Landlord and Tenant Act 1954, Part II — New tenancy of Indian restaurant — Tenancy itself agreed in principle but issues remained as to rent, length of tenancy and terms — Assistant recorder fixed rent at £20,500 a year for a 10-year term, with a rent review five years before termination, together with an increase of £1,000 a year if a new shop front should be provided
appeal arose because the landlord applied to the Registrar of Civil Appeals for
leave to appeal out of time and to adduce new evidence and the registrar
adjourned the applications to the full court — The assistant recorder had heard
evidence from two experts and a number of other witnesses and had viewed
premises alleged to be comparable — He had excluded from consideration two
comparables in the same street as the subject premises, no 23 used as a
restaurant and no 25 a ‘Sock Shop’, both of which had
prime positions
evidence which it was sought to adduce consisted of evidence of an agreed rent
relating to one of the alleged comparables which the assistant recorder had
excluded and evidence of the agreed rent of certain premises which had not been
referred to at the trial — The court refused leave to call this further
evidence, holding that it fell precisely within the kind of fresh evidence
which Lord Wilberforce condemned in Mulholland v Mitchell when he said
‘fresh evidence ought not to be admitted when it bears upon matters falling
within the field or area of uncertainty, in which the trial judge’s estimate
has previously been made’
merits of the appeal were concerned the court rejected all the grounds put
forward — They did not agree that the assistant recorder had misdirected
himself in excluding from consideration as comparables the current rents of nos
23 and 25; he had ample evidence for his ruling — They rejected a complaint
that he took into account the adverse effects of certain building works but
failed to take into account the probable future benefits of the improvements
resulting therefrom; the latter were speculative and would be better evaluated
at the 1993 rent review — Another complaint amounted to no more than a
suggestion that the assistant recorder ought to have accepted the evidence of
one witness rather than another
The following
cases are referred to in this report.
Ladd v Marshall [1954] 1 WLR 1489; [1954] 3 All ER 745, CA
Mulholland v Mitchell [1971] AC 666; [1971] 2 WLR 93; [1971] 1 All ER
307, HL
This was an
application on behalf of the landlords, Law Land plc, for leave to appeal out
of time from the decision of Mr Assistant Recorder Stephen Sedley QC in regard
to matters affecting a new tenancy of premises known as 31 Villiers Street,
London WC1. The landlords also applied for leave to adduce new evidence. The
tenant was Mr Abdul Khalique, who carried on an Indian restaurant on the
premises.
Miss J E
Belson (instructed by Howard Kennedy) appeared on behalf of the appellant
landlords; Stephen Lloyd (instructed by Nelsons) represented the respondent
tenant.
Giving the
first judgment at the invitation of Sir Nicolas Browne-Wilkinson V-C, PARKER LJ
said: The appellant is the landlord and the respondent the tenant of premises
known as 31 Villiers Street, London WC1, next to Charing Cross station, which
have been and are being used as an Indian restaurant. I shall refer to them in
this judgment as ‘the landlord’ and ‘the tenant’.
On December 4
1987 in the Westminster County Court before Mr Stephen Sedley QC, sitting as
assistant recorder, there began the trial of certain issues with regard to an
application for a new tenancy under the Landlord and Tenant Act 1954, the
tenancy itself having been by consent agreed in principle on September 14 1987.
The issues before the court, which took a considerable time to investigate,
concerned the rent, period and terms of the new tenancy which it was agreed
should be granted. The learned assistant recorder gave judgment on February 9
1988. The rent which he fixed was £20,500 a year for a 10-year period with a
rent review five years before the termination of the tenancy, the date of
termination of which was agreed, with an increase of £1,000 per year as from
the next quarter day after the provision of a new shop front by the landlord
should he choose to provide such a shop front.
On April 28
1988 the landlord applied to the Registrar of Civil Appeals for leave to appeal
out of time and indicated that it was intended to apply for leave to call further
evidence. That application the learned registrar adjourned to the full court
because it appeared that a question might arise as to the jurisdiction of this
court to hear or grant any application to admit further evidence on an appeal
from the county court. The application for leave to adduce further evidence was
rejected before the court proceeded to hear the merits of the appeal for
reasons to be given later. Those reasons I will give at a later stage, since it
is necessary before doing so to say a little about the nature of the
proceedings.
The learned
assistant recorder had to consider a number of matters concerning the rent to
be granted. The contentions at the trial on the part of the landlord were that
the rent should be £30,000 a year if there were no development break clause,
and £25,500 a year if there were such a break clause. For the tenant the
equivalent figures were £17,500 and £15,800. The learned judge had to determine
whether there should be a break clause. He decided that there should not and
accordingly the rival figures which had to be considered on that basis were
£30,000 and £17,500. The figure which he fixed was accordingly some midway
between the two.
There is no
appeal from the decision of the assistant recorder that there should be no
break clause.
The assistant
recorder heard evidence from two experts and a number of other witnesses. He
viewed premises which were alleged by the landlord to be comparable premises
and, as he expressed it, ‘endeavoured to get the feeling of the market’ in the
street concerned.
The
comparables which were advanced were nos 19, 23, 25 and, initially, 45 Villiers
Street. No 19 was used as a hairdresser’s, no 23 as a restaurant and no 25 as a
‘Sock Shop’. No 45, although originally relied on, faded from the picture, it
being a kiosk for which an unusually high rent would be paid.
The rents of
the alleged comparables had to be the subject of certain adjustments in order
to take account of differences between them and the premises in question — no
31. The following matters had to be considered: first, what increase over and
above the rents chargeable for the comparables should be made for increase in
market values from the time that the rents were fixed to the time at which the
learned recorder had to consider the matter?
Second, what should be the proper adjustment to be made for the absence
of a break clause, nos 23 and 25 both having a break clause? Third, what adjustment should be made since
the tenancies of nos 23 and 25 had a provision for contracting out of the 1954
Act?
Next, a
question arose as to whether there should be a premium for permission to use
the premises as a restaurant, although strictly speaking there was a limitation
to use as a restaurant rather than bargaining for a particular need to use it
as a restaurant.
Finally,
questions arose as to what adjustments should be made owing to the fact that
building work was going to disrupt the position for a period, suggested to be
some two and a half years, due to a massive redevelopment and new development
of nearby premises; and what adjustment should be made for the poor nature of
no 31?
The rival
figures given for increase in market value were: on the part of the landlord,
20% and on the part of the tenant 10%. The adjustment made by the learned judge
was midway between the two, namely 15%.
So far as the
break clause was concerned, he found it unnecessary to make any adjustment
because he excluded from consideration nos 23 and 25 and relied as the only
realistic comparable on no 19, which did not contain a break clause. He
considered that no adjustment should be made in respect of the restaurant user
and he made an adjustment downwards of 5% in respect of the disruption and
damage to restaurant trade which would be caused for a period, at any rate,
while the works were in progress. No specific allowance was made in respect of
the poor nature of the premises, but it is submitted by Miss Belson, on behalf
of the landlord, that it can be seen that an adjustment of 4% was made.
The new evidence
which it was sought to adduce relates to two new lettings which were made
fairly shortly after the learned judge’s decision on February 9. The summons
for leave to adduce further evidence is in the following terms:
The further
evidence to be adduced is:
The Affidavit
of John Charles Dawson in which he deposes
(1) as to the rent agreed in the letting of the
ground floor and basement of 23 Villiers Street, London WC2 by a lease dated
June 8 1988.
(2) as to the rent agreed on May 31 1988 in the
letting of the ground floor and basement of 35/37 Villiers Street London WC2,
the basis upon which such rents were negotiated and agreed, and presents an
analysis of the open market rent of the ground floor and basement of 31
Villiers Street, London WC2 on the basis of such a comparable.
Nos 35 to 37
Villiers Street, as to which it is sought to admit further evidence, was not
referred to at the trial. Mr J C Dawson [BSc FRICS] was the landlord’s expert
at the trial. He is an associate in the firm of Hillier Parker May &
Rowden, who managed the entire neighbouring property, and cannot therefore be
regarded in any way as being an independent expert. To his affidavit he annexes
a report. That report contains, for the most part, nothing but contentious
argument, and an attempt to show why the learned judge was wrong not to accept
Mr
part, of an application to admit further evidence, for it is not further
evidence at all. The only concrete fact which appears to be of any relevance at
all is the fact that no 23 Villiers Street was let at a rental some 70% higher
than the rental prevailing at the time of trial rather than the 20% figure for
which Mr Dawson was contending. That fact by itself is, in my view, of no real
importance. Mr Dawson, despite the increase of 70%, does not seek to advance
his 20% figure at all, and thereby, as it seems to me, acknowledges, as the
learned judge found, that no 23 is not really truly comparable at all.
It is unnecessary
in my view to consider the question of the jurisdiction of this court because
the application, even assuming there is jurisdiction, has been and had to be
rejected. It is, assuming jurisdiction in this court, a matter which falls for
consideration, in so far as Mr Dawson gives relevant evidence of new facts at
all, under Ord 59, r 10(2) of the Rules of the Supreme Court. That provides:
The Court of
Appeal shall have power to receive further evidence on questions of fact,
either by oral examination in court, by affidavit, or by deposition taken
before an examiner, but, in the case of an appeal from a judgment after trial
or hearing of any cause or matter on the merits, no such further evidence
(other than evidence as to matters which have occurred after the date of the
trial or hearing) shall be admitted except on special grounds.
The effect of
the exception as to matters which have occurred after the date of the trial or
the hearing is that the matter has to be considered, not in accordance with the
well-known principles laid down in Ladd v Marshall [1954] 1 WLR
1489, but in accordance basically with the decision of the House of Lords in Mulholland
v Mitchell [1971] AC 666. In that case Lord Wilberforce at p 679 says
(having gone into some detail before):
This
abbreviated and over-simplified description shows at least what limitations
must inherently exist to the Court of Appeal’s discretion to admit further
evidence. It makes it clear that an impossible situation would arise if
evidence were to be admitted of every change which may have taken place since
the trial. In the nature of things medical condition will vary from year to
year, or month to month; earning prospects may change, prices may rise, or even
fall. If the Court of Appeal were to admit evidence of changes of this kind
(and it must not be overlooked that a facility given to one side cannot be
denied to the other), not only would a mass of appeals involve the hearing of
evidence but the Court of Appeal would merely be faced with the same uncertainties
as faced the judge, and of which the judge has, ex hypothesi, already
taken account. In other words, an appellant’s contention that factors such as
these have changed since the trial must, in normal cases, be met with the
answer that the judge, in his estimate, has already taken account of them.
It is to be
noted that Lord Wilberforce refers to the change in prices which, converted
into terms of the present application, is change in market values. It is also
to be noted that he refers to the point that what must be accorded to one side
must also be accorded to the other. It would therefore appear that, if this
application were right, it would follow that every landlord could come back and
ask to admit evidence of an alleged new comparable which intended to show that
a higher rent should have been granted, and that every tenant should be able to
come before the court on the occcasion of every alleged new comparable which
would seem to suggest that the rent ought to have been lower.
Later, on the
same page, Lord Wilberforce says*:
It is possible
to extract from these cases some indications as to the way in which the Court
of Appeal’s discretion may be exercised. In Curwen v James appeal
could be made to the argument that the court should not speculate where it
knows, but my noble and learned friend, Lord Pearson, pointed out that even so
neat an axiom had its dangers. The fact that the marriage occurred so close to
the trial was no doubt a factor. In Jenkins evidence was admitted as to
the plaintiff’s inaptitude for work thought suitable for him at the trial, but
that decision was regarded as dubious in Murphy. In Murphy an
assumption, held at the trial, that the plaintiff would not be dismissed was
falsified by the defendant, and evidence as to that was admitted. Their
lordships thought that not to do so would be inequitable.
These cases
are useful as instances, but they cannot be generalised into a formula. I do
not think that, in the end, much more can usefully be said than, in the words
of my noble and learned friend, Lord Pearson, that the matter is one of
discretion and degree (Murphy [1969] 1 WLR 1023 at 1036). Negatively,
fresh evidence ought not to be admitted when it bears upon matters falling
within the field or area of uncertainty, in which the trial judge’s estimate
has previously been made. Positively, it may be admitted if some basic
assumptions, common to both sides, have clearly been falsified by subsequent
events, particularly if this has happened by the act of the defendant.
Positively, too, it may be expected that the courts will allow fresh evidence
when to refuse it would affront common sense, or a sense of justice. All these
are only non-exhaustive indications; the application of them, and their like,
must be left to the Court of Appeal. The exceptional character of cases in
which fresh evidence is allowed is fully recognised by that court.
*Editor’s
note: Having earlier referred to three reported case in which fresh evidence
had been admitted in the Court of Appeal, namely Curwen v James
[1963] 1 WLR 748; Jenkins v Richard Thomas & Baldwins Ltd
[1966] 1 WLR 476; and Murphy v Stone-Wallwork (Charlton) Ltd
[1969] 1 WLR 1023.
I stress the
sentence ‘negatively, fresh evidence ought not to be admitted when it bears
upon matters falling within the field or area of uncertainty, in which the
trial judge’s estimate has previously been made’. It appears to me that the
evidence sought to be admitted in the present case is precisely the sort of
evidence which Lord Wilberforce considered should not be admitted. The learned
judge had had to consider the very question of the adjustment which ought to be
made in order to reflect market increases. He had rejected the evidence, in
part, of both sides and had made his own estimate. He was acting, necessarily,
in the field of uncertainty, among other things because an increase in the
value of one premises in a particular street may, for any number of reasons, be
no indication of the change which should be made for another set of premises in
the same street. This application for leave to adduce further evidence, on the
assumption that this court has jurisdiction, in my judgment had no chance of
success, although it was presented with great ability by Mrs Belson on behalf
of the applicant.
I turn now to
the merits, and in doing so I will begin by reading some passages from the
learned judge’s judgment. He says this at the beginning of his judgment:
I have had
the advantage of carefully reading the expert evidence both from Mr Bassett,
for the applicant, and from Mr Dawson, for the respondent. With the help of the
respondent I have also been able to view all the comparables relied on in the
evidence. It would be an endless task to review the entirety of his evidence
here and to pick my way through it. Having considered and reconsidered all of
it I conclude that there is little firm evidence of truly comparable recent
open market lettings in Villiers Street apart from the lease of the ground
floor and basement of no 19.
He then sets
out details concerning nos 23 and 25 and continues:
The chief
reason why these two comparables have in my view to be treated with caution is
that they are located in a prime spot in Villiers Street directly opposite the
staircase which links the Charing Cross comparables with the street. There are
also the considerations that the lessors were in a special bargaining position
in relation to the change of user of no 23 and that a minor inducement was paid
to secure the tenants of no 25.
Grounds 1, 2
and 3 of the notice of appeal in effect object that the learned assistant
recorder misdirected himself in excluding from consideration as comparables the
current rent levels of premises at 23 and 25 Villiers Street. The chief reason
given is said to be wrong on the basis that there was evidence that when the
development was complete there would be an entrance to the entire office
redevelopment lower down the street which would be of benefit to no 31. As far
as I am able to conclude, the new access would be about as far from no 31 as
the present staircase to the station is presently from no 31. There is no
evidence that that access to the station was intended to be changed. The
learned judge had ample evidence upon which he could find that the positions of
no 23 and no 25 were prime positions. From the nature of what they were selling
the best position to be in was at the foot of a staircase up and down which the
travelling public using Charing Cross station would come. I would reject that
ground of appeal.
The next
ground of appeal which is advanced is that:
the assistant
recorder failed to increase the said new rent to take account of the greater
security of tenure afforded by the terms of the new lease as ordered at the
trial in comparison with the terms of the said excluded comparables.
That ground of
appeal must fail with the failure of the first three grounds, since if nos 23
and 25 fell to be excluded it would follow that ground of appeal no 4 would not
arise.
Ground no 5
was that
the
landlord’s valuer put the uplift at 20%, the tenant’s at 10%. The judge took a
figure of 15%. In doing so he failed to take proper account of the evidence
that the landlord’s valuer had been directly involved in lettings in this
particular area since March 1986 . . . while the tenant’s valuer accepted that
he had not been involved in negotiating such leases over the last year.
That appears to
me to be a submission that the learned judge ought to have accepted the
evidence of one witness rather than another. The learned judge had the
advantage, which this court cannot have, of seeing and evaluating the two
witnesses in the witness box, and I can see no basis upon which that ground can
succeed.
Ground no 6
(and I quote from the skeleton argument) is as follows:
(i) The Learned Assistant Recorder applied a
reduction of 5% to take account of the adverse effects of building works but
failed to apply any increase to take account of the effects of the improvements
to the area resulting from the building works which would take effect 2 1/2
years before the five yearly rent review.
(ii) In so doing he failed to take account of the
evidence of the Landlord’s valuer . . . that the impact of the building works
would be balanced out by the subsequent improvements and that there had been no
effect in fact on demand.
(iii) The Tenant’s valuer accepted that the effect
of the development will probably help the business of the restaurant to some
extent . . . No account was taken of this so as to reduce the discount
suggested by the Tenant’s valuer of 7.5%.
In dealing
with this particular point the assistant recorder said:
I have borne
in mind a considerable body of other evidence concerning the particular
characteristics of no 31 and the various comparables relied on and have done my
best to obtain the feel of the street and its letting values. I have also borne
in mind the fact that for some two years the street is going to be blighted by
major building works. It is already invaded by heavy lorries and Mr Dawson
frankly pointed out that the piling and foundations had not yet been started.
He accepted that a restaurant in the street was bound to suffer in its lunch
time trade and to be adversely affected by noise. He went so far as to agree
that any ultimate improvement in the street to the benefit of 31 is at present
speculative, though in my view it is likely. However, those conducting the 1993
rent review which by agreement is to be included in the lease will be much
better placed than I can be to gauge whether and how far the completion of the
new station buildings and the paving of the street are going to enhance the
value of the demised premises.
The learned
judge in that paragraph was acting exactly, in my view, in accordance with the
evidence which had been given. I can see no ground for criticising his
conclusion in that respect.
Finally, it is
said that the learned judge was in general terms wrong. That calls for no
addition to this judgment. For the reasons which I have given, I would dismiss
the appeal as the application has already been dismissed.
SIR NICOLAS
BROWNE-WILKINSON V-C and SIR JOHN MEGAW agreed and did not add anything.
The appeal
was dismissed with costs, including the costs of an abortive hearing.
