Landlord and Tenant Act 1954, Part II — Appeal by tenant from decision of county court judge refusing a grant of a new tenancy — Appellant occupied a house from which she carried on a nature cure business and also held tenancies of two flats in an adjoining house of which the respondent was the landlord — It was the use made of these flats in connection with the appellant’s business which gave rise to the present proceedings — The respondent served a 1954 Act notice of termination in respect of both parts and they were treated by the judge, and by the Court of Appeal, as constituting the holding in respect of which a new tenancy was sought — The respondent’s grounds of opposition for the purpose of the appeal were confined to those under paras (c) and (g) of section 30(1) — The county court judge held that the respondent succeeded under both heads, but the Court of Appeal decided that the judge had fallen into error in each case — As regards para (g), the judge was wrong, in the light of the decisions in LeeVerhulst (Investments) Ltd v Harwood Trust and Bagettes Ltd v G P Estates Ltd, in holding that para (g) could apply — There was no evidence that the respondent was actually going to occupy the premises for the purpose of a business to be carried on by her therein — As regards para (c) there was no evidence to support the judge’s finding that three rooms in the basement flat had been converted into a laundry in breach of the tenancy obligations — There was evidence to support a finding of a breach in the use of the top flat as a massage parlour, but, as the judge had been partly in error in regard to para (c), the exercise of his discretion to refuse a new tenancy might have been vitiated — Unfortunately for the parties, the case would have to go back for retrial by another judge, as it would not be right for the Court of Appeal simply to allow the appeal and order a new tenancy — Order for rehearing accordingly
This was an
appeal by the tenant, Miss W E Jones, from a decision at Malvern County Court
in favour of the landlord, Mrs M I Jenkins, whereby the appellant was refused a
new tenancy of a basement and top-floor flat at 7 College Grove, Malvern. The
appellant tenant was herself the occupier of 5 College Grove and conducted a
business known as ‘The Malvern Nature Cure Centre’.
J R West
(instructed by Gaynor Smith Owen & Co, of Malvern) appeared on behalf of
the appellant; J K Quirke (instructed by Parkinson Wright, of Worcester)
represented the respondent.
Giving
judgment, O’CONNOR LJ said: This is a tenant’s appeal against the refusal of
the learned recorder who tried the case in October 1984 to grant her a new
lease of certain premises in Malvern under Part II of the Landlord and Tenant
Act 1954. The facts giving rise to the dispute were domestic and simple. There
are two houses, 5 and 7 College Grove. The tenant, Miss Jones, occupies no 5
and runs a business there as ‘The Malvern Nature Cure Centre’. The landlord of
no 7 (Mrs Jenkins at the time of the trial — now Mrs Buckland, by which name I
will refer to her for the rest of this judgment) owns no 7, and that is divided
into four flats at the moment. She lives on the ground floor and has the
garden, which is substantial, as we can see from the photographs. The basement
flat, naturally called the garden floor now — part of it at least gives on to
the garden — is one. The first floor, with which we are not concerned, is let
to a teacher, and the top floor formed part of what has emerged as the business
tenancy.
What appears
to have happened was that Miss Jones was being helped in her business by a man
named Foreman, who was also a friend of Mrs Buckland at that time, and Mrs
Buckland agreed, first of all, to put some money into the business and, second,
to let the basement flat for the purposes of putting up clients of the
business, as she thought, and to let the top flat to be occupied by Mr Foreman
while he worked there. At the time when all these things were being agreed it
seems that there was an intention that Mr Foreman and Mrs Buckland should
depart for Australia. I need say no more about it because it never happened.
The relationship became unhappy for a variety of reasons, as the evidence
showed before the judge. To start with, while the kitchen in no 5 was being
redone, it seems that Mrs Buckland agreed that the laundry could be brought
over to no 7, the basement, and done there, and a washing machine was put in.
But apparently that arrangement went on for keeps, and we have photographs of
baskets of laundry being carried through the garden and brought over to no 7.
There was a dispute with Foreman about an old ambulance which he had brought
there, about knocking down fences and coming across from no 5 and so forth. In
addition, Mrs Buckland did not take kindly to the fact that, so far as the
basement being used for guests was concerned, the cook was put in there, who
sometimes had her child, but, much more importantly, she did not take kindly to
the fact that the top-floor flat, instead of being used as accommodation for Mr
Foreman while he worked next door, was turned into a massage parlour to which
clients were brought across and introduced.
Both these
flats were let at a weekly tenancy. The rent was calculated as at £30 for the
basement and £20 for the top. It may well be that there was never any intention
to have a business letting of the top at all, but that is beside the mark now,
because a 1954 Act notice was served in respect of both parts and, for the
purposes of the Landlord and Tenant Act, they were treated by the judge, and
must be treated by us, as the holding in respect of which a new tenancy was
sought. Notice to quit was given, and the relevant notices were served.
Application for a new tenancy was made on October 21 1983. The tenancies were
determined as at April 30 1984. In her answer Mrs Buckland opposed the grant of
a new tenancy on a number of grounds which are available under section 30 of
the Act. In the end we are concerned only with two, namely, section 30(1) paras
(c) and (g).
As to (c) she
said:
The tenant
ought not to be granted a new tenancy in view of other substantial breaches by
her of her obligations under the current tenancy or for some other reason
connected with the tenant’s use or management of the holding,
and remember
that the holding was the two flats: one in the basement, which has got six
rooms in it; and one upstairs, which has got four or five rooms in it.
Under (g) she
said in her answer:
That on the
termination of the current tenancy I intend to occupy the building for the
purposes, or partly for the purposes, of a business to be carried on by me
therein or as my residence.
In that
paragraph of her answer for ‘building’ one has to read, in
Subject as
hereinafter provided, that on the termination of the current tenancy the
landlord intends to occupy the holding for the purposes, or partly for the
purposes, of a business to be carried on by him therein, or as his residence.
Mrs Buckland,
perfectly properly and legitimately, said that the business that she intended
to carry on was to let the two flats for residential purposes and not for
business purposes. She also said that she proposed to divide the basement flat
at least into two; that there was plenty of room to make two flats, and therefore
she would be able to make more money. That was the broad outline of the case
that went before the learned recorder.
There were,
therefore, two issues. Was she entitled to resist the application for the grant
of a new tenancy, which prima facie the tenant was entitled to, on
either of those two grounds? So that the
recorder had to apply his mind to whether there had been substantial breaches
of the existing agreement or of the tenant’s obligations under the current tenancy,
or for any other reason connected with the tenant’s use or management of the
holding. It will be seen that the wording of para (c) inevitably gives a
discretion to the trial judge as to whether, even if there is a substantial
breach, nevertheless he is entitled to order the grant of a new tenancy. It is
obvious that it is desirable that there should be a discretion where para (c)
is concerned; this is not so when one comes to para (g). There, if the landlord
satisfies the court that he intends to occupy the holding for the purposes, or partly
for the purposes, of a business to be carried on by him therein or as his
residence, he is entitled to have the application for a new lease refused,
subject of course to the period that he has been landlord in the proviso to the
section.
Unfortunately,
I have come to the conclusion that, although the learned judge appreciated the
difference between the two sections (both counsel who appeared before him have
appeared in this court and we have been told that he was referred to the
relevant law), he has fallen into error in two substantial ways. First of all,
he came to the conclusion that para (g) had been satisfied by the landlord. He
did it very shortly. He said:
I am
satisfied therefore that the premises are within the Act. Working backwards the
landlord relies on the [section] 30(1)(g). Her residence doesn’t apply; she
says that she intends to let the rooms to tenants; it cannot be doubted that
letting rooms to a tenant is a business. Mr West
who appeared
for the tenant
says that if
she lets she doesn’t occupy but I am satisfied particularly in view of the case
of [Lee-Verhulst (Investments) Ltd v Harwood Trust] [1973] QB 204
where a landlord let fully furnished rooms. Mrs Jenkins
that is, Mrs
Buckland
says that she
would alter these rooms and let them and I am satisfied that that would be her
occupation. Mr Quirke says that if I found that it would be conclusive, but I
will deal with the other matters.
He then rejected
the plea under section 30(1)(f). There has been no respondent’s notice on that
topic, because it had been supported by the contention that Mrs Buckland
proposed to convert the basement at all events into two flats.
As far as
section 30(1)(c) was concerned, the judge found:
Mrs Jenkins
said she let the ground floor as a residential annexe and thought it would be
occupied by middle class middle-aged people. She permitted the use of the
kitchen as a laundry whilst work was being done at number 5, now she says the
basement is being used for a laundry. The photograph shows staff with bundles
of laundry. She also says that two members of staff occupy the rooms there and
that a quiet room is occupied by someone who is rowdy. I am satisfied that to
use a residential annexe as a place where there are now three rooms used as a
laundry is a substantial breach of the terms agreed. I am quite satisfied that
the agreement on the top floor was for Mr Foreman to occupy and not for long
for a residence for himself rent being paid by the Nature Cure Centre. Now he
sleeps there and other people constantly go there for treatment. An entirely
different use from that contemplated and therefore the landlord succeeds in her
contention under ground (c).
Both those
matters are challenged on behalf of the tenant by Mr West, who submits that, as
far as para (g) is concerned, in law the learned judge, on the evidence before
him, simply could not find that the requirements of para (g) had been
satisfied. Our attention has been drawn to two decisions of this court. Lee-Verhulst,
which was cited to the learned judge, is a case where the business of the
tenant company was letting furnished rooms with services. The effective owners
of the company lived in one of the flatlets or flats in the premises. They had
a kitchen, a boilerhouse and storage places, and there were 20 rooms which were
service rooms: furnished; serviced by the landlords, who had keys so that the
chambermaids could go in and make the beds and keep the place clean and so forth;
food was available to be brought up — there were no cooking facilities in the
rooms, except for a gas ring for boiling a kettle. The question was as to
whether, when the lease of the whole building fell in, the tenants were
entitled to a new lease on the basis of section 23. The argument in that case
was that they were not within the wording of section 23(1):
The property
comprised in the tenancy is or includes premises which are occupied by the
tenant and are so occupied for purposes of a business carried on by him for
those and other purposes.
Sachs LJ said
at p 213:
Is there
anything in the Act of 1954 which precludes the court from giving to the word
‘occupied’ in section 23 its natural and ordinary meaning in the context of the
subject matter of that Act — a meaning which would in the set of circumstances
above described clearly lead to it being held that the tenant did occupy the
premises for the purpose of the business?
Being unable to find anything in the Act which so precludes the court, I
have come to the conclusion that this tenant did so occupy the whole of the
premises.
For reaching
that conclusion it is neither necessary nor desirable to provide a definition
of that word which would deal with all the greatly varying sets of
circumstances that can exist. As a number of elements have been taken into
account, each of a physical nature and each involving a degree of presence on
the part of the tenant personally or by goods under his ownership, it is
however as well to observe that it could be proper in some other case to reach
the same conclusion even if one or more of those elements were subtracted. For
instance if the furniture was that of the occupants or if some of the services
were not rendered or if the occupancies were not so much controlled, there
could still be an occupation by the tenant of the premises as a whole. Much
depends on questions of degree.
Earlier in his
judgment Sachs LJ had considered the case of Wheat v E Lacon & Co
Ltd [1966] AC 552. That was an occupier case. Then, on p 213, in a passage
before that which I have cited, he said:
That a person
who by himself or his agents resides in an apartment house, ‘lets’ the
apartments on terms of a month’s notice, and in return for the ‘rent’ provides
the chamber-maid and other services described above, is carrying on a business
is plain, and in that behalf it makes no difference whether his contact with
the occupant results in law in a tenancy or in a licence. If it helps to point
to statutory recognition of that fact, then it can be found in section 17(3)(b)
of the Landlord and Tenant Act 1927 where reference is made to ‘the business of
subletting the premises as residential flats’.
In Lee-Verhulst
the court had been referred to the decision of this court in Bagettes Ltd
v G P Estates Ltd [1956] Ch 290. In that case once again the tenants of
a block of flats were asking for a new lease under section 23. At the time of
the hearing they contended that they brought themselves within section 23 for
these reasons: that one flat was occupied by, I think, a caretaker, that there
were the common parts of the building — staircases, passages and boilerhouse,
and that they in fact had three vacant flats in hand. They submitted that
therefore they were in occupation of part of the premises for the purposes of
their business of letting flats. Jenkins LJ (as he then was), who gave the
principal judgment, found that the property comprised in the tenancy included
premises which were occupied by the tenant and occupied for the purposes of a
business carried on by him for those and other purposes. He held that
nevertheless a new tenancy could not be granted because of the definition of
the holding in section 23(3) which provides:
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 a person employed by the tenant and so
employed for the purpose of a business by reason of which the tenancy is one to
which this Part of this Act applies.
The court held
that, as it was only possible to grant a new lease of ‘the holding’, the
holding on the facts of that case comprised only the caretaker’s flat and
common staircases and passages and boilerhouse, all of which of course were not
being used for any business once you disconnected them from the flats in the
building.
Both of those
cases are binding on us. I have no difficulty in seeing the difference between Lee-Verhulst
and Bagettes. As far as the present case is concerned, I am quite
satisfied that the business, for so it was, and is, of Mrs Buckland of letting
flats (it matters not that it is on a small scale), the holdings, which are the
flats — and the holding here was the two flats — has got to be given the same
meaning when we are considering section 30(1)(g) as it has elsewhere. When I
ask myself was there any evidence that she was proposing to occupy the holding
for the purposes of a business to be carried on by her therein, I am satisfied
that she was not. It was submitted by Mr Quirke on her
to have accepted that she intended to convert a substantial part of the holding,
namely, the bottom flat, and that she would be occupying it during that period
of conversion and therefore that she fell within para (g). He placed reliance
on the case of Cam Gears Ltd v Cunningham [1981] 1 WLR 1011,
where Oliver LJ gave the first judgment. That was a case where the holding
comprised a vacant lot which had been concreted and was used as a car park. The
landlords, who apparently had neighbouring premises, wanted to build a new
building on it for the purposes of their business, which I think was a garage
or filling station of some kind — a workshop and a waiting room. Although the
case would have fallen fairly and squarely under para (f), the notice had been
given under para (g) only, and the court held that para (g) applied; that the
holding was going to be occupied for the purposes of a business to be carried
on therein, although a new building was going to be put up on the holding; the
whole of it was to be used for the new premises. Mr Quirke has submitted,
therefore, that the court would be entitled to apply para (g) to the facts of
the present case. For my part, I cannot agree with that. It seems to me that Cam
Gears v Cunningham is an exceptional case, and we are not concerned
with the whole of the holding being taken over and used in the sense which that
one was going to be used. The present case differs from it, because the use
which Mrs Buckland proposes to put the converted flat or flats is to relet
them; and that immediately takes them outside the holding. She is not going to
occupy them once they are relet; that is clear. I do not think that temporary
occupation can possibly be sufficient to bring the case within (g). If it were,
holding any commercial premises in hand for any purpose, such as redecoration
or otherwise, would be sufficient occupation to provide an answer to a tenant’s
request for a new lease or prima facie rights to a new lease.
I am satisfied
that that is not the proper construction of para (g) and I have come to the
conclusion that the learned judge fell into error in holding that the landlord
had satisfied para (g).
Now I turn to
the finding on para (c). I can deal with that very shortly. I am quite clear
that he made a mistake. There was no evidence to support the finding that three
rooms had been converted into a laundry in the basement. There simply was no
evidence to that effect. I of course take into account that he was not asked to
agree the note of his judgment until many months after it had been given. I of
course take into account that the judgment was given at the end of a long
hearing and that it may be that he did not mean what he said, but we have got
to work on the basis that he did make that finding, and I am satisfied that it
is quite plainly wrong.
As far as the
top flat is concerned, the breach which he found was that he held that it was a
term of the letting that it should be occupied by Mr Foreman and not used as a
massage parlour. Mr West has submitted that the learned judge has wholly
misconceived what he was doing. He made the finding (and I repeat it):
I am quite
satisfied that the agreement on the top floor was for Mr Foreman to occupy and
not for long for a residence for himself rent being paid by the Nature Cure
Centre. Now he sleeps there and other people constantly go there for treatment.
An entirely different use from that contemplated.
First of all,
he submits that there is no sufficient finding as to what the terms of the
agreement were; that it is not good enough to talk about compensation. I cannot
read that finding in that fashion. It seems to me that the learned judge was
finding that there was a substantial breach and that it was a term that the top
floor was to be used as a residence for Mr Foreman; that was a restriction on
the use of the top floor and that it was broken when it was used as a massage
parlour. Mr West submitted that by adding the ‘not for long’ it shows that the
learned judge was not dealing with the question properly because he was harking
back to the evidence that at the time of the letting Mrs Buckland and Mr
Foreman were planning to go off to Australia and that it is to be concluded
that the judge was reading into the agreement that that would put an end to the
tenancy so far as it concerned the top floor, whereas that cannot be right
because that would not be lawful under the Act.
I do not read
the passage in the judgment as making a finding of that kind. I think that,
when the passage is read as a whole, that was only an aside and that the
reality is that he was finding that it was a term that the top floor was to be
used only as a residence for Mr Foreman and that the term was broken when it
was used as a massage parlour by others.
So, as far as
para (c) is concerned, one half of the breach which the judge has found is not
to be supported on the evidence; the other half, in my judgment, is. The
difficulty about that is that the judge has got to exercise a discretion, and
it seems to me inevitable that in this situation, where he has gone hopelessly
wrong on one half, it is impossible to say that the exercise of his discretion
to refuse a new lease and support the landlord’s answer has not been vitiated.
This is because, although he makes no reference to the exercise of his
discretion, he was referred to the relevant authority, and the wording of para
(c) shows that it is discretionary, it is inevitable that the discretion has
not been properly exercised because in part it has been exercised on a false
basis. Mr West has submitted that in those circumstances the appeal should be
allowed and a new lease ordered. I do not think that would be just. It seems to
me that there has been a mistrial of these proceedings (I need say no more
about it) and that the learned judge has simply not tackled the case with
proper clarity. He has made a mistake on the basement, but there was plenty of
evidence to support the finding that the top flat was to be for the occupation
of Mr Foreman and nothing else; there was a breach and it requires the exercise
of discretion as to whether that satisfies para (c).
We invited the
parties to consider whether this court, in order to save expense, should try to
do the necessary exercise, but it was pointed out that that would require
bringing the facts up to date, as the case is a year old already, and we cannot
do that.
Unfortunate
though it is for the parties (and I am deeply conscious that it will be putting
them to further expense unless they can come to terms), I see no alternative
but to allow this appeal and to send the case back for retrial by another
judge.
LATEY J agreed
with the order proposed and the reasoning of O’Connor LJ and did not add
anything of his own.
The appeal
was allowed to the extent that the case should be remitted for rehearing before
another judge; the costs below and of the appeal to be determined by the judge
who rehears the case. Legal aid and taxation of appellant’s costs ordered.
