Mistake in landlord’s legal department as to effect of order in Landlord and Tenant Act proceedings–Tenant offered advantageous terms for temporary tenancy–Mistake quite one-sided, tenant entitled to take the benefit–Landlord’s possession claim fails
This was a
claim by ITC Pension Fund Ltd against Mr David Pinto, estate agent, surveyor
and valuer, of 15 Dover Street, London W1, for possession of the fourth floor
of 14 Dover Street. The defendant counterclaimed a declaration that he was
entitled to retain possession by virtue of a tenancy which had not determined.
Mr P R R
Sinclair (instructed by Trower, Still & Keeling) appeared for the
plaintiffs, and Mr J M Chadwick (instructed by Lieberman, Leigh & Co)
represented the defendant.
Giving
judgment, PLOWMAN V-C said: In this action the plaintiffs, as landlords, claim
possession of the fourth floor of 14 Dover Street, W1, and damages for
trespass. The defendant claims to be entitled to retain possession by virtue of
a tenancy which has not determined, and counterclaims a declaration to that
effect. The defendant carries on business as an estate agent, surveyor and
valuer in the adjoining property, 15 Dover Street, from which there is access
to the fourth floor of No 14, and for a number of years he has occupied the
only room on that floor in conjunction with his premises at No 15 for the
purposes of his business. He claims to be entitled to continue that occupation.
No 14 is a building consisting of a basement, ground floor and five upper
floors. Immediately before January 3 1969, the freehold of the building was
vested in London Property Inc. from whom the plaintiffs bought it as an
investment and with a view to redevelopment in 1970. The building was subject
to two head leases. The first of these was a lease of the ground floor and
basement for a term expiring on September 29 1973. The second was a lease of
the upper floors for a term expiring on December 24 1972 at a rent of £2,270
per annum. The upper floors were separately underleased for terms expiring a
day or two before December 24 1972. Among those underleases was one of the
fourth floor, dated April 2 1964, for a term expiring on December 23 1972. This
underlease (which I will call ‘the 1964 underlease’) had become vested in the
defendant in 1968 by assignment. The rent payable under it was £650 per annum.
On January 3
1969 two things happened. First, the head lease of the upper floors was
assigned to the Trustees of the Manifold Charitable Trust, and secondly, those
trustees granted to the defendant an underlease (which I will call ‘the 1969
underlease’) of the upper floors (including the fourth floor) for a term
expiring on December 23 1972 at a rent of £4,300 per annum. I have heard much
argument on the question whether the 1964 underlease thereupon merged in the
1969 underlease, a matter to which I will revert later. On December 28 1971 the
defendant served on the plaintiffs a notice under section 26 of the Landlord
and Tenant Act 1954 requesting a new tenancy of all five upper floors of No 14
commencing on December 25 1972. That notice is referable only to the 1969
underlease. On March 2 1972 the plaintiffs served on the defendant a notice
under section 40 (1) of the Act requiring information about the occupation and
subtenancies of the upper floors. I refer to that subsection, which is as
follows:
Where any
person having an interest in any business premises, being an interest in
reversion expectant (whether immediately or not) on a tenancy of those
premises, serves on the tenant a notice in the prescribed form requiring him to
do so, it shall be the duty of the tenant to notify that person in writing
within one month of the service of the notice:
(a) whether he occupies the premises or any part
thereof wholly or partly for the purposes of a business carried on by him, and
(b) whether his tenancy has effect subject to any
subtenancy on which his tenancy is immediately expectant and, if so, what
premises are comprised in the subtenancy, for what term it has effect (or, if
it is terminable by notice, by what notice it can be terminated), what is the
rent payable thereunder, who is the subtenant, and (to the best of his
knowledge and belief) whether the subtenant is in occupation of the premises or
of part of the premises comprised in the subtenancy and, if not, what is the subtenant’s
address.
On March 21
1972 the defendant, in reply to the section 40 notice, stated that D Pinto
& Co occupied the fourth floor office for the purposes of the business
carried on by the defendant and gave particulars of the subletting of the other
floors, but did not specifically mention either the 1964 or the 1969
underlease. On March 29 1972 the plaintiffs served on the defendant a notice
that they would oppose an application to the court under Part II of the Act on
the ground set out in section 30 (1) (f) of the Act, namely
‘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.’
On April 24
1972 the defendant issued an originating application to the Westminster County
Court for a new lease of the upper floors.
On May 9 1972
the plaintiffs put in their answer, stating that they opposed the grant of a
new tenancy in accordance with section 30 (1) (f). They then instructed their
surveyors, Richard Ellis & Son, to prepare a scheme for the reconstruction
of No 14. This was done, and on June 15 1972 the plaintiffs applied for
planning permission. The application for a new lease was heard by Judge
Stockdale on June 28
reserved judgment, but indicated that he proposed to refuse the application for
a new tenancy on the ground set out in section 30 (1) (f), but that since the
plaintiffs would be unable to proceed with their scheme until the lease of the
ground floor and basement fell in on September 29 1973, he would exercise his
power under section 31 (2) of the Act and substitute September 29 1973 for
December 25 1972 in the defendant’s section 26 notice. Section 31 (2) is as
follows:
Where in a
case not falling within the last foregoing subsection the landlord opposes an
application under the said subsection (1) on one or more of the grounds
specified in paragraphs (d), (e) and (f) of subsection (1) of the last
foregoing section but establishes none of those grounds to the satisfaction of
the court, then if the court would have been satisfied of any of those grounds
if the date of termination specified in the landlord’s notice or, as the case
may be, the date specified in the tenant’s request for a new tenancy as the
date from which the new tenancy is to begin, had been such later date as the
court may determine, being a date not more than one year later than the date so
specified:
(a) the court shall make a declaration to that
effect, stating of which the said grounds the court would have been satisfied as
aforesaid and specifying the date determined by the court as aforesaid, but
shall not make an order for the grant of a new tenancy;
(b) if, within 14 days after the making of the
declaration, the tenant so requires the court shall make an order substituting
the said date for the date specified in the said landlord’s notice or tenant’s
request, and thereupon that notice or request shall have effect accordingly.
On July 21
1972 Judge Stockdale made a consent order which was in the following terms:
It is hereby
declared that the respondents have not established any ground on which they are
entitled under section 30 of the Landlord and Tenant Act 1954 to oppose the
application of the applicant for a new tenancy of the premises known as 14
Dover Street, London W1, but that the court would have been satisfied on the
following ground, namely that specified in section 30 (1) (f) of the said Act,
that the respondents would have an intention to demolish the said premises if
the date specified in the applicant’s request for a new tenancy under section
26 of the said Act as the date from which the new tenancy is to begin had been
September 29 1973. It is ordered that the last-mentioned date be substituted
for the date specified in the said tenant’s request.
The effect of
this was to continue the 1969 underlease until September 29 1973, but the
defendant was hoping that by then a scheme for the redevelopment of 13, 14 and
15 Dover Street as a whole, about which he was in negotiation with Richard
Ellis & Son, would have been worked out and that he would be given office
accommodation in the redeveloped block.
The legal
aspects of the matters to which I have been referring were being dealt with on
behalf of the plaintiffs by Mr W A Tacey, a solicitor in the legal department
of the Imperial Group at Bristol, of which the plaintiffs form part. He got
into a complete muddle as to the effect of the judge’s order, and appears to
have thought that it operated on the 1964 underlease rather than on the 1969
underlease. He said in evidence: ‘I mistakenly believed that the essence of the
court order was to keep the 1969 underlease in existence until December 1972
and then in some way to resurrect the tenant’s rights under the 1964 underlease
for nine months.’ It is not easy to see
why he went wrong, because on July 19 1972 Richard Ellis & Son had written
a letter to his department stating the effect of the anticipated order quite
accurately. They said this:
Thank you for
your letter of June 29, the contents of which are appreciated and have been
recorded by our estate records department.
We have
assumed from the information you have given us we should demand rent from Mr
David Pinto in respect of the periods from December 23 1972 to September 9 1973
at the rent reserved in his underlease dated January 3 1969 granted to him by
the trustees of the Manifold Charitable Trust, under which we imagine he would
continue to hold the premises by virtue of the county court order you have
secured.
In this
connection we are wondering if you would be kind enough to confirm that the
rent we should demand with effect from December 23 1972 should be at the rate
of £4.300 per annum exclusive, reserved by the above-quoted underlease, and not
the £2,270 exclusive reserved in the head lease to the Manifold Charitable
Trust.
Mr Tacey,
however, saw matters differently. On July 21 he replied as follows:
Thank you for
your letter of July 19. I confirm that you should demand rent from Mr David
Pinto for the period December 25 1972 to September 29 1973. The Westminster
county court judge is in fact today delivering his reserved verdict, but it is
understood that the effect of this will be to extend Pinto’s lease to the
September quarter day 1973.
Up to
December 25 1972 you should continue to collect rent from the Manifold
Charitable Trust at the existing rate. After December 25 1972 rent will be
payable by Pinto at the current rate payable under his underlease of the fourth
floor, namely £650 per annum, since the essence of the court order is an
extension of his occupation lease, not his lease of the upper floors.
At about this
time the defendant became aware that the plaintiffs were busy acquiring the
interests of the other subtenants of the upper floors of No 14 with a view to
obtaining vacant possession. He was under no illusions about the effect of the
court order, and viewed with some apprehension the prospect of having to pay
£4,300 per annum under the 1969 underlease from December 1972 to September 1973
while upper floors (except his own fourth floor) were vacant and producing no
rent. He was therefore relieved to get the following letter, dated October 19
1972, from Mr Tacey:
Dear Sirs,
Fourth Floor,
14 Dover Street, W1
As you are
aware, with effect from December 25 1972 you will become direct tenants of my
clients in respect of the fourth-floor premises until September 1973. My
clients do not have a copy of the lease under which you hold the fourth floor
and I should be most obliged if you could let me have a copy of your lease.
Pausing there,
that is clearly a reference to the 1964 underlease, because the plaintiffs
already had a copy of the 1969 underlease. The letter goes on:
I shall, of
course, be responsible for your copying charges in this matter.
The impression
that that letter made on the defendant’s mind was that the plaintiffs were
making the reasonable suggestion that as from Christmas 1972 he should stay on
until September 29 1973, not under the 1969 underlease, but under the 1964
underlease at a rent of £650 per annum. Accordingly, when on November 17 1972
Richard Ellis & Son wrote to him on the question of renewing a contract for
servicing the lift at No 14 (the maintenance of which was the tenant’s
obligation under the 1969 underlease) he replied on November 20 1972 as
follows:
We thank you
for your letter of November 17.
Our lease on
the whole of the upper parts of 14 Dover Street terminates on December 25 1972
and at that date we cease to be responsible for the servicing and maintaining
of the lift, and indeed the cleaning and general maintenance of the common
parts. We assume that from that date all these services will be taken over by
your clients for the benefit of the tenants who remain in occupation of the
various premises in the upper parts.
We shall, of
course, be continuing in occupation of the fourth-floor room only after that
date and naturally we shall expect the services to the common parts to be
continued by your client.
On November 22
1974 the plaintiffs renewed their request for a copy of the 1964 underlease.
They wrote to the defendant as follows:
Re 4th Floor,
14 Dover Street, W1.
You will
recall that I wrote to you on October 19 asking for a copy of the lease of the
fourth floor under which you will continue to hold these premises until
September 1973. I shall be most obliged if you would let me have a copy of your
lease.
A copy of
your letter of November 20 to my clients’ managing agents has been passed to
me, and of course my clients are unable to deal with the various queries in
your letter until such time as we have a copy of the lease, since it is
necessary to examine the various responsibilities of the landlords under that
lease, which responsibilities will be taken over by my clients with effect from
the December quarter day.
On December 6
1972 the defendant replied as follows:
Dear Sirs,
4th Floor, 14
Dover Street
I am sorry
for the delay in dealing with your request for a copy of my lease under which I
hold the fourth-floor premises and this is now enclosed.
I pause to say
that that was the 1964 underlease.
Kindly let us
have a remittance for our copying charges of 60p.
Then there is
a postscript:
I take the
opportunity whilst writing of enclosing my firm’s cheque for the quarter’s rent
due on December 25 in the sum of £162.50.
Under the 1964
underlease the rent was payable quarterly in advance. This letter was
acknowledged on December 8 1972 by the plaintiffs, who wrote as follows:
Thank you for
your letter of December 6 enclosing a copy of the lease under which you hold
the fourth-floor premises. I enclose herewith a cheque in the sum of 60p in
respect of your copying charges. I am obliged for your cheque in the sum of
£162.50 in respect of the December quarter’s rent.
Similar
payments in advance were made in respect of the rent due on March 25 and June
24 1973, but when the defendant sent a cheque for the Michaelmas rent, Richard
Ellis & Son returned it, saying:
As you know,
the rent in respect of the above premises is payable quarterly in advance, and
accordingly we return your cheque for £162.50 as we envisage you will be
vacating the premises on September 29.
On October 1
1973 the plaintiffs were notified that their application for planning
permission was refused. In March 1974 they gave notice of appeal to the
Secretary of State, and on November 4 1974 the Secretary of State dismissed the
appeal. The plaintiffs are therefore no longer in a position to avail
themselves of section 30 (1) (f) of the Act, and instead of reconstructing the
property have undertaken a substantial programme of internal refurbishment not
involving planning consent, and in order to assist to that end the defendant
has moved out of the fourth floor as a temporary measure and without prejudice
to his claim in this action that he is entitled to remain in occupation under a
tenancy which has never been determined.
The plaintiffs
issued their writ on November 15 1973. Their case can be summarised as follows:
(1) On the granting of the 1969 underlease, the 1964 underlease merged in it;
(2) alternatively, the defendant is estopped from contending that it did not
merge; (3) by virtue of the county court judge’s order, the defendant’s tenancy
under the 1969 underlease came to an end on September 29 1973; (4)
alternatively, that order estops the defendant from asserting the continued
existence of the 1964 underlease; (5) ergo, the plaintiffs are entitled to
possession and damages for trespass. The defendant’s case can be summarised as
follows: (1) The 1964 underlease did not merge in the 1969 underlease; (2) the
defendant is not estopped from so contending; (3) the plaintiffs themselves are
estopped from asserting that it did merge; (4) the county court judge’s order
did not affect the defendant’s tenancy of the fourth floor under the 1964
underlease, and accordingly at all times since December 25 1972 the defendant
has held the fourth floor under a tenancy from the plaintiffs upon the terms of
the 1964 underlease and is entitled to possession of that floor by virtue of
that tenancy; (5) alternatively the defendant is entitled to possession of the
fourth floor by virtue of a tenancy for a term of years commencing on December
25 1972 and ending on September 28 1973, the terms of which are the terms of
the 1964 underlease (so far as the same are applicable to and not inconsistent
with the said term of years); (6) this tenancy has not terminated. In reply,
the plaintiffs say that if (which they deny) they did grant or agree to grant
the defendant the tenancy referred to in paragraph 5 of my summary of the
defendant’s case, they did so under a mistake, which they plead as follows:
(a) In granting or agreeing to grant such lease
the plaintiffs and their agents were under a mistake (i) as to the true effect
of the order of His Honour Judge Stockdale referred to in paragraph 9 of the
statement of claim in that they erroneously believed that the consequence of
the said order was that the defendant became entitled to occupy the fourth
floor from December 25 1972 until September 29 1973 upon the terms of the 1964
sublease and (ii) as to their contractual rights and obligations vis-á -vis the
defendant in the circumstances which arose after the said order had been made
in that the plaintiffs and their agents erroneously believed that the 1969
sublease determined on December 25 1972 and that thereafter until September 29
1973 such contractual rights and obligations arose under the 1964 sublease
rather than under the 1969 sublease.
(b) At all material times or at any rate by
December 6 1972 the defendant knew of the said mistakes of the plaintiffs.
Particulars
of knowledge: The plaintiffs will rely on the terms of a letter dated December
6 1972 from the defendant to the plaintiffs.
(I have read
that letter.)
(c) In the further alternative, if the defendant
did not know of the said mistakes of the plaintiffs then such mistakes were
common to the plaintiffs and the defendant in that they shared the same
erroneous beliefs referred to in subparagraph 5 (a) hereof.
In my
judgment, it matters not whether the 1964 underlease did or did not merge in
the 1969 underlease, nor, in my judgment, is it material to determine whether
the 1964 underlease survived the county court judge’s order. I am prepared to
assume, without so deciding, that the plaintiffs are right about both these
matters. But the crux of the matter is that after Christmas 1972 the defendant
remained in possession of the fourth floor with the consent of the plaintiffs
and on the understanding that he should be entitled to continue in occupation
until September 20 1973, paying a rent of £650 per annum and otherwise on the
terms of the 1964 underlease. In my judgment, the inference is irresistible,
first, that a new tenancy was thereby created and, secondly, that the
arrangement under which the defendant remained in possession operated as a
surrender of the 1969 underlease.
That leaves
only the question of mistake, and in my judgment there is nothing in it. The
only mistake proved was the unilateral mistake of Mr Tacey. The defendant was
under no misapprehension as to the effect of the county court judge’s order,
nor was he at any material time aware that the plaintiffs were mistaken as to
its effect. I was referred to the equitable rule which was stated by Denning LJ
(as he then was) in Solle v Butcher [1950] 1 KB 671, 693 in these
terms:
‘A contract
is also liable in equity to be set aside if the parties were under a common
misapprehension either as to facts or as to their relative and respective
rights, provided that the misapprehension was fundamental and that the party
seeking to set it aside was not himself at fault.’
In the present
case there was no common misapprehension, and the fault was all on the side of
the plaintiffs, in the sense that there was no reasonable excuse for the
mistake, the only explanation for it being that Mr Tacey got into a muddle.
Since the defendant’s present tenancy has never been terminated in accordance
with the provisions of the Landlord and Tenant Act, it still continues. In the
circumstances I dismiss the action, and on the counterclaim I will make the
alternative declaration sought, namely, a declaration that the defendant holds
the fourth floor under a tenancy for a term of years commencing on December 25
1972 and ending on September 28 1973, the terms of which are now the terms of
the 1964 sublease (so far as the same are applicable to and not inconsistent
with the said term of years), which tenancy has not terminated.
The action
was dismissed with costs of both claim and counterclaim.
