Landlord and tenant — Landlord applying for new tenancy – Tenant assenting to grant – Tenant serving statutory notice terminating proceedings – Judge making no order for costs – Whether judge wrong in principle in refusing to order tenant to pay landlord’s costs – Appeal allowed
The respondents held business premises pursuant to a five-year lease granted by the appellants for a term from March 2000 to March 2005 at a rent of £125,000 pa. In August 2004, the respondents informed the appellants that they were considering renewing the lease for three years, and asked whether that would be acceptable, and at what rent.
In April 2005, the appellants brought proceedings for the grant of a new tenancy under section 24(1) of the Landlord and Tenant Act 1954, which enabled a landlord to apply for the grant of a new tenancy by virtue of articles 2 and 3(1) of the Regulatory Reform (Business Tenancies)(England and Wales) Order 2003.
In November 2005, the respondents indicated that they had relocated to new premises. In April 2006, they notified the court that they no longer required a new lease and the claim was dismissed, pursuant to section 29(5) of the 1954 Act. The recorder ordered that the proceedings were to continue in order to conclude the amount of the interim rent payable from the date that the appellants’ notice under section 25 took effect, terminating the respondents’ tenancy until they gave up possession of the premises, and for the purpose of disposing of the issue of costs.
In fact, the parties had already agreed a formula for determining the interim rent but the matter returned to court before the circuit judge to determine the issue of costs. The judge made no order as to costs, taking the view that the case before him amounted to a compromise of the appellants’ claim for a new lease. Accordingly, he concluded that the case was governed by the decision of the Court of Appeal in BCT Software Solutions Ltd v Brewer & Sons Ltd [2003] EWCA Civ 939 that, where parties had settled a claim on all issues save costs before a trial or where the trial was incomplete, the court should not make an order for costs, save in a reasonably obvious case; rather, the parties should be put to their election to proceed with the trial or accept no order as to costs. The appellants appealed.
Held: The appeal was allowed.
In the present case, the service on the court by the respondents of notice under section 29(5) was equivalent to a notice to discontinue proceedings in which they had been seeking an order from the court awarding them a new tenancy upon terms settled by the court. Accordingly, the judge should have placed the burden of proof upon the respondents to establish facts that would justify a departure from the normal order in those circumstances. Since they had been unable to do so to his satisfaction, he should have ordered them to pay the appellants’ costs.
The present case was not on all fours with BTC and the judge had not fully appreciated the purpose and effect of the new regime introduced by the 2003 Regulations, namely, that the appellants’ new right to commence proceedings for the grant of a lease was given to them in order to bring to a head the issue of the terms upon which any new lease of the premises was to be granted; and that, by entering an acknowledgement of service assenting to such grant, the respondents were, in effect, themselves launching proceedings for the grant of a new tenancy but upon more favourable terms than the appellants were prepared to offer. Moreover, the judge had failed to appreciate that those proceedings had been terminated as a result of the respondents’ unilateral change of mind by service of a notice pursuant to section 29(5) of the 1954 Act: BTC distinguished.
The judge had had no previous contact with the case but appeared to have lost sight of the normal rule in CPR 38.6(1) that, where proceedings had been brought that were not premature and otherwise not demurrable, and that terminated because the defendant conceded the relief sought, the defendant had to pay the costs unless it could show some special circumstance justifying a different order: Walker v Walker [2005] EWCA Civ 247 applied.
Katharine Holland (instructed by Pinsent Masons) appeared for the appellants; Mark Warwick (instructed by Olswang) appeared for the respondents.
Eileen O’Grady, barrister
