Landlord and Tenant Act 1954, Part II — Whether Secretary of State for Social Services was entitled to claim a new tenancy under Part II of property belonging to plaintiffs which was used for the accommodation of staff employed at National Health Service hospitals — Premises were let to secretary of state under a lease which expired on June 24 1985, were managed by a district health authority, and were physically occupied by the health service staff concerned — The plaintiff freehold owners of the property, which had been converted into eight self-contained flats, sought a declaration as to their rights in relation to the secretary of state’s claim — The staff who occupied the flats did not have exclusive possession and the district health authority maintained a large measure of control over the property — The staff accommodated changed frequently and usually one or more of the flats stood vacant — Provisions of the National Health Service Act 1977 as amended by the Health Services Act 1980 and of the Landlord and Tenant Act 1954 considered — Section 56(3) of the 1954 Act provided that Part II of the Act applied where a tenancy was held by a government department if the premises ‘were occupied for any purposes of a government department’, even if the condition of section 23(1) as to occupation by the tenant was not fulfilled — There was no requirement that the department holding the tenancy should be the same as that for whose purposes the premises were occupied — In the present case the district health authority could be regarded as in occupation of the premises — Features which justified this conclusion were that vacant flats were under the control of the authority, that the authority retained keys to the flats and visited them regularly, that exclusive possession was not given to the staff accommodated in them, and that the authority provided furniture, crockery and blankets and carried out repairs and decorations — Furthermore, the authority was in occupation ‘for any purposes of a government department’ within section 56(3), as the occupation was in furtherance of the functions of the secretary of state under the National Health Service Act, one of which, delegated to the authority, was to provide residential accommodation for employees of the service — Among decisions considered were Lee-Verhulst (Investments) Ltd v Harwood Trust, William Boyer & Son Ltd v Adams, Groveside Properties Ltd v Westminster Medical School and Pfizer Corporation v Minister of Health — Plaintiffs’ action dismissed
In this action
Bennie Linden and Helen Goldie Linden, freehold owners of 40 Nottingham Place,
London W1, plaintiffs, sought a declaration against the tenant, the Secretary
of State for Social Services, defendant, in regard to his claim to be entitled
to a new tenancy of the premises under Part II of the Landlord and Tenant Act
1954.
Michael Barnes
QC and R J Furber (instructed by Berwin Leighton) appeared on behalf of the
plaintiffs; Kim Lewison (instructed by Beachcrofts) represented the tenant.
Giving judgment,
SCOTT J said: The plaintiffs in this case are the owners of premises known as
40 Nottingham Place, London W1. The premises were, by a lease dated October 25
1971, demised by the plaintiffs’ predecessors in title, Rickatson Estates Ltd,
to the Secretary of State for Social Services for a term of 14 years from June
24 1971. The contractual term expired, therefore, on June 24 1985. The question
in issue is whether, pursuant to the provisions of Part II of the Landlord and
Tenant Act 1954, the secretary of state is entitled to a new tenancy of the
premises comprised in the lease. The defendant in the action is the Department
of Health and Social Services although, as I understand it, the secretary of
state remained the lessee throughout the contractual term. Nothing turns on
this.
The plaintiffs
acquired the freehold reversion to the lease in May 1978.
The case
raises questions both of fact and of law. I will first set out the relevant
facts and then turn to the law.
No 40
Nottingham Place is a terraced property with a basement, a ground floor and
three upper floors. It has been converted into eight self-contained flats, one
in the basement, one on the ground floor and two on each of the upper floors.
This conversion was carried out pursuant to a licence dated June 19 1975,
granted by Rickatson Estates Ltd to the secretary of state. Clause 3(b) of the
lease contains the lessee’s user covenant: ‘To use the said premises only as a
hostel for nurses whilst in employment or under the control of the lessee.’ Clause 1(b) of the licence authorised the
secretary of state:
to use the
premises as eight self-contained flats provided . . . that the lessee shall not
permit the same to be occupied other than by persons in his employment or
control and then only on fully furnished service occupancies.
Pursuant to
the licence, the conversion of 40 Nottingham Place, into eight self-contained
flats was carried out. Thereafter the flats have been used in the manner
authorised by clause 1(b) of the licence. They have been occupied by persons
employed in National Health
has varied widely. Some have been engineers; some accountants; some have been
doctors or otherwise employed in a medical capacity; some have been
administrators. All past and present occupants have been or are employed for
the purposes of one or other of the local National Health Service hospitals.
The flats are
let fully furnished and equipped with cutlery and crockery. Blankets are
provided, but no bed linen. They are managed by the Paddington and North
Kensington Health Authority (which I shall call ‘the authority’) to which
powers of management of the provision of health services in the area have been
delegated. I will later in this judgment describe more particularly the
statutory relationship between the secretary of state and the authority. The
flats are used by the authority as a means of providing low-cost furnished
accommodation to hospital employees.
The occupants
of the flats occupy their respective flats under the terms of written
agreements with the authority. The agreements are all in the same form. No rent
is reserved. Instead an agreed deduction is authorised to be made from the
salary of the occupant in question. The occupants do not have exclusive
possession. Para 4 of each written agreement provides that:
The
possession, management and control of the premises shall remain vested in the
employer, who shall be the occupier for all purposes and shall have the right
of entry at all times for the purpose of exercising the management and control.
Consistently
with that provision, the authority retains keys to each flat and causes each
flat to be visited regularly. Naturally, the authority is responsible for
carrying out all repairs and decorations. Even trivial repairs are, it seems
from the evidence, seen to by the authority. The agreements impose very light
obligations on the occupants. There is an obligation to vacate the flat on
ceasing to be employed by the authority or when so required by the authority.
There is an agreement not to commit any nuisance; an agreement not to attach
any fixtures or fitments to any part of the flat; and an agreement not to use
the flat for any purpose other than as a residence for the employee and his
family. As to the condition of the flat, there is simply an agreement:
To take
reasonable care of the interior of the premises including all fixtures and
furniture therein and keep the same in good and clean condition, reasonable
wear and tear allowed, and to replace all cracked or broken glass and make good
all damage not attributable to reasonable wear and tear.
There is no
evidence before me as to the arrangements made for the cleaning of the common
parts of the building, that is to say, the hall, the staircases and the
landings. In view, however, of the content of the written agreements, it seems
likely that the authority is responsible for making appropriate arrangements
for these common parts to be cleaned.
Mr High, the
acting district administrator of the authority, deposed in his affidavit sworn
on May 31 1985 that ‘the authority maintains a high degree of control over both
the occupation and the maintenance of the premises’.
In general,
the persons who occupy the flats do so for short periods. They tend to be
persons who, having taken up employment in one or other of the National Health
Service hospitals in the area, need immediate accommodation. They are likely to
remain at 40 Nottingham Place for no longer than is necessary to enable them to
find suitable permanent accommodation. The occupants of the flats are,
therefore, constantly changing and usually one or more of the flats will be
standing vacant.
The authority
regards the flats as a highly desirable facility for the purpose of attracting
staff. Mr T M Higgins, a chartered surveyor and estate agent who gave evidence
before me, estimated that on average it took about three months for someone to
find and complete the purchase of a house or flat in central London. It seems
obvious that the attractions of an offer of employment in central London will
be greatly enhanced if the offer can be accompanied by the offer of immediate
accommodation. In his affidavit Mr High pointed out the difficulties of
obtaining staff for employment in central London. He said this: ‘This Health
Authority, because of its geographical area, has to compete with an
exceptionally high proportion of private companies offering considerably higher
salaries with better fringe benefits and general terms and conditions of
service.’ A little later in his
affidavit he said this: ‘It is of paramount importance to the efficient running
of this authority for the authority to be able to offer accommodation for a
reasonable charge to para-medical, nursing and junior medical staff especially
where the staff have to be available at short notice for work.’
These are
views expressed by a senior officer of the authority. He was not challenged on
them in cross-examination. Moreover, these views seem to me self-evidently
reasonable.
It is an
important feature of this case that the tenancy of 40 Nottingham Place was
vested in the secretary of state, whereas management of the property was
carried out by the authority and the occupants of the flats were all employed
by the authority and not, directly at least, by the secretary of state.
The
relationship between the secretary of state and the authority is provided for
by the National Health Service Act 1977 as amended by the Health Services Act
1980. Section 1 of the 1977 Act imposes on the secretary of state the statutory
duty of providing a health service for England and Wales. Section 2 of the Act
authorises him ‘(a) to provide such services as he considers appropriate for
the purpose of discharging any duty imposed on him by this Act and (b) to do
any other thing whatsoever which is calculated to facilitate, or is conducive
or incidental to, the discharge of such a duty’. Section 3 of the Act imposes
on the secretary of state a duty ‘to provide throughout England and Wales, to
such extent as he considers necessary to meet all reasonable requirements (a)
hospital accommodation; (b) other accommodation for the purpose of any service
provided under this Act’. Section 87(1) of the Act provides:
The Secretary
of State may acquire (a) any land, either by agreement or compulsorily; (b) any
other property, required by him for the purposes of this Act; and (without
prejudice to the generality of paragraph (a) above) land may be so acquired to
provide residential accommodation for persons employed for any of those
purposes. (2) The Secretary of State may use for the purposes of any of the
functions conferred on him by this Act any property belonging to him by virtue
of this Act, and he has power to maintain all such property.
Section 8 of
the 1977 Act, as amended by the Health Services Act 1980, imposes on the
secretary of state the duty to establish regional health authorities, area
health authorities and district health authorities. The Paddington and North
Kensington Health Authority is a district authority established by the
secretary of state pursuant to section 8, as amended. Section 13 of the Act, as
amended, gives the secretary of state power to ‘direct a Regional Health
Authority . . . to exercise on his behalf such of his functions relating to the
health service as are specified in the directions . . .’. The section goes on
to provide that ‘(subject to section 14 below) it shall be the duty of the body
in question to comply with the directions’. Section 14 of the Act, as amended,
gives a Regional Health Authority power to:
direct any
Area or District Health Authority of which the area or district is included in
its region to exercise such of the functions exercisable by the Regional Health
Authority by virtue of section 13 above as are specified in the directions . .
.
Here, too, the
section provides that ‘it is the Area or District Health Authority’s duty to
comply with the directions.’
In paras 3 and
4 of his affidavit, Mr High deposes as follows:
3. The
individual Regional Health Authorities pursuant to powers contained in the
National Health Service Acts 1946 to 1973 and directions from the Secretary of
State delegate powers of management to the District Health Authorities in their
individual Regions. 4. The North West Thames Regional Health Authority has
delegated to the Paddington and North Kensington Health Authority (the
Authority) the responsibility for the management of property within the
District of the Authority. The property at 40 Nottingham Place, London W1 (the
premises) is geographically outside but administratively within the District of
the Authority and consequently the Authority manage the premises under the
terms of the lease dated 25th October 1971 made between Rickatson Estates Ltd
and the Secretary.
The
delegations to which Mr High refers, although made under previous Acts, were
made pursuant to statutory provisions in all respects the same as the statutory
provisions in the 1977 Act, as amended, which I have read.
The authority,
by virtue of these delegations, manages 40 Nottingham Place. It also, by virtue
of these delegations, employs the various employees who work at the National
Health Service hospitals for which it is responsible. These employees, as I
have said, include the occupants of the flats. In doing these various things
and generally in discharging its duties pursuant to the delegations the
authority is exercising, on behalf of the secretary of state, his functions
relating to the Health Service. The authorities, whether regional, area or
district, are, by para 8 of the Fifth Schedule to the 1977 Act, declared to be
bodies corporate. Para 15(1) of the Fifth Schedule is relevant. It provides
that:
An authority
shall, notwithstanding that it is exercising any function on
any rights acquired in the exercise of that function, and be liable in respect
of any liabilities incurred (including liabilities in tort) in the exercise of
that function, in all respects as if it were acting as a principal.
Then the
subpara goes on:
Proceedings
for the enforcement of such rights and liabilities shall be brought, and
brought only, by or, as the case may be, against the authority in question in
its own name.
I now turn to
the Landlord and Tenant Act 1954 and its relevant sections. Section 23(1) of
the Act is in these terms:
Subject to
the provisions of this Act, this Part of this Act applies to any tenancy where
the property comprised in the tenancy is or includes premises which are occupied
by the tenant and are so occupied for the purposes of a business carried on by
him or for those and other purposes.
This
subsection expresses two criteria. First, the premises comprised in the tenancy
must be occupied by the tenant. Second, the premises must be occupied for the
purposes of the business carried on by the tenant. If these criteria are
satisfied, Part II of the Act applies to the tenancy. Section 23(1), however,
does not have to be satisfied in the case of a tenancy held by a government
department. That case is specially dealt with under section 56 of the Act.
Section 56(1) provides that:
Subject to
the provisions of this and the four next following sections, Part II of this
Act shall apply where there is an interest belonging to Her Majesty in right of
the Crown or the Duchy of Lancaster or belonging to the Duchy of Cornwall, or
belonging to a government department or held on behalf of Her Majesty for the
purposes of a government department, in like manner as if that interest were an
interest not so belonging or held.
Subsections
(3) and (4) of section 56 are important:
(3) Where a tenancy is held by or on behalf of a
government department and the property comprised therein is or includes
premises occupied for any purposes of a government department, the tenancy
shall be one to which Part II of this Act applies . . . (4) The last foregoing
subsection shall apply in relation to any premises provided by a government
department without any rent being payable to the department therefor as if the
premises were occupied for the purposes of a government department.
Accordingly,
where a tenancy is held by a government department, Part II of the Act will
apply, if the requirements of subsection (3) or of subsection (3) supplemented
by subsection (4) are satisfied, regardless of whether or not the case can be
brought within section 23(1) of the Act. It is accepted that a minister of
state is, for the purpose of these provisions in section 56, a government
department.
I should,
however, mention at this point a preliminary submission made by Mr Barnes,
counsel for the plaintiffs. He drew my attention to the decision of the House
of Lords in Town Investments Ltd v Department of the Environment
[1978] AC 359. This case concerned a tenancy which had been granted to the
Ministry of Works. A question arose as to the applicability to the tenancy of
the Counter-Inflation (Business Rents) Order 1972 and it became necessary to
decide whether the demised premises were occupied by the tenant for the
purposes of that order, notwithstanding that they were being used to
accommodate civil servants in other government departments. The House of Lords,
reversing a unanimous Court of Appeal, held that tenancies granted to ministers
of state or to government departments were, in reality, tenancies granted to
the Crown, and that the demised premises were being occupied by the tenant, the
Crown, if occupied or used by any government servants, irrespective of the
department to which they belonged. The point that the tenancy in question was
held not by the Ministry of Works but by the Crown was succinctly made by Lord
Diplock at p 381:
In my
opinion, the tenant was the government acting through its appropriate member
or, expressed in the term of art in public law, the tenant was the Crown.
So, submitted
Mr Barnes, there is in law no such creature as a tenancy held by or on behalf
of a government department. It follows, he argued, that subsections (3) and (4)
of section 56 were drafted on an erroneous view of the law and are devoid of
any effect whatever.
I find it
difficult to take this submission seriously. It is obvious that the subsections
were intended to apply to tenancies which had been expressed to be granted or
assigned to a minister of the Crown or to a government department and which
were still so held. The legal misdescription established in 1978, 22 years
after the 1954 Act was enacted, cannot change the true construction of the
subsections. I hold that they apply to the lease of 40 Nottingham Place, which
was expressed to be granted to the secretary of state.
Subsection (3)
applies Part II of the Act to a tenancy held by a government department if ‘the
property comprised therein is or includes premises occupied for any purposes of
a government department’. There is, therefore, apparently one criterion only to
be satisfied. The subsection, unlike section 23(1), does not in terms add the
requirement that the premises must be occupied by the tenant.
There are two
other significant features of the wording of subsection (3). First, there is no
requirement that the government department that holds the tenancy should be the
same government department as that for whose purpose the premises are occupied.
Second, the requisite occupation must be ‘for any purposes of a
government department’: contrast the language of section 23(1), where the
occupation is required to be ‘for the purposes of the business carried on by’
the tenant.
In my
judgment, subsection (3) brings within Part II of the Act any tenancy held by a
government department if the premises are being occupied for any purposes of
any government department.
In the present
case the only government department involved is the secretary of state and the
only relevant purposes of a government department are his purposes under the
National Health Services Acts. So, Part II of the Act applies to the secretary
of state’s tenancy of 40 Nottingham Place if it can be said that the property
comprised in the lease is or includes premises occupied for any purpose of his
under those Acts.
I turn to
subsection (4) of section 56. If that subsection applies, then, for the
purposes of subsection (3), the premises are to be assumed to be occupied for
the purposes of a government department, whether or not that is in fact the
case.
Mr Lewison,
counsel for the defendant, submitted that subsection (4) applied to the facts
of this case. No 40 Nottingham Place has, he said, been provided by the
secretary of state to the authority. No rent is payable to the secretary of
state for the property. So, he submitted, the statutory hypothesis contained in
subsection (4) comes into effect.
Mr Lewison’s
approach appears to follow from a literal reading of subsection (4). It has,
therefore, much to recommend it. But I am not satisfied that it is right. If
his approach is right, it would seem that every tenancy held by every
government department would be entitled to the protection of Part II of the
1954 Act unless rent for the premises was being paid to the government
department under, presumably, a subletting. In the absence of a subletting, no
rent would be payable, the statutory hypothesis of subsection (4) would bring
the case within subsection (3) and Part II of the Act would apply, whether or
not the premises were being occupied for any purpose of a government department
and, perhaps, even if the premises were vacant. This seems a very odd result. I
do not think it can be right.
I must, I
think, look again at subsection (4) for its true construction and effect. The
subsection provides:
the last
foregoing sub-section shall apply in relation to any premises provided by a
government department without any rent being payable to the department therefor
as if the premises were occupied for the purpose of a government department.
The reference
there to ‘premises’ is obviously a reference to the ‘premises’ mentioned in
subsection (3).
If subsection
(4) is, then, incorporated into subsection (3), so that the two subsections are
read together, subsection (3) would read as follows:
Where a
tenancy is held by or on behalf of a government department and the property
comprised therein is or includes premises provided by a government department
without any rent being payable to the department therefor, the tenancy shall be
one to which Part II of this Act applies.
If the two
subsections are read together in that way, the reference to the premises being
provided by a government department cannot sensibly be taken to be a reference
to the premises being provided by the tenant/government department. It can
only, in my view, be read as a reference to the premises being provided by the
landlord. Read thus, subsection (4) seems to be dealing with the case where one
government department has granted a tenancy to another government department,
but without any rent being payable thereunder, and to be applying Part II of
the Act to the tenancy whether or not the premises are actually occupied for
the purposes of a government department.
I would accept
that there are difficulties in this construction. It seems to contemplate some
sort of dispute between two government departments as to whether or not a
tenancy purported to have been granted by one and appearing to be held by
another qualifies for protection under Part II of the Act. It may be said that
there is little
read the reference to premises being ‘provided’ as a reference to the premises
being provided by the tenant/government department. That latter construction
seems to me to lead to such nonsensical consequences as to be impossible to be
accepted as representing the true parliamentary intention.
It is also to
be noted that the construction I have preferred is shown by the House of Lords
decision in Town Investments Ltd v Department of the Environment
to be based on an erroneous view of the nature of a tenancy or other interest
in land held by a minister of state or government department. All such
tenancies or interests in land are, held the House of Lords, simply held by the
Crown. The Crown cannot very well grant a tenancy to itself or hold a tenancy
from itself as landlord. So what is to be made of the construction of
subsection (4) that I have adopted? That
criticism is a formidable one, but the 1954 Act was, as I have already
remarked, enacted some 22 years before the House of Lords clarified the law in
the Town Investments case. In doing so it reversed a unanimous Court of
Appeal. It is not clear to me that the legislators in 1954 may not have had in
mind the possibility of one government department granting a tenancy to another
government department. At all events, a construction of subsection (4) which
proceeds on that footing produces, in my opinion, fewer anomalies and is less unsatisfactory
than any other construction. It is the one that I adopt.
Accordingly, I
hold that subsection (4) has no application to this case. If Part II of the Act
is to apply, the secretary of state must bring his tenancy within subsection
(3) unaided by subsection (4).
I must,
therefore, now consider how the case stands under subsection (3) of section 56.
Can the secretary of state satisfy the criterion that the property, 40
Nottingham Place, is or includes premises occupied for a purpose of his under
the National Health Service Acts?
Although
section 56(3), unlike section 23(1), imposes only one criterion, that one
criterion cannot be satisfied unless there is someone in occupation of the
premises whose occupation can be said to be for a purpose of a government
department.
The occupation
in question cannot, in my judgment, be that of the employee occupants
themselves. Their occupation is not, so far as they are concerned, for the
purposes of the National Health Service Acts. They occupy their respective flats
for ordinary personal residential purposes.
Mr Lewison
submitted that, in addition to the employee occupants occupying their
respective flats, the authority, as managers of the flats, was, for the purpose
of section 56(3) of the Act, in occupation of the whole property. Mr Barnes
submitted that the connection between the authority and the property was
insufficiently close to justify a finding that the authority was in occupation
thereof.
The question
of whether a manager of premises which are occupied by others can claim, by
virtue of his management function, to be in occupation of the premises was
considered in two cases cited to me. They were Lee-Verhulst (Investments)
Ltd v Harwood Trust [1973] QB 204 in the Court of Appeal and William
Boyer & Sons Ltd v Adams (1975) 32 P & CR 89, a decision of
Templeman J (as he then was).
In Lee-Verhulst
(Investments) Ltd v Harwood Trust the property comprised in the
tenancy was a house which had been subdivided into 20 separate fully furnished
apartments. The tenant lived in the basement and carried on the business of
letting the apartments. There was a considerable degree of control which the
tenant exercised over the whole property. The Court of Appeal upheld the
conclusion of the judge at first instance that the tenant occupied the whole
property for the purpose of his business. Sachs LJ said this at p215:
the court
must look at the substance of the position as a whole, take into account the
various elements which have been discussed and then come to a common sense
conclusion as to whether the tenant ‘occupies’ the premises for the purpose of
his business . . .
He went on:
The county
court judge was right in the course of his helpful judgment in attaching
importance, inter alia, to the time and attention devoted by Mr Lee to
running the business, to the services rendered to occupants, and to the control
exercised over the occupancies. They were all relevant elements and he came to
the correct overall conclusion.
In William
Boyer & Sons Ltd v Adams the demised property had been divided
into 11 units used for the purposes of light industry. Templeman J set out the
facts of the case, referred to the Lee-Verhulst case and then said this
at p92:
In the Lee-Verhulst
case the time devoted by the landlord to the activities of the business, the
services rendered and the control exercised were extensive; the landlord’s
presence in the flats was marked by his chattels. In the present case all these
factors are only present on a reduced scale or are missing. But in my judgment the
activities of the defendants are sufficient to show that he is not so much
acting as a landlord passively receiving rent but as the manager of a business
actively earning profits by providing accommodation, facilities and services
and by devoting time for this purpose. Some degree of presence by the defendant
in the units is provided by his central heating and other fixtures, by the need
for him to enter the units to maintain the services and the facilities which he
provides for an inclusive rent and by his nightly visits. The organisation of
the complex which enables the tenants of the units to carry on their work
requires a manager and not only a landlord.
He concluded
that the defendant tenant was:
in occupation
of premises including the units for the purpose of his business of providing
accommodation, power, facilities and services for the carrying on of light
industries.
I think the
present case is on the borderline, but, on balance, in my opinion, the
authority is in occupation of 40 Nottingham Place for the purposes of section
56(3). The features of the case which lead me to that conclusion are,
particularly, that one or more of the flats will usually be found to be vacant
and under the control only of the authority; that the authority retains keys to
all flats and visits them regularly; that under the agreements exclusive
possession is not given to the occupants; that the authority provides not simply
furniture but crockery and blankets at the premises; and that the authority’s
maintenance of the flats includes decorating and the carrying out of quite
trivial repairs. The evidence shows, in my view, that 40 Nottingham Place, like
the units with which Templeman J was concerned, needs not just a landlord but a
manager. On the evidence that is the function discharged by the authority. The
conclusion is, in my view, justified that the authority is in occupation of 40
Nottingham Place for the purposes of section 56(3).
The next
question is whether or not the authority is in occupation of 40 Nottingham
Place ‘for any purposes of a government department’. That requirement will be
satisfied if it can be shown that the authority is in occupation for the purposes
of the secretary of state in carrying out one or other of his functions under
the National Health Service Acts. Mr Barnes submitted that where the property
in question was used for the residential purpose of housing employees in the
relevant business, the property could not be said to be used for the purposes
of the business unless it could be said that it was necessary for the purposes
of that business that the employees should reside there. Convenience was not
enough. On the facts of the present case, however convenient it might be for
the running of the local hospitals to have 40 Nottingham Place available for
accommodation, it could not, submitted Mr Barnes, be said to be necessary.
Mr Barnes
relied on Chapman v Freeman [1978] 1 WLR 1298, a decision of the
Court of Appeal, as authority for his submission. In that case the defendant
tenant owned a hotel. He rented a cottage for the accommodation of hotel staff.
It was accepted that he was in occupation of it. The question, however, was
whether he occupied the cottage for the purpose of his hotel business. At p1300
Lord Denning MR said:
Speaking
generally, the test is whether it is necessary for the individual to
live in the house in order to perform his own particular duties properly; or
whether it is just for convenience that he should live there in
connection with his duties (Lord Denning’s emphasis).
Then a little
later on Lord Denning expressed his conclusion thus:
The truth is
that it is a dwelling-house simply for the convenience of the person carrying
on the business. It is not a business tenancy.
Geoffrey Lane
LJ (as he then was) said, however, at p1301:
It was merely
a matter of convenience that the Andrews should be housed in this particular
cottage. That, to my mind, is not enough. The tenant must go beyond mere
convenience and show that the occupation was in furtherance of his business
activities — in other words, that it was for business reasons that he was
occupying the cottage and not merely for reasons of convenience.
Geoffrey Lane
LJ, therefore, while agreeing with Lord Denning that mere convenience was not
enough, was not proposing quite the same test as was Lord Denning. Lord Denning
was proposing the test of necessity. The test proposed in this passage by
Geoffrey Lane LJ is that the ‘occupation was in furtherance of his business
activities’.
The third
member of the court, Eveleigh LJ, said at p1302:
We must look
to see what the servant is doing there. Why is he there? The servant is not occupying for the purpose
of the hotel business but simply as a resident. He is not there for anything to
do with the hotel, although his
there.
This approach
is concentrating on the servant’s reason for occupying rather than on the
master’s reason for putting the servant in occupation. Lord Denning and
Geoffrey Lane LJ had both approached the matter on the latter footing which
must, if I may respectfully say so, be right.
These dicta do
not, in my view, establish a common ratio. I agree with Mr Lewison that the
case is not authority for the proposition that the test of necessity must be
passed before tenant’s occupation of premises in order to provide residential
accommodation for his employees can be taken to be occupation for the purposes
of his business.
The point was
further considered by the Court of Appeal in Groveside Properties Ltd v Westminster
Medical School (1983) 47 P & CR 507.*
In this case, in my view, the Court of Appeal in effect adopted Geoffrey
Lane LJ’s test that the occupation must be ‘in furtherance of’ the tenant’s
business. The case concerned a flat leased by the Westminster Medical School
and used for providing residential accommodation for four medical students. It
was held, first, that the school’s overall control of the flat justified the
conclusion that it was in occupation of the flat and, second, that its
occupation was in furtherance of its educational purposes. Fox LJ referred to Chapman
v Freeman at p511, cited the passages from the judgments of Geoffrey
Lane LJ and Eveleigh LJ that I have cited and continued:
That decision
does not lead me to any different view of the present case. The user by the
students is not simply for convenience, and it is not simply as a residence; it
is to achieve an educational purpose for the advancement of their medical
training, and it is to assist the achievement of the same purpose and to the
same end that the medical school occupies the flat.
*Editor’s
note: Also reported at (1983) 267 EG 593, [1983] 2 EGLR 68.
Stephenson LJ
at p515 said this of Chapman v Freeman:
I do not
think that that decision requires us to apply any kind of ‘tied cottage’ or
‘service tenancy or occupancy’ test for the tenancy of such a body as this
school, or to treat desirable arrangements of this kind as mere matters of
convenience.
In my
judgment, the question in the present case is whether the occupation of 40
Nottingham Place by the authority is an occupation in furtherance of one of the
functions of the secretary of state under the National Health Service Act. In
my judgment, it clearly is. The secretary of state has power under section 2 of
the 1977 Act ‘to do any . . . thing whatsoever which is calculated to
facilitate, or is conducive or incidental to, the discharge of any duty imposed
on him’ under the Act. He has power under section 87(1) of the 1977 Act to
acquire property ‘to provide residential accommodation for persons employed for
any of the purposes of this Act’.
The exercise
of these functions of the secretary of state has been delegated to the
authority. Pursuant to that delegation and to the duty cast on it by section 14
of the 1977 Act, as amended, the authority is managing 40 Nottingham Place. In
so doing it is discharging that duty and exercising one of the functions of the
secretary of state. Accordingly, in my judgment, the authority’s occupation of
40 Nottingham Place is an occupation for a purpose of a governing department.
The criterion of section 56(3) is, in my judgment, satisfied. Part II of the
Act applies.
That is
unfortunately not an end to the difficulties of this case. Subsection (3) of
section 23 must now be considered. It is in these terms:
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 purposes of a business by reason of which the tenancy is one
to which this Part of this Act applies.
That
subsection determines the extent of the holding in respect of which a new
tenancy can be claimed by the secretary of state under the Act.
Mr Barnes
submits that the secretary of state is the tenant — so he is; that at best the
authority is in occupation — I have held that it is — and that the secretary of
state is not in occupation of any part of 40 Nottingham Place. Moreover, he
submits, the employees who live in the flats at 40 Nottingham Place, are not
the employees of the tenant, the secretary of state: they are, he says,
employees of the authority. So, he submits, the effect of section 23(3) on the
present case is that, even if under section 56(3), Part II of the Act applies
to the tenancy, the whole of the premises comprised in the tenancy are
withdrawn from ‘the holding’ in respect of which a new tenancy can be sought.
There is, it would follow, ‘no holding’, in respect of which the secretary of
state can claim a new tenancy. Mr Lewison’s answer is that, for the purposes of
section 23(3), the authority’s occupation of 40 Nottingham Place must be taken
to be the occupation of the secretary of state, the tenant. He submits that the
authority, in carrying out the management function which has, in my view,
justified the conclusion that it is in occupation of 40 Nottingham Place, is
acting as the agent of the secretary of state.
I have already
referred to sections 13 and 14 of the National Health Service Act 1977, as
amended. Under section 13 a regional health authority on which a delegated
function devolves exercises the function on behalf of the secretary of state.
Under section 14 a district health authority is directed to exercise ‘such of
the functions exercisable by the regional health authority as are specified . .
.’. So a district health authority, too, acts on behalf of the secretary of
state. Mr Lewison is, in my view, right in submitting that the authority is in
occupation of 40 Nottingham Place on behalf of the secretary of state.
Mr Barnes
submitted, however, that a statutorily authorised delegation of the sort
provided for by sections 13 and 14 did not constitute the authority the agent
of the secretary of state. The authority, he submitted, discharged its duty
under the delegated powers as principal. This submission is, however, in my
view, inconsistent with authority. In Pfizer Corporation v Ministry
of Health [1964] Ch 614 in the Court of Appeal and [1965] AC 512 in the
House of Lords, the question was whether the Minister of Health was entitled to
supply a patented drug to National Health Service hospitals for use in those
hospitals. He was entitled under the relevant statutory powers to authorise the
use of the drug ‘for the services of the Crown’. The National Health Service
hospitals in question were managed by regional health boards, which then
discharged the functions now discharged by the regional, area and district
health authorities. Regional health boards, too, were statutory corporations.
The contention of the plaintiff in the case was that the regional health boards
to whom the drug was supplied by the minister for use in the hospitals were
using the drug for their own purposes and that their use of it in the hospitals
could not be properly described as use ‘for the services of the Crown’. In the
Court of Appeal Diplock LJ (as he then was) said this at p 651:
The Ministry
of Health, of which the minister is the head, was established by the Ministry
of Health Act 1919 and is plainly a ‘government department’; but it is
contended by counsel on behalf of the plaintiffs (1) that the use with which
this appeal is concerned is not use by a government department or alternatively
(2) that it is not use for the services of the Crown.
Diplock LJ
then referred to various statutory provisions and continued at p 652 with this:
The scheme of
the Act is thus plain. The duty to provide hospital and specialist services is
imposed upon the minister. It is in its nature a duty which he can only perform
vicariously through agents acting on his behalf. The Act requires him to do so
through the immediate agency of the Regional Hospital Boards. The Regional
Hospital Boards, being corporations, can themselves only do the physical acts
involved in the provision of the services on behalf of the minister,
vicariously through their officers and servants. Any act done by an officer or
servant of a Regional Hospital Board for the purpose of providing hospital or
specialist services is accordingly done on behalf of the minister in
performance of the statutory duty which is imposed upon him. Their acts are
acts of a government department. Counsel for the plaintiffs placed considerable
reliance upon section 13 of the Act, as showing that the Regional Hospital
Boards exercised their functions as principals and not as agents of the
Minister. But the section seems to me to be directed to quite a different
matter. The National Health Service Act 1946 was passed before the Crown
Proceedings Act 1947. At that date the fact that a Regional Hospital Board was
acting on behalf of a minister of the Crown would have entitled it to shelter
behind the immunity of the Crown from suit except by petition of right: see Feather
v The Queen; Raleigh v Goschen. All that section 13 does
is to re-assert that a Regional Hospital Board is acting on behalf of the
minister (ie on behalf of the Crown) but to provide that for the purpose of
legal proceedings for the enforcement of rights and liabilities it shall be
treated, notwithstanding that it is an agent of the Crown, as if it were acting
as a principal and shall sue and be sued in its own name. Such a provision
would have been unnecessary unless a Regional Hospital Board in exercising its
functions under the Act, was acting on behalf of the Crown.
Section 13 to
which Diplock LJ was referring is to the same effect for all relevant purposes
as para 15 of Schedule 5 to the 1977 Act which I have read.
Willmer LJ at
p 641 said this:
The section
and he, too,
was referring to section 13
does not do anything
to alter the fact that Regional Hospital Boards in exercising their functions,
by themselves and through the Hospital Management Committees in their area, are
discharging the duties laid upon the minister.
The judgment
of the Court of Appeal was upheld by the House of Lords. No doubt was expressed
as to the accuracy of the analysis of the relationship between the minister and
the regional hospital board as expressed, in particular, by Diplock LJ.
In my
judgment, the authority, in acting on behalf of the secretary of state in
discharge of the functions laid on the secretary of state by the National
Health Service Acts, is acting as agent for the secretary of state. The
relationship justifies, in my view, a conclusion that, for the purposes of
section 23(3) of the Landlord and Tenant Act 1954, the authority’s occupation
of 40 Nottingham Place is the occupation of the secretary of state, the tenant.
In my opinion, for the same reason, the persons employed by the authority in
discharge of its delegated functions are, for the purposes of section 23(3), to
be treated as the employees of the secretary of state.
Accordingly, I
conclude that the holding in the present case extends to the whole of 40
Nottingham Place and that section 23(3) does not exclude any part of the
premises comprised in the lease from the holding in respect of which the
secretary of state is entitled to claim a new lease.
I therefore
dismiss the action.
The action
was dismissed with costs.
