom Graysim reserves to itself
the right to open up or enter into a stall or run it in the absence of the
stall-holder. I should add that Mr Jameson has never held the keys of
individual stalls.
One of Mr
Jameson’s tasks is to collect the rent. He recalled one incident in 1987 when a
stall-holder was in arrears of rent and had been absent from his stall for some
weeks. Mr Jameson broke the lock, cleared out the stall and reallocated it to
another trader. This seems to me to have been an isolated example of forfeiture
or distraint of goods or both.
Graysim
provides lighting and heating for the market hall and lays on electricity
supplies to individual stalls. Traders pay for their personal electricity
consumption by a meter system. In most cases the stall meter can be read from
outside the stall, but in any event meter reading is conducted by Manweb and
not only Mr Jameson. There was, apparently, an occasion when Mr Jameson was
required to get details of the serial numbers of the meters which were situated
inside four of the stalls, but he did not suggest that he obtained entry to the
stalls other than by seeking and obtaining the consent of the relevant
stall-holders.
The lavatories
are maintained and cleaned by Graysim. There is a burglar alarm. There is also
a coin-operated telephone. Mr Jameson also performs small maintenance services
in the hall, and there was some evidence that at the request of individual
traders he may have done small repairs to one or two stalls. According to
Graysim, Mr Jameson is also employed to maintain discipline among traders and
their employees and to ensure that the aisles are kept clear so as not to impede
shoppers and not to infringe fire regulations.
Mr Jameson
keeps an eye on the stalls and deals with complaints about traders who are or
may be in breach of their contractual arrangements with Graysim whereby they
agree to supply only a specified range of goods. These arrangements are
designed to ensure that the market traders between them provide a full range of
choice to the public and that there is no cut-throat competition. Mr Jameson
gave evidence about one or two incidents where he was obliged to intervene and
help to resolve differences which had arisen between traders.
There are
substantial disputes in the affidavits and in the oral testimony as to the
quality and extent of the services actually provided by Graysim. Evidence given
by or on behalf of P&O was to the effect that many of these so-called
services were never provided and in that sense were ‘fictional’, or, where
provided, the quality of the service was very poor. Graysim, on the other hand,
took the position that, although some of Mr Jameson’s predecessors had not been
very efficient, he had performed well and had done a good job.
Stall-holders
pay a set weekly charge as well as a service charge to Graysim. The service
charge is calculated as to reimburse Graysim in respect of expenses it has
incurred in the provision of services. It seems that stall-holders have
regularly paid the service charge, and the implication I draw is that on the
whole they have been willing to pay for whatever service they have been
getting. In any event, and notwithstanding the large amount of affidavit
evidence which was directed to this issue, I do not think I need to resolve the
debate about the quality of services provided by Graysim in order to answer the
questions which have been posed.
Contractual
documentation
I turn now to
deal with the contractual documentation as between Graysim and the
stall-holders. There are here no less than four different documents and a set
of regulations.
(i) I was told that four stall-holders have
contracts in terms in the form of a lease. This document looks like an ordinary
lease of shop premises. The parties are described respectively as landlord and
tenant and rent is payable. There is a forfeiture clause, but the landlord has
no other right of entry. There are provisions which regulate opening times and
there is a precise description of the goods which the tenant is permitted to
display for sale.
(ii) Eight stall-holders have the ‘old form’
licence. It is described on its face as a licence but has all the
characteristics of a lease. There is a term of 21 years at a specified licence
fee. The licensee agrees, inter alia, not to part with ‘possession’ of a
unit without the written consent of the licensor, which may not be unreasonably
withheld. The licensee’s covenants do not differ materially from those of the
tenant under the lease I have referred to. There is a forfeiture clause but,
once again, there is no other right of entry in the licensor. There is also a
provision which declares that:
nothing in
this licence shall be construed as creating a tenancy.
(iii) There are 14 stall-holders who have
contracted on the basis of a more modern form of licence. This is a shorter
document than the lease and the old-form licence. It is described as a ‘Licence
Agreement’. The licensee pays a licence fee and a service charge. The term is
for 12 months. The licensee expressly permits the licensor:
facilities to
read the electricity meter on the said unit.
As a matter of
construction this provision, in my view, assumes that Graysim has no right to
enter the stall. Furthermore, as I have already found, on those rare occasions
when it has been necessary for Mr Jameson to enter the stalls in connection
with the electricity meter or otherwise he has always sought and obtained the
consent of the stall-holder.
(iv) Two stall-holders have the ‘interim form’ of
licence. This purports to be a 12-month licence and is similar to the
modern-form licence.
Each of the
agreements incorporates a set of rules and regulations issued by Graysim as
applicable to market halls. Para 24 of this document provides:
The licensee
may have access to and use his unit and the shopping hall only at such
reasonable hours as the company may determine.
There is no
provision giving Graysim access to any of the units.
Mr Harvey’s
evidence was sensible and realistic on this point. He accepted in principle
that all stall-holders were entitled to be treated in the same way regardless
of any technical differences there may
Strictly
speaking, it is not necessary for me to express a concluded view in answer to
the question did these stall-holders or any of them have tenancies with
Graysim? Mr Charles Sparrow QC, who
appeared on behalf of Graysim, submitted that for the purposes of his case it
really did not matter whether these arrangements gave rise to tenancies or
licences. It is also the case that although a few of the stall-holders gave
evidence, none of them are parties to this action and, strictly speaking, they
are not bound by this judgment.
My provisional
view is that on the material before me, and applying the principles laid down
by the House of Lords in Street v Mountford [1985] 1 AC 809*, in
particular the speech of Lord Templeman (with whom the rest of their lordships
agreed), especially at pp 826H-827B, all the stall-holders have tenancies. Lord
Templeman emphasised that what matters in these cases is not the way in which
the parties have described their legal relationship in the document, but whether
their agreement has the effect in law of granting exclusive possession for a
term at a rent. Broadly speaking, if it does the result will be that a tenancy
has been created, and the fact that they may have described their relationship
as one of licensor/licensee will be irrelevant.
*Editor’s
note: Also reported at [1985] 1 EGLR 128.
In Ashburn
Anstalt v Arnold (No 2) [1989] 1 Ch 1† the Court of Appeal held (applying Street v
Mountford) that, although no rent was payable under the relevant
agreement, it did provide for exclusive possession of premises for a term
certain and created a tenancy notwithstanding the fact that it was expressed in
terms to be a licence. No doubt it could be argued here that stall-holders
falling within categories (iii) and (iv) to which I have referred are only
licensees, but in the face of Mr Harvey’s evidence, it is difficult to see how
some stall-holders could be tenants and other licensees.
† Editor’s
note: Also reported at [1988] 1 EGLR 64.
Aside,
however, from this question, the most important point is that, in my judgment
and in all the circumstances which I have described, the traders in this case undoubtedly
have exclusive possession of their stalls.
In order for
Graysim to be protected under the 1954 Act, the occupation test must be
satisfied. The relevant provisions at section 23 are as follows:
(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 . . .
(3) In the following provisions of this Part of
this Act the expression ‘the holding’, in relation to a tenancy to which this
Part of this Act applies, means the property comprised in the tenancy, there
being excluded any part thereof which is occupied neither by the tenant nor by
the person employed by the tenant and so employed for the purposes of a
business by reason of which the tenancy is one to which this Part of this Act
applies.
It follows
that the tenant may occupy a part only of the premises and that in order to
claim protection in respect of the whole or any part of the premises the tenant
must ‘occupy’ the same.
‘Occupation’
is an ordinary English word and the cases show that in this context it should
be given its ordinary meaning and construed in a common-sense way: Narcissi v
Wolfe [1960] Ch 10 at p 16 (Roxburgh J), Lee- Verhulst (Investments)
Ltd v Harwood Trust [1973] QB 204 at p 213E (Sachs LJ), Hancock
& Willis v GMS Syndicate Ltd (1982) 265 EG 473 at p 474, [1983]
1 EGLR 70 (Eveleigh LJ) and Wandsworth London Borough Council v Singh
(1991) 62 P&CR 219 at p 224§
(Ralph Gibson LJ).
§ Editor’s
note: Also reported at [1991] 2 EGLR 75.
The cases also
show that, although occupation need not be continuous, there has to be an
element of actual physical occupation before the requirements of the 1954 Act
can be said to be satisfied. The point is neatly summarised by Eveleigh LJ in
the Hancock & Willis case, at p 474:
That does not
mean physical occupation every minute of the day, provided the right to occupy
continues.
The same point
is made by the Court of Appeal in Trans-Brittania Properties Ltd v Darby
Properties Ltd [1986] 1 EGLR 151 at p 154F Slade LJ) and in the Wandsworth
case at p 224, where Ralph Gibson LJ adopted the observations of Eveleigh
LJ in the Hancock & Willis case.
In his
submissions Mr Sparrow emphasised that this was a market and that the success
or failure of any market depended on the ability of the operator, through his
control of the market, to attract the public to it. Mr Sparrow drew my
attention to a number of authorities in which (he submitted) the presence of a
person when coupled with his ability to exercise control over premises was
decisive of whether or not the occupation test had been satisfied: Groveside
Properties v Westminster Medical School (1983) 47 P&CR 507* at p
509 (Fox LJ) and p 513 (Kerr LJ), the Lee- Verhulst case at pp 213D and
215F-G (Sachs LJ), William Boyer & Sons Ltd v Adams (1975) 32
P&CR 89 at p 92 (Templeman J) and the Wandsworth case at pp 225 and
226 (Ralph Gibson LJ).
*Editor’s
note: Also reported at (1983) 267 EG 593, [1983] 2 EGLR 68.
By reference
to the facts of this case Mr Sparrow then proceeded to emphasise those elements
which showed that Graysim satisfied the presence/control test of occupation. It
selected the mix of stall-holders, it imposed stringent regulations, it
determined the working hours of Wallasey Market and provided advertising for
the market (although the evidence in support of this was extremely thin).
Through Mr Jameson it controlled the traders’ access to their units outside
opening hours, it maintained a vigilant watch over traders and participated in
the resolution of disputes in the market place, it provided services, including
on-site management and it prescribed in detail the range of goods which could
be displayed by traders.
On behalf of
P&O, the response of Mr Neuberger QC to this submission was that in the
context of the 1954 Act there was no magic in a market and that the occupation
test still had to be satisfied. He accepted (as he was bound to) that the
judgments referred to by Mr Sparrow did use the words ‘presence’ and ‘control’,
but he submitted that when properly analysed they were all cases in which, to a
greater or lesser extent, there was an element of actual physical occupation on
the part of the person held to have been in occupation, and that the extent of
Graysim’s control and presence in the sense in which those words could be
applied in this context was insufficient to satisfy the requirements of the
1954 Act.
Thus in the Lee-
Verhulst case the tenant provided room service in each of 20 furnished
rooms. The director of the tenant company said that the chambermaids employed
to carry out the room service had pass keys which they used: see pp 211H-212A,
213D (Sachs LJ) and p 217D-G (Stamp LJ). In the William Boyer case the
defendant required to enter and did enter the units for the purpose of his
business as landlord of the subtenants: see pp 92-93 (Templeman J). In the Groveside
case the medical school kept the keys to the student flat and Mr Forest,
the school secretary, regularly visited the flat and spent time there: see pp
510 and 513 (Fox LJ) and p 51G (Stephenson LJ). In the Wandsworth case
Ralph Gibson LJ said at p 230:
The council
were physically present upon and exercised control over the piece of land by
their servants or agents.
Finally, so
far as the case law is concerned, there is Ross Auto Wash Ltd v Herbert
(1978) 250 EG 971, [1979] 1 EGLR 95, where the tenant company, which
granted licences to concession holders, was held to be in occupation of the
premises. There the stalls were mobile, one of the services provided by the
tenant was the running of the licensees’ stalls for short periods in a day in
the absence of the licensee, and Fox J found that full possession and control
of the premises remained with the tenant.
In my
judgment, Mr Neuberger’s submissions and his analysis of the cases is correct.
In view of my findings of fact and the contracts to which I have referred, it
seems to me that I am bound to conclude that Graysim does not occupy any of
these stalls. That result seems to me to be consistent with common sense, because
as a matter of ordinary language, I think one would say that the stalls are
occupied by the individual stall-holders and not by Graysim. Accordingly, they
do not, in my judgment, form part of ‘the holding’ for the purposes of section
23(3) of the 1954 Act.
In the
alternative, Mr Sparrow submitted that in any event the common parts of the
market hall are occupied by Graysim. He submitted that ‘the holding’ on this
hypothesis consisted of the common parts which were retained by Graysim for the
purpose of carrying on a business which consisted of supplying a market
enterprise to any new stall-holder. As a practical matter I would reject this
argument as being artificial once it has been determined that Graysim has no
protection in respect of the stalls. In any event, the point is resolved for
present purposes because of the Court of Appeal decision Bagettes Ltd v GP
Estates Ltd [1956] Ch 290. There the retained common parts were held to be
ancillary to the business of subletting flats. It was held that the flats, when
sublet, were excluded from the tenancy and it followed that the common parts
could not be
conclusion is that Graysim’s tenancy of Wallasey Market is not protected under
the Landlord and Tenant Act 1954, Part II, and that it came to an end on
September 29 1991.
Part II
(Question iii)
This part of
the judgment assumes (contrary to my conclusion in Part I) that Graysim’s
tenancy is protected in whole or in part by the 1954 Act.
Premises
comprised in the holding
There is a
preliminary point of construction of the lease. The relevant works P&O
intends to carry out must be done to ‘the premises comprised in the holding’
(see section 30(1)(f)) and, because some of the proposed works are
intended to be carried out at the boundaries of the premises, it is necessary
from the outset that ‘the premises’ should be precisely defined.
The schedule
to the lease defines the premises so as
to include
one half of any walls dividing the demised premises from any adjoining premises
forming part of the said Precinct TOGETHER with (a) the canopy in front of the
ground floor of the demised premises.
Mr Sparrow
submitted that on the true construction of the lease the outer skin of the
perimeter walls of Wallasey Market does not form part of the premises. He
submitted that it did not matter if the adjoining ‘premises’ had a flank wall
or not. He said that the lessor would have wanted control of the outer skin so
that he could regulate such matters as the placing of signs on the premises. He
relied on the reference to the canopy in the schedule as supporting his
construction. He submitted that the canopy must be a fixture to the outer skin
and that it would have been unnecessary for the lease to have made express
provision incorporating the canopy a part of the demise.
Mr Neuberger
countered these arguments by contending that the reference to ‘any adjoining
premises’ was concerned with the case of a party-wall. Thus the area which is
contiguous to the southern wall of the market hall consists of an open car park
and there is no party-wall. In these circumstances Mr Neuberger submitted that
the whole of the southern wall forms part of the demised premises. He said that
the reference to the canopy implicitly assumes that the outer skin of bricks
forms part of the demise and that is why it was necessary for the lease to
refer to the canopy only as being included.
In support of
his submissions Mr Neuberger drew my attention to other provisions — namely
clause 2(17) (tenant prohibited from exhibiting on the exterior of the walls),
clause 2(32) (tenant prohibited from fitting any external blind to the demised
premises) and clause 3(c)(iv) (tenant obliged to paint the exterior of the
demised premises). These provisions presuppose that the exterior of the
premises form part of the demise. Mr Neuberger submitted that ‘adjoining
premises’ simply meant ‘adjoining building’ and it was only if there was an
adjoining building that the outer skin of the boundary wall fell outside the
demise; in all other cases the whole wall formed part of the demise.
I prefer Mr
Neuberger’s submissions, and I agree with him that there can be no practical
purpose for a wall dividing the market hall premises from the car park to be
owned jointly between the lessee of the car park and the lessee of the building
which houses the market hall.
Proposed
works
P&O
acquired Cherry Tree Centre in June 1989. It was in a dilapidated condition.
Planning applications were made, consents were obtained and Bovis Construction
Ltd were appointed management contractors for the redevelopment of the whole of
the centre. The works, apart from the market hall, were designated as phase 1
and were anticipated to take from February 1991 until mid-October 1991. In the
event practical completion was achieved very close to target on October 21
1991. There were minor delays outside the control of the contractors. The only
remaining works are those intended to be carried out to the market hall which
are designated as phase 2.
If the phase 2
works are carried out, the market hall will cease to be self-contained. Under
the new scheme a thoroughfare will be constructed through the market hall. This
will be one of four main entrances to the centre and it will remain open when any
of the shops in the centre are open.
There is no
dispute between the parties as to the content of the phase 2 works, which can
be summarised as follows:
(i) Most of the front (or north) brick-built wall
is to be removed. It will not be rebuilt. This will create access to a newly
constructed cafeteria outside the demise and will have the practical effect of
enlarging the market hall.
(ii) The whole of the interior, consisting of all
the stalls, lavatories and storage areas together with the associated fixtures
and fittings and all internal features, will be removed.
(iii) The existing entrance at the rear is to be
blocked off. There will be a new entrance incorporating an enclosed lobby
facing on to the car park. The new entrance will link up with the internal
aisle creating a new main thoroughfare into the centre. One of the two new sets
of double doors, which will be a feature of the new entrance, is to be erected
within the demise. As part of this aspect of the works the outer leaf or
external skin of facing brickwork on part of the south wall will be removed and
rebuilt.
(iv) The existing floor finish and base is to be
completely removed and replaced with a new floor screed. All circulation areas
are to be tiled in ceramic floor tiles.
(v) Sixteen new stalls will be erected within the
market hall. They will be fully self-contained and secured. They will be
brick-backed because they will be built adjacent to the existing perimeter
walls. They will be constructed from metal-stud partitions and fitted with
roller security shutters. It is intended that they will be constructed in
different locations from the existing stalls.
(vi) New lavatories for the use of stall-holders,
bin storage and access will be provided in a new location in a corner of the
market hall. Internal breeze-block dividing walls will be built in that corner
area.
(vii) There will a new open-type ceiling for the
hall with a solid-type ceiling above the lavatories and bin stores.
(viii) A sprinkler system will be installed and the
existing electrical supply will be modified to meet current standards. Each
stall will be individually metered. A fire alarm will also be installed.
As is apparent
from the evidence of Mr Alan Webster [FRICS], a chartered quantity surveyor who
was called as a witness on behalf of Graysim, the building in which the market
hall is housed has a reinforced-concrete frame comprising structural columns
and beams. It follows that the brick and block external cavity walls are
in-fill between the structural columns and are not load-bearing. P&O does
not dispute this fact.
Mr Leland
Jennings, a building surveyor who gave evidence on behalf of P&O, drew
attention to the fact that in relation to the new entrance at what is currently
the rear of the market hall two structural brick piers are to be erected which,
in part at least, will be within the demise. The piers will carry steel beams
which will support both the roof and fascia detail of the new lobby and the new
external skin of brickwork above.
Legal test
Section 30(1)(f)
contains the relevant ground of opposition to the grant of a new tenancy which
is invoked by P&O. It provides:
that on the
termination of the current tenancy the landlord intends to demolish or
reconstruct the premises comprised in the holding or a substantial part of
those premises or to carry out substantial work of construction on the holding
or part thereof and that he could not reasonably do so without obtaining
possession of the holding.
It is common
ground that P&O intends to carry out these works and that it has the
ability to do so.
The
authorities establish that:
(i) ‘reconstruct’ means ‘rebuild’ and involves
substantial interference with the structure: Percy E Cadle & Co Ltd v
Jacmarch Properties Ltd [1957] 1 QB 323 and Joel v Swaddle [1957]
1 WLR 1094;
(ii) the correct approach to the question whether
what is intended will amount to reconstruction of a substantial part of the
premises comprised in the holding is to look at the position as a whole and
compare the effect on the premises of carrying out the proposed work with the
condition and state of the premises before the work is done: see Joel v Swaddle;
and
(iii) the demolition and/or construction need not
be confined to load-bearing walls in order for the landlord’s plans to qualify
under subpara (f): Bewlay (Tobacconists) Ltd v British Bata
Shoe Co Ltd [1959] 1 WLR 45.
In my
judgment, it is abundantly clear that the ground specified in section 30(1)(f)
is made out. P&O’s plans could not be more extensive than they already are.
The removal of part of the north wall is
be done to the outer skin of the south wall which, in addition, will have to be
reconstructed. It is appropriate to describe the removal of the existing
interior of the market hall as an exercise in demolition followed by a
reconstruction of a substantial part of the premises. It is equally appropriate
to describe all of these proposed works as the carrying out of substantial work
of construction on the holding. These are very extensive works which will
result in a brand new market hall.
It also seems
to me to be quite unrealistic to suggest that these proposed works could be
done while the market continued to function and without P&O obtaining legal
possession of the holding. It is plain, in particular from the evidence of Mr
Kelsall and Mr Jennings on behalf of P&O, that it would be impracticable
for these proposed works to be carried out piecemeal. On their evidence, which
I accept, it would be necessary for the market hall to be vacated before the
work could be commenced. Clause 2(6) of the lease permits P&O, inter
alia, to enter the demised premises for the purpose of carrying out
repairs. If these proposed works could reasonably be characterised as ‘repairs’
then it would be quite inappropriate for me to conclude that P&O required
legal possession in order to do the works: see Heath v Drown [1973]
AC 498. I am quite satisfied that these proposed works cannot be so
characterised.
Section
31A of the 1954 Act
Graysim would
be willing to have included in any new lease terms giving P&O ‘access and
other facilities for carrying out the work intended’. Graysim submits that,
given access and facilities, P&O could reasonably carry out the work
without obtaining possession of the holding and without interfering to a
substantial extent or for a substantial time with the use of the holding for
the purposes of Graysim’s business. In dealing with this submission I must have
regard to the physical effects of the work on the use of the holding for the
purposes of Graysim’s business. On the authorities I am not concerned with
potential interference with the business itself or with the goodwill of the
business: Redfern v Reeves (1978) 37 P&CR 364 and Cerex
Jewels Ltd v Peachey Property Corporation plc (1986) 52 P&CR
127*.
*Editor’s
note: Also reported at [1986] 2 EGLR 65.
Accordingly,
the remaining question which I have to decide is one of fact and degree as to
the time and extent of the interference during which the works are to be
carried out. In Cerex Jewels (supra) and Price v Esso
Petroleum Co Ltd (1980) 255 EG 243, [1980] 2 EGLR 58, periods of
respectively two months and 16 weeks were held to fall within the statutory
formula and the landlord was, in each case, entitled to possession.
So far as the
facts here are concerned, P&O’s evidence is that with vacant possession of
the market hall the relevant works would take eight weeks. This estimate
assumes that concurrent works outside the demised premises, eg outside the new
entrance being constructed at the rear, would have no impact on the time
expected to be taken over the work being done to the demised premises.
On behalf of
Graysim, Mr Webster’s evidence was that the work could be carried out during
normal working hours in a reasonable five-week period, ie excluding overtime
and weekend working. He went on to say that because this was retail space it
had a high value, and that it was reasonable to anticipate weekend overtime
which would reduce the overall contract period. In his opinion, the works
should be completed in a maximum of four weeks.
On behalf of
P&O, Mr Bangham, a quantity surveyor, gave evidence to the effect that
significant overtime and weekend working could increase P&O’s costs by as
much as £33,000. He suggested that this would be an unreasonable additional
cost and that it would be an uneconomical way of proceeding.
The other relevant
area of difference between the witnesses related to the rescreeding of the
floor. If successful in these proceedings, P&O has undertaken to rescreed
the whole floor and not, as one of its plans suggests, only parts of the floor.
This will require a seven-day curing process during which time it will not be
possible to proceed with other works within the market hall. Graysim took the
position that the rescreeding work could be done in portions so as not to
inhibit other work which could be done at the same time.
I accept
P&O’s evidence on these matters. P&O’s time estimate for phase 1 proved
to be extremely accurate, and that seems to me to be a good indication of the
likelihood of its estimate for phase 2 being accurate. I do not believe that
P&O should be obliged to incur significant additional costs in the form of
overtime and weekend working. I think this would be an unreasonable imposition.
Moreover, it is not appropriate for me to conclude that there is or might be
some other way in which the rescreeding works could be done. I must proceed on
the basis put forward by P&O in its scheme of works: Decca Navigator Co
Ltd v Greater London Council [1974] 1 WLR 748.
In these
circumstances, my conclusion is that the work which it is proposed will be done
to the premises will in all probability take eight weeks. During this time it
will not be possible for Graysim to make any use whatever of the holding. In my
view, this would in the circumstances constitute an interference to a
substantial extent and for a substantial time with the use of the holding for
the purposes of the business carried on by Graysim, and accordingly, Graysim is
not entitled to the protection afforded by section 31A of the 1954 Act.
The answer to
question (iii) is that P&O is entitled to oppose Graysim’s application for
a new tenancy on the ground specified in section 30(1)(f) of the 1954
Act.
Declaration
accordingly.
