Lewisham London Borough Council v Masterson

Parties entering into negotiations for grant of lease – Defendant carrying out works and taking possession of premises – Negotiations for lease collapsing – Defendant vacating premises – Council claiming payment for use and occupation – Whether use and occupation to be valued on basis of negotiated rental price – Council’s claim allowed – Appeal dismissed The defendant builder wanted a yard for the purposes of working and storing equipment. He contacted the claimant council and informed them that he was interested in renting premises known as Site 1, The Coal Yard, Cold Blow Lane, London SE14. On 25 November 1985 the council’s valuer wrote a letter to the defendant, marked as being subject to contract and without prejudice, which set out the terms upon which the council would be prepared to grant a lease of the premises to the defendant. It stated that the valuer was prepared to recommend that a lease be granted for a term of 15 years, with an upwards-only review at the end of every third year, at a rent of £2,900 pa, exclusive of rates. It also stated that the defendant would be responsible for clearing the premises erecting a fence to an approved design. The defendant signed a copy of the letter on 3 December 1985 and sent it to the council. On 1 July 1987 the defendant took possession of the premises and the negotiations for a lease continued slowly without success. On 24 June 1991 the council wrote a further letter, marked as being subject to contract, which stated that the council were still prepared to grant a lease on the basis of the terms agreed in the letter dated 25 November 1985, subject to the amendments that the lease be for a term of 15 years from 1 July 1987 and that the initial rent be as originally agreed. The defendant signed a copy of the letter on 12 July 1991 and returned it to the council. The negotiations for a lease eventually collapsed without a lease being executed, notice to quit was served and the defendant vacated the site on 11 November 1992. The council issued proceedings claiming that the defendant was liable to pay for use and occupation from 1 July 1987 to 11 November 1992. The judge found that the best evidence of what the premises were worth was not expert evidence, but what the parties had agreed between themselves, particularly since the figure of £2,900 had been agreed in 1985 and again in June 1991. He therefore awarded the council £2,900 pa for the period claimed, but deducted £2,900 for the essential works that had been carried out by the defendant to make the premises usable. The defendant appealed and the council crossappealed against the deduction of £2,900. The defendant contended that due to the state of the premises, he had not been able to use them as a builders’ yard and had only them intermittently during the period to carry out works to the premises. On that basis it was submitted that the tenancy at will, which was what the judge should have valued, could not be considered to have had any rental value. Held: The appeal was dismissed; the cross-appeal was allowed. The judge had been justified in taking the agreed figure of £2,900 pa as the value of the premises. It had not been a sophisticated transaction and the defendant had got what he bargained for. That conclusion was strengthened by the fact that the defendant had signed both agreements. It could not be concluded that a rent-free period had been agreed or that the council had agreed to pay for essential works. Accordingly, the judge had not erred in making an award for use and occupation on the basis of £2,900 pa, but had erred in deducting £2,900 for the essential works. Christopher Heather (instructed by the solicitor to Lewisham London Borough Council) appeared for the claimants; James Roberts (instructed by Thornton & Co, of St Annes) appeared for the defendant. Thomas Elliott, barrister