Landlord and Tenant Act 1954, Part II — Motions by tenants seeking leave to discontinue proceedings for grants of new tenancies — Leave of court required under RSC Order 21, rule 3 — Court may impose such terms as it thinks just — Landlords, relying on decision in Young, Austen & Young Ltd v BMA, submitted that tenants should be given leave to discontinue, if at all, only on giving undertakings not to pursue any claims for compensation under section 37 of the 1954 Act as amended by the Law of Property Act 1969 — Substantial amounts of compensation involved in the present two cases — Judge’s detailed analysis of arguments for and against imposition of term requiring the forgoing of compensation — Young, Austen decision not accepted by judge as authority for a general principle that where a tenant has made an application to the High Court for a new tenancy, and then wishes to withdraw the application because he no longer wants the tenancy in question, he should be allowed to discontinue only on giving an undertaking not to pursue a claim to compensation under section 37 — In special cases justice might require such a term, but not in either of the present cases — Leave to discontinue given in both cases subject only to appropriate conditions as to costs — Landlords’ summonses under section 24A (interim rent) directed to stand (to preserve them from falling on discontinuance of actions)
These were two
motions by the plaintiffs, Lloyds Bank Ltd in both cases, in proceedings
against National Westminster Bank Ltd and the Corporation of the City of London
respectively, under Part II of the Landlord and Tenant Act 1954. By the motions
the plaintiffs sought the leave of the court under Order 21, rule 3 to
discontinue the proceedings. The proceedings had been brought by originating
summonses. The only question was as to what terms, if any, should be imposed on
the plaintiffs if leave to discontinue were given.
Jonathan Gaunt
(instructed by Cameron Markby) appeared on behalf of the plaintiffs; M Rich QC
and J Male (instructed by Herbert Smith & Co) represented National
Westminster Bank Ltd; Michael Essayan QC (instructed by the Comptroller and
City Solicitor) represented the City Corporation.
Giving
judgment, SLADE J said: This is a judgment in two motions. In one of them,
Lloyds Bank Ltd seeks an order that it may be at liberty to discontinue certain
proceedings which it has instituted against the Corporation of London (‘the
corporation’), asking for the grant of a new tenancy, pursuant to Part II of
the Landlord and Tenant Act 1954 (‘the Act’), of part of certain premises known
as 3 Broad Street Place, London EC2. I will call this motion, these proceedings
and these premises, respectively, ‘the Broad Street motion’, ‘the Broad Street
action’ and ‘the Broad Street premises’.
In the other
motion, Lloyds Bank Ltd seeks an order that it may be at liberty to discontinue
certain proceedings which it has instituted against National Westminster Bank
Ltd (‘National Westminster’), asking for the grant of a new tenancy, pursuant
to Part II of the Act, of certain premises at first floor, Berkeley Square
House, Berkeley Square, London W1. I will call this motion, these proceedings
and these premises, respectively, ‘the Berkeley Square motion’, ‘the Berkeley
Square action’ and ‘the Berkeley Square premises’.
It is common
ground that the hitherto subsisting tenancies in respect of the Broad Street
premises and the Berkeley Square premises are tenancies to which Part II of the
Act applies.
The court’s
leave to discontinue is required because RSC Order 21, rule 3 provides that,
except as provided by rule 2, a party may not discontinue an action (whether
begun by writ or otherwise) without the leave of the court and the right to
discontinue conferred by rule 2 does not apply to proceedings begun by
originating summons, such as these.
Order 21, rule
3 further provides that the court hearing an application for the grant of such
leave may order the action to be discontinued ‘on such terms as to costs, the
bringing of a subsequent action or otherwise as it thinks just’.
The
plaintiffs, Lloyds Bank Ltd, accept that, if they are to be given the leave
sought in respect of either action, this should be on the terms, at least, of
paying any costs incurred by the defendants up to the date of the plaintiffs’
application to withdraw. If they are given leave, no question arises of their
bringing of any subsequent action because, having regard to the provisions of
the Act, any such action would be out of time. The question therefore is what
terms, if any, ‘otherwise’ should be imposed on the plaintiffs, as the price of
giving the leave sought, if leave is given at all?
The defendants
in each action, in reliance on the decision of Whitford J in Young, Austen
& Young Ltd v BMA [1977] 1 WLR 881, claim that the plaintiffs
should be given leave, if at all, only on giving an undertaking not to pursue
any claim for compensation under section 37 of the Act. The plaintiffs, while
not disputing that the court would have jurisdiction to impose such a term,
contend, in effect, that on the facts of these two cases the imposition of such
a term would be neither appropriate nor just.
The discretion
conferred by RSC Order 21, rule 3 is a wide one. Apart from the Young,
Austen decision, two cases have been cited to me relating to its exercise.
The earlier of them was Stahlschmidt v Walford (1879) 4 QBD 217.
In that case, an action had been referred to an arbitrator to state a special
case. He had then made findings of fact with regard to all but a very small
part of the claim. These findings had been in the defendant’s favour. The
plaintiff had then applied for leave to discontinue the action. The Court of
Appeal, reversing the decision of Field J, who had granted the plaintiff leave,
refused him such leave. Cockburn CJ said (at p 219):
The
defendant, as it seems to me, is in justice entitled to the fruits of these
proceedings and we ought not to interfere to deprive him of them.
Mellor J,
after referring to the relevant rule, which was in substantially the same form
as the present Order 21, rule 3 said (at p 219):
But the
discretion thus given must be exercised within certain limitations, and so as
not to take away from the defendant any advantage to which he is fairly and
reasonably entitled.
In Covell
Matthews & Partners v French Wools Ltd [1977] 1 WLR 876, Graham
J, after referring to certain authorities, including the Stahlschmidt
decision, echoed the language of Mellor J in saying this (at p 879):
The
principles to be culled from these cases are, in my judgment, that the court
will normally, at any rate, allow a plaintiff to discontinue if he wants to,
provided no injustice will be caused to the defendant. It is not desirable that
a plaintiff should be compelled to litigate against his will. The court should
therefore grant leave, if it can, without injustice to the defendant, but in
doing so should be careful to see that the defendant is not deprived of some
advantage which he has already gained in the litigation and should be ready to grant
him adequate protection to ensure that any advantage he has gained is
preserved.
On the
particular facts of that case, which did not raise any dispute concerning
compensation under section 37 of the Act, Graham J gave leave to a tenant to
withdraw an application for a new tenancy under the Act, on terms designed to
ensure that the landlords were not prejudiced. The Court of Appeal in due
course ([1978] 1 WLR 1477) upheld his decision, expressing no criticism of the
principles as formulated by him. Bridge LJ, however, added (at p 1485D):
It is
perfectly clear from authorities to which we have been referred that the
granting of leave to discontinue is no mere formality, that an applicant for
leave to discontinue may be put in a position, by the terms which the court is
minded to impose upon him as a condition of ordering discontinuance of his
proceedings, which will be so onerous that he would not wish to accept them.
Buckley LJ,
after referring to Order 21, rule 3, said (at p 1487):
That rule
does empower a court to whom application is made to discontinue an action upon
terms, but those terms must, I agree, be terms which are imposed upon the
applicant.
In the
circumstances, my approach to the present cases is intended to follow the
principles stated by Graham J and the Court of Appeal in the Covell Matthews
case, subject to two points. First, while Graham J referred specifically merely
to the need for the court, in considering whether to grant a plaintiff leave to
discontinue, to preserve for the defendant any advantage that he had gained in
the litigation, I am sure that he would have regarded it as no less important
to consider the need to compensate the defendant for any proven loss that he
might have suffered through the institution of the proceedings. This, I would
think, is the reason why plaintiffs are frequently given leave to discontinue
only on the terms of paying defendants’ costs. Secondly, the advantage gained
in the litigation to which Graham J was referring, in my judgment, means an
advantage which a defendant has already gained by resisting the
proceedings. In other words, it covers what Cockburn CJ called ‘the fruits of
these proceedings’.
The relevant
legislation
Before
examining the facts of each of the two present cases, I think it will be
convenient to refer to the relevant legislation. Section 24(1) of the Act (as
amended) provides that a tenancy to which Part II of the Act applies shall not
come to an end unless terminated in accordance with the provisions of Part II.
It further confers on the tenant under such a tenancy the right, subject to
certain conditions, to apply to the court for a new tenancy if the landlord has
given notice under section 25 to terminate the tenancy or the tenant has made a
request for a new tenancy in accordance with section 26.
Section 24A
enables a landlord who has given a section 25 notice or has received from the
tenant a section 26 request to apply to the court to determine a rent, which it
would be reasonable for the tenant to pay while the tenancy continues by virtue
of section 24, and gives the court the power to determine such a rent.
Section 25(1)
confers on the landlord the right to terminate a tenancy to which Part II of
the Act applies, by a notice given to the tenant in the prescribed form,
specifying the date at which the tenancy is to come to an end, though this
subsection has effect subject to the provisions of section 64.
Section 25(5)
provides that a notice under that section shall not have effect unless it
requires the tenant, within two months after the giving of the notice, to notify
the landlord in writing whether or not, at the date of termination, the tenant
will be willing to give up possession of the property comprised in the tenancy.
Section 25(6)
requires a landlord’s notice under the section to state whether he would oppose
an application to the court under Part II of the Act for the grant of a new
tenancy and, if so, to state on which of the grounds mentioned in section 30 he
would do so.
Section 26(1)
confers on the tenant the right to make a request for a new tenancy, if his
current tenancy is a tenancy granted for a term of years certain exceeding one
year. The tenant, however, does not have this right if the landlord has already
given notice under section 25 to terminate the tenancy: see section 26(4).
Section 26(6)
provides:
Within two
months of the tenant’s request for a new tenancy the landlord may give notice
to the tenant that he will oppose an application to the court for the grant of
a new tenancy, and any such notice shall state on which of the grounds
mentioned in section 30 of this Act the landlord will oppose the application.
Section 29(1)
provides:
Subject to
the provisions of this Act, on an application under subsection (1) of section
24 of this Act for a new tenancy, the court shall make an order for the grant of
a tenancy comprising such property at such rent and on such other terms as are
hereinafter provided.
Section 29(3)
provides:
No
application under subsection (1) of section 24 of this Act shall be entertained
unless it is made not less than two nor more than four months after the giving
of the landlord’s notice under section 25 of this Act or, as the case may be,
after the making of the tenant’s request for a new tenancy.
Section 30(1)
of the Act begins with the following words:
The grounds
on which a landlord may oppose an application under subsection (1) of section
24 of this Act are such of the following grounds as may be stated in the
landlord’s notice under section 25 of this Act or, as the case may be, under
subsection (6) of section 26 thereof, that is to say:
There then
follow seven subparagraphs, (a) to (g). I need read only subparagraph (f):
That on the
termination of the current tenancy the landlord intends to demolish or
reconstruct the premises comprised in the holding or a substantial part of those
premises or to carry out substantial work of construction on the holding or
part thereof and that he could not reasonably do so without obtaining
possession of the holding.
Section 31 of
the Act, subject to certain conditions, precludes the grant of a new tenancy by
the court where the landlord opposes an application for a new tenancy on
grounds on which he is entitled to oppose it, in accordance with section 30 and
which he establishes to the satisfaction of the court.
Section 37(1)
(in its amended form) provides:
Where on the
making of an application under section 24 of this Act the court is precluded
(whether by subsection (1) or subsection (2) of section 31 of this Act) from
making an order for the grant of a new tenancy by reason of any of the grounds
specified in paragraphs (e), (f) and (g) of subsection (1) of section 30 of
this Act and not of any grounds specified in any other paragraph of that
subsection, or where no other ground is specified in the landlord’s notice
under section 25 of this Act or, as the case may be, under section 26(6)
thereof, than those specified in the said paragraphs (e), (f) and (g) and
either no application under the said section 24 is made or such an application
is withdrawn, then, subject to the provisions of this Act, the tenant shall be
entitled on quitting the holding to recover from the landlord by way of
compensation an amount determined in accordance with the following provisions
of this section.
The words in
this subsection, reading from ‘or where’ to ‘withdrawn’ were inserted in it by
section 11 of the Law of Property Act 1969, as from January 1 1970. I pause to
make two comments on this subsection. First, the reason why the legislature,
from the very beginning, included a reference only to paragraphs (e), (f) and
(g) of section 30(1) is, I think, fairly clear. Paragraphs (a), (b) and (c) all
deal with cases where the tenant is, in one way or another, in breach of his
obligations. Paragraph (d) deals with the case where the landlord has offered
and is willing to provide or secure suitable alternative accommodation for the
tenant on reasonable terms. In a case where the landlord can establish one or
more of the grounds referred to in paragraphs (a), (b), (c) or (d), statutory
compensation may therefore not appear very appropriate. However, it was the
legislature’s clear intention that, in a case where the landlord successfully
resisted an application to the court solely by reference to one or other of the
grounds referred to in paragraphs (e), (f) or (g), the tenant should be
entitled to compensation.
Secondly,
however, as section 37(1) was originally enacted, the tenant, in order to
secure his compensation in such circumstances, not only had to serve a
counternotice on the landlord stating that he was not willing to give up
possession, but also had to make and pursue an unsuccessful application for a
new tenancy: (see Re 14 Grafton Street, London W1 [1971], Ch 935).
Now, however,
in its amended form, section 37(1) gives the tenant who has a tenancy protected
by Part II of the Act the statutory right to compensation in a case (among
other cases) where all the following conditions are fulfilled:
(1) The landlord has served on the tenant a
notice under section 25 or section 26(6); and
(2) the notice thus served has specified no
ground other than one or more of the grounds specified in paragraphs (e), (f)
and (g) of section 30 of the Act; and
(3) the tenant either has made no application at
all under section 24 or has withdrawn any such application after it has been
made; and
(4) the tenant has quitted the holding.
In a case
where these four conditions are fulfilled, section 37(1) (as now amended)
confers a clear and unqualified statutory right on the tenant to compensation.
The amount of compensation to be awarded under the section is specified in
section 37(2), as amended by paragraph 4 of Schedule 33 to the Local
Government, Planning and Land Act 1980 and in the Landlord and Tenant Act 1954
(Appropriate Multiplier) Regulations 1981. Nothing much turns on these
provisions for present purposes, save to say that if compensation were to be
due to the plaintiffs in either case at all, it would be substantial, having
regard to the rateable value of each set of premises. I think it is common
ground that in the case of the Broad Street premises the compensation (if any)
would be £65,776. In the case of the Berkeley Square premises, there is some
dispute whether it would be £21,734 or £48,900.
The Broad
Street Motion
I now propose
to turn to the facts of the Broad Street motion, which I regard as the more
difficult of the two motions before me. These facts appear from an affidavit
sworn by Mr W F Abbott, a chartered surveyor who is employed by the plaintiffs
in the estates department of their premises division, an affidavit sworn in
answer by Mr Anthony Wheaton, a principal in the office of the City Solicitor,
and an affidavit sworn in reply by Mr Abbott. From these affidavits the
following facts appear.
The plaintiffs
hold the Broad Street premises under three leases dated June 1 1905, August 31
1910 and March 31 1917, the terms granted by which were all limited to expire
on December 18 1980. The reversioner under these leases is the Corporation of
London (‘the corporation’). The rateable value of the Broad Street premises is
£32,888.
Until March 31
1981 the plaintiffs occupied the Broad Street premises as their Finsbury Circus
branch. By January 1980 they had received information that the building of
which the premises formed part was to be the subject of major works of
refurbishment and renovation and that, if these works were to be carried out,
they would necessitate the vacation by the plaintiffs of the Broad Street
premises. The plaintiffs, however, did not at that time know whether new leases
would be granted to them when their current leases expired in December 1980.
In these
circumstances, the plaintiffs’ solicitors, on February 8 1980, pursuant to
section 26 of the Act, served on the defendants’ solicitors requests for the
grant of three new tenancies beginning on December 25 1980. On April 1 1980 the
plaintiffs’ solicitors received from the City Solicitor three counternotices,
dated March 31 1980, saying, in effect, that the corporation was not willing to
grant new tenancies and would oppose any application to the court for such
tenancies on the grounds set out in section 30(1)(f) of the Act. These
counternotices were served pursuant to section 26(6) of the Act.
On June 5 1980
the plaintiffs issued three originating summonses seeking the grant of three
new tenancies pursuant to Part II of the Act. These three originating summonses
constitute the Broad Street action. They were consolidated by an order of
Master Dyson made on June 26 1980. On that occasion he gave directions for the
trial of the preliminary issue, whether new tenancies should be granted, having
regard to the landlord’s grounds of opposition.
At a meeting
of July 14 1980 the corporation informed the plaintiffs that it would not
oppose the application for new leases. The corporation’s decision not to oppose
the application was confirmed by a letter of July 22 1980, written by the City
Solicitor to the plaintiffs’ solicitors and in other correspondence.
At the meeting
of July 14 1980 and in subsequent correspondence in July, the plaintiffs had
indicated to the corporation that it was their present wish and intention to
obtain new leases and to continue to occupy the premises. However, by August 6
1980 the plaintiffs had changed their minds in this regard. On August 6 they
reached the decision to close their Finsbury Circus Branch in the spring of
1981 and to move it to their Stock Exchange Branch, and to vacate the Broad
Street premises accordingly.
On August 7
1980 they instructed their solicitors to inform the corporation of their intention
to vacate, but in the event revised these instructions, because they considered
that the decision had to remain confidential until the customers and staff of
the Finsbury Circus Branch had been informed of the impending move.
In due course,
however, by a letter of October 20 1980 the plaintiffs’ solicitors informed the
City Solicitor that the plaintiffs would be vacating the Broad Street premises
in the spring of 1981. After some intermediate correspondence, the plaintiffs’
solicitors, on January 23 1981, wrote to the City Solicitor, informing him that
they would be ceasing business at the premises at about the end of February and
would be finally vacating them about a month after that. They drew attention to
the fact that their clients were entitled to statutory compensation and asked
for confirmation that it would be paid to them immediately on their finally
vacating the premises.
The date for
vacation was subsequently extended by agreement between the plaintiffs and the
corporation to March 31 1981. The plaintiffs have, I understand, now vacated
the premises, though no surrender of the leases has been formally accepted by
the corporation, so that the plaintiffs would be in a position to resume
possession if they should desire to do so.
On March 9 1981
the corporation applied for the determination of an interim rent under section
24A of the Act. On March 24 1981 the City Solicitor wrote to the plaintiffs’
solicitors stating the terms on which the corporation was prepared to consent
to an application by the plaintiffs for leave to discontinue the Broad Street
action. One of these terms was that the plaintiffs should undertake not to seek
compensation under section 37 of the Act.
In these
circumstances, the Broad Street motion was issued on April 6 1981, by which the
plaintiffs seek leave to discontinue the Broad Street action.
Mr Essayan, on
behalf of the corporation, has submitted that, if the plaintiffs are to be
given leave to discontinue at all, this should only be on the terms that they
undertake not to seek statutory compensation because on no possible view, he
says, could they now receive compensation if they were compelled to continue
with their application to the end. He points out that ever since July 14 1980
the corporation has not relied on any ground of opposition. He invites me,
therefore, to consider what would happen if I were to refuse the plaintiffs
leave to discontinue. Their application for a new tenancy would then come
before the court with no opposition from the corporation. One of two
alternative possibilities might then occur. In the one alternative, the
plaintiffs might ask for their application to be dismissed, in which event they
would obtain no statutory compensation. In the other alternative, the
plaintiffs might ask for a new tenancy. If they did so, section 29(1) of the
Act would oblige the court to grant a new tenancy because no ground of
opposition would have been established. It would be its duty to decide the
terms of the new tenancy. Once the order had been made, the plaintiffs could
either accept these terms or, if they considered the rent fixed by the court
unacceptably high, they could ask the court to revoke its order under section
36(2) of the Act. Whether they accepted the new tenancy or not, however, they
would not get compensation, because the conditions of section 37(1) would not
have been satisfied.
Mr Essayan’s
analysis of the position that would arise, as a practical matter, if I were to
refuse the plaintiffs leave to discontinue, appears to me correct and I proceed
on this basis. From this hypothesis, he went on to submit that, since it is
thus a certainty that the plaintiffs will not get compensation if they proceed
with the Broad Street action, they cannot or should not now be placed in a
better position by seeking the court’s indulgence, so as to enable them to
discontinue these proceedings. In his submission, the corporation has gained an
advantage from the litigation, within the principle enunciated by Graham J, of
which it would be wrong to deprive it.
In submitting
that the court’s discretion should be exercised in this manner, Mr Essayan
naturally relied strongly on the decision of Whitford J in the Young, Austen
case. I will return to that decision a little later, but think that I should
first attempt to consider the submissions put forward on behalf of the
corporation, without reference to authority.
First, and I
think foremost, Mr Essayan submitted that for the court to refuse the desired
leave to discontinue would be entirely consonant with the policy of the Act. He
pointed out that, even under section 37(1) as amended, it is only in very
limited circumstances that a tenant is entitled to compensation on quitting the
premises. The policy of the Act, he submitted, is that the tenant shall receive
compensation only in a case where he is deprived of his new tenancy through
circumstances entirely beyond his control and for which he is not responsible.
This, he submitted, was the reason why the legislature, in enacting section
37(1), singled out paragraphs (e), (f) and (g) of section 30. It did not, in
his submission, contemplate that the tenant should get compensation if he
merely decided that he did not want a new tenancy.
On reading
section 37(1) in conjunction with section 30(1), I accept that the legislature
contemplated that the tenant who received a landlord’s notice under section 25
or section 26(6) should not receive compensation on quitting his holding,
either if he was in such breach of his obligations under the tenancy that he
would not have obtained a new tenancy if he had asked for it or if the landlord
had made an offer of alternative accommodation of the nature referred to in
section 30(1)(d). I cannot, however, accept the wider submission that the
legislature contemplated that the tenant should never get compensation if his
motives for failing to press his possible rights to a new tenancy were merely
that he did not want a new tenancy. Section 37(1), as amended, says nothing
whatever about the motives which may prompt a tenant either to omit to apply
for a new tenancy or to withdraw his application after it has been made. The
motives prompting a tenant to take either of these courses, after he has
received a landlord’s notice under section 25 or section 26(6), relying on one
or more of the grounds specified in paragraphs (e), (f) or (g) of section 30,
may be many and mixed. I cannot impute an intention to the legislature to
withhold compensation from a tenant who complies with all the other conditions
in section 37(1) merely because his motives for omitting to apply to the court,
or for withdrawing an application when made, may be of a particular nature. The
rights to compensation given by the subsection, in circumstances such as those
of the plaintiffs in the present case, to a party who withdraws his application
and then vacates the premises, are in terms absolute, not qualified by
reference to any considerations of motive.
Perhaps it
might be suggested that the legislature, in amending section 37(1), would have
had in mind that the court might from time to time, in the exercise of its
discretion and in appropriate circumstances, effectively deprive a tenant of
his right to compensation, by requiring him to abandon this right as the price
of allowing him leave to withdraw his proceedings. However, I think there is a
conclusive answer to any such suggestion. As the legislature must have been
well aware, many applications under the Act fall to be brought in the county
court, where it is open to a tenant to discontinue his application merely by
notice to the landlord, without obtaining the leave of the court. It cannot
therefore be inferred that the legislature, in amending section 37(1),
specifically contemplated that, in practice, the exercise of a tenant’s right
to statutory compensation might be controlled and fettered through an exercise
of the court’s discretion.
For these
reasons, in so far as Mr Essayan submits that the court would be giving effect
to the true intentions of the legislature if it were to withhold the leave to
discontinue now sought by the plaintiffs against the corporation, I must,
without hesitation, reject this submission.
In support of
the corporation’s case, however, Mr Essayan put forward a number of further
points which did not directly depend on any presumed intention of the legislature.
He accepted that, if the plaintiffs had indicated that they were prepared to
vacate the premises as soon as they received the corporation’s counternotices
of March 31 1980, they would have been entitled to statutory compensation,
whatever their motives for such acquiescence might have been. However, he
submitted that, by applying to the court, the plaintiffs radically altered the
respective positions of themselves and the corporation, to the benefit of
themselves and the detriment of the corporation. If the plaintiffs, on receipt
of the corporation’s counternotices, had not applied to the court, they would
have been obliged to vacate the Broad Street premises when their original
tenancies came to an end in December 1980. The corporation would, in these
circumstances, have had the advantages not only of earlier possession but also
of knowing for certain, at latest by June 1980, that it would be entitled to
possession in December of that year; for a date in June was the latest date on
which the plaintiffs would have been entitled to apply for new tenancies: see
section 29(3) of the Act. With this certain knowledge, Mr Essayan submitted,
the plaintiffs could either have taken steps during the last six months of 1980
to relet the Broad Street premises as from December 1980 at a full market rent
or could instead, if they had preferred, have made arrangements with
contractors to effect alterations to them.
In his
submission, the corporation have thus suffered detriment through the
plaintiffs’ reliance on their statutory rights to apply for new tenancies, in
the form of delay in obtaining possession of the premises, uncertainty as to
their position and loss of rent. Though the corporation will no doubt receive
the award of an interim rent on its section 24A application, this will not, he
suggested, be the same as a full market rent. On the other hand, he suggested,
the corporation has gained an advantage in the litigation by the very
institution of the Broad Street action, simply because this action cannot be
withdrawn without the leave of the court. In these circumstances, he submitted,
even apart from the Young, Austen decision, it is only just that, if the
court is to deprive the corporation of this advantage by giving the appropriate
leave to the plaintiffs, it should do so by giving the corporation compensation
in the form of the undertaking which it seeks.
With all
respect to Mr Essayan’s very persuasive argument, it seems to me that it
involves some begging of the crucial question. The so-called advantage to the
corporation gained in the litigation is of a quite different nature from the
‘fruits of the litigation’ referred to by Cockburn CJ in the Stahlschmidt
case. It can only be a real advantage if there is a good reason why the court
should deprive the tenant of the compensation to which he is otherwise entitled
by statute; but this is the very question which the court now has to decide. I
have already expressed the view that any deemed intention of the legislature
constitutes no good reason for depriving the tenant of his compensation in such
a case. One is therefore left with the question whether, on the particular
facts, justice requires that the plaintiffs should be required to forfeit the
compensation to which they are prima facie entitled, as the price of
obtaining the desired leave.
There are, in
my judgment, several good reasons why justice does not so require, on the facts
of the present case. First, as Mr Gaunt has pointed out on behalf of the
plaintiffs, it is not and could not be suggested that the amount of the
statutory compensation would bear any relation in monetary terms to any
financial loss which the corporation may have suffered. Secondly, in its
evidence the corporation has not asserted any special damage or given any
particulars of financial loss. Thirdly, if and in so far as the corporation may
have suffered financial loss through delays and uncertainties caused by the
plaintiffs’ reliance on their statutory rights, such delays and uncertainties
are likely to arise in any case where a tenant relies on the system of
statutory protection afforded to him by the Act. These, however, are inherent
in the system. It has not been asserted in the present case that the plaintiffs
acted in any way improperly in relying on their statutory rights or that they
abused the process of the court, in issuing their applications for new
tenancies. Fourthly, in so far as the corporation alleges that it has lost rent
through the exercise of the plaintiffs’ statutory rights, it will have the
benefit of the remedies given to it by section 24A of the Act which, it is to
be inferred, were regarded by the legislature as providing adequate recompense
to landlords in such circumstances.
For all these
reasons, at least in the absence of authority, I would not be minded to impose
any conditions on the plaintiffs, save in regard to costs, in giving them the
leave to discontinue their proceedings against the corporation which they now
seek. I must, however, turn to the decision in Young, Austen & Young Ltd
v BMA [1977] 1 WLR 881, on which Mr Essayan replies. The facts of that
case, as summarised in the headnote to the report, were as follows:
Following
notices to terminate two tenancies served by the landlords under section 25 of
the Landlord and Tenant Act 1954, the tenant served requests for new tenancies
under section 26 of the Act. Counternotices were served by the landlords under
section 26(6) opposing the grant of new tenancies under section 30(1)(g) on the
ground that on termination of the existing tenancies they intended to occupy
the premises for the purposes of their own business. The tenants applied to the
High Court for new tenancies pursuant to Part II of the Act on terms to be agreed.
Subsequently, the landlords indicated that they were prepared to relet one set
of premises. The tenants having decided, however, that they no longer wanted a
renewal of the tenancies, applied to the Court under RSC Order 21, rule 3 for
leave to discontinue the proceedings on payment of the landlords’ costs.
Whitford J (at
p 885) summarised the submissions made on behalf of the landlords as follows:
So the point
made on the landlords’ side is that it would be quite wrong in such
circumstances for leave to be given to discontinue, as if such leave were given
without any undertaking with regard to the question of an application for
compensation, they would be disadvantaged. As the matter at present stands,
their point is that if the tenants have to proceed, they are not going to seek
an order for the grant of new tenancies and in those circumstances their
applications will be dismissed and no compensation will be payable to them; and
it is quite wrong that they should be allowed to withdraw without some term
being imposed which will preserve to the landlords the position which would
undoubtedly result so far as compensation is concerned if the action were to
proceed.
On the
tenant’s side (see at p 886 of the report) substantially two principal
submissions were made. First it was contended that it was not within the power
of the court in granting leave to discontinue to impose a condition of the kind
which, on the face of it, would be going against the provisions which
Parliament had specifically enacted. Secondly, it was contended that in any
event, it would be wrong for the court, as a matter of discretion, to impose
such a condition.
Whitford J
rejected the first of these submissions, holding (at pp 886 and 887) that the
court on any such application had the duty to consider all the circumstances of
the case and whether, in justice, it would be right that leave to discontinue
should be granted. I respectfully agree with this part of Whitford J’s
decision; and, indeed, Mr Gaunt, on behalf of the plaintiffs, has not
challenged its correctness. His challenge is directed to the second part of the
decision, which related to the exercise of the court’s discretion.
In this
context, Whitford J (at p 886) referred to the passage from Graham J’s judgment
in the Covell Matthews case, which I have already read. He observed (at
p 887) that, if the matter were to proceed in the subsisting circumstances, the
tenants were no longer going to seek the fresh tenancies which they originally
sought, their action would be dismissed and their right to compensation would
go. The kernel of his decision as to the question of discretion is to be found
in the following two paragraphs of his judgment (at pp 887 to 888):
I think the
submission on behalf of the landlords is a good one. It is perhaps a little
troubling that, as counsel for the tenants quite rightly pointed out, if this
had been a proceeding brought in the county court, the imposition of a term of
the sort which I think ought to be imposed would not have been possible. It may
be that this is a matter which was never in the contemplation of those
responsible for the amendment to section 37 of the Act of 1954. Prior to the
amendment of that section, it will of course be recalled that the position was
that there was no specific provision relating to compensation upon mere
withdrawal and the right to compensation arose only after there had been a
decision adverse to the tenant. It may possibly have been thought that to force
the parties to a hearing in circumstances where it would be likely to be
apparent to the tenants that they would not succeed in opposing a section
30(1)(g) objection would be unnecessarily onerous, and that therefore they
should be granted a right to withdraw. What I think was never in contemplation
was a circumstance such as this, where basically the reason why the tenants
want to withdraw is not that they fear they will be unable to resist the
objection of the landlords: indeed, in one case, there is no question of
objection by the landlords. Basically, the reason why they want to withdraw is
that they no longer want the tenancies in question. I do not think that in
those circumstances it would be right that I should grant them leave to
discontinue without imposing some term. It may be that the injustice, if there
be any, lies in this, that it is impossible, if proceedings be brought in the
county court, for a term of this character, which I think is in fact
appropriate, to be made.
I am prepared
to grant leave to discontinue, but only on an undertaking by the tenants that
they will not pursue any claim to compensation pursuant to section 37 of the
Act as amended.
Essentially,
therefore, the ratio of Whitford J’s decision on the question of
discretion, as I understand it, was that the court should require the tenants to
abandon their statutory right to compensation as the price of being allowed to
withdraw their application, because otherwise they would be receiving
compensation in circumstances which Parliament would never have contemplated.
In this manner, Mr Essayan submitted, Whitford J filled a lacuna in the Act by
doing what was fair and equitable.
Any case in
which the exercise of the court’s discretion is involved must depend on its
particular facts and I express no view on the exercise of the court’s
discretion on the particular facts of the Young, Austen case. I do not,
however, accept the submission of Mr Essayan that the passing reference by
Bridge LJ to that case in his judgment in the Covell Matthews case
[1978] 1 WLR 1477 at p 1485 amounted to specific approval of that decision, in
so far as the exercise of the discretion was involved. The question at issue
before the Court of Appeal in the Covell Matthews case was a very
different one.
However, in
the present case it has been suggested that the Young, Austen decision
established a general principle that, in any case where a tenant has made an
application to the High Court for a new tenancy under the Act and then wishes
to withdraw the application because he no longer wants the tenancy in question,
he should be allowed to discontinue only on giving an undertaking not to pursue
any claim for compensation under section 37 of the Act.
In so far as
the decision can be read as establishing any such general principle, I would
respectfully dissent from this principle for a number of reasons, which more or
less appear from what has already been said in this judgment, but can be
summarised as follows: (1) I am not satisifed that there is any lacuna at all
in section 37(1) of the Act as amended. The amendment gives a tenant who, after
receiving a landlord’s notice of the nature referred to in the section,
forbears to make an application to the court or withdraws his application after
it has been made, the clear and unqualified right to receive compensation on
quitting the holding. I am far from convinced that, even if the point had been
put to it, the legislature would have intended to make any distinction between
tenants who withhold or withdraw an application to the court with one motive
and those who do so with another motive, particularly since motives may be very
mixed and any such distinction would, I think, have given rise to formidable
difficulties both of statutory drafting and of evidence. (2) Even if there be a
lacuna in section 37(1), in my judgment it is one for the legislature to fill
and not for the High Court when exercising its discretionary jurisdiction under
RSC Order 21, rule 3.
I accept that
special cases could arise when the court, in exercising its discretionary
jurisdiction, might properly consider that, quite apart from any presumed
intention of the legislature, justice to the landlord demanded that the tenant
should be required to give an undertaking of the nature sought by the landlords
in the present case. The Broad Street motion, however, is not in my view one of
them. The court should not force the plaintiffs to continue with the Broad
Street action merely for the purpose of ensuring that they do not receive the
compensation which Parliament has said they should have on withdrawing their
application. I therefore propose to give the plaintiffs the leave to
discontinue the Broad Street action which they seek, subject to an appropriate
condition as to costs. I will hear submissions in due course as to its precise
form.
So that the
corporation’s summons under section 24A of the Act will not fall if and when
the plaintiffs’ Broad Street action is discontinued, Mr Essayan has asked for a
direction that this summons under section 24A should stand as a counterclaim:
(see the notes in the Supreme Court Practice 1979 under RSC Order 97, rule 9A).
I propose to give such a direction.
The Berkeley
Square motion
This motion
concerns certain office premises on the first floor of Berkeley Square House,
Berkeley Square, which have been used by the plaintiffs since 1961 as their
Greater London (North) regional head office premises. The plaintiffs hold them
by virtue of an underlease dated August 1 1961, made between Berkeley Square
Holdings Ltd and the plaintiffs, the reversion of which is now vested in
National Westminster.
Clause 1 of
the underlease excepted and reserved to the landlords certain rights to enter
the premises for the purposes of effecting repairs and alterations to the
structure of Berkeley Square House and other similar rights. The term limited
by this underlease was due to expire on March 25 1981. The plaintiffs, in fact,
occupy certain other parts of Berkeley Square House.
The evidence
before me on this motion consists of three affidavits, namely (1) an affidavit
of Mr N P Draper, a chartered surveyor who is employed by the plaintiffs in the
estates department of their premises division; (2) an affidavit sworn by Mr J A
Glass, on behalf of National Westminster; and (3) an affidavit sworn in reply
by Mr Draper on behalf of the plaintiffs.
From this evidence
I think that the following facts appear. As long ago as 1978 National
Westminster instructed project managers in connection with certain works of
improvement to Berkeley Square House which it was then contemplating. In April
and May 1980 Mr Glass, who is a project manager with the firm in question, made
contact with all the tenants of the building with a view to seeking their
cooperation in the proposed works of improvement and discovering whether, on
the expiry of their various interests, they would be interested in continuing
the occupation of their existing premises or in taking additional
accommodation. In particular, as Mr Glass explains in his affidavit, it was
convenient for the purposes of the works for National Westminster to have
possession of the plaintiffs’ Berkeley Square premises and essential for them
to have at least the cooperation of the plaintiffs.
On May 21 1980
Mr Glass met Mr Draper. At this meeting, Mr Draper indicated that the
plaintiffs might be willing to move out of the Berkeley Square premises. No
decision, however, had yet been reached by the plaintiffs and indeed none was
reached, it seems, until August 20 1980.
Against this
background, on July 31 1980, National Westminster served on the plaintiffs a
notice dated July 30 1980, under section 25 of the Act, terminating the
plaintiffs’ tenancy on March 25 1981. The notice stated in effect that National
Westminster would oppose an application to the court for the grant of a new
tenancy on the grounds set out in section 30(1)(f) of the Act. A covering
letter of July 29 1980 explained that the notice was served ‘in order to
maintain maximum flexibility having regard to the landlords’ proposals to
undertake various works at and within the building and the extent to which
access will be required to your offices to complete the project, which will
commence in the near future’.
Mr Glass, in
paragraph 6 of his affidavit, suggested that Mr Draper at all times
appreciated, first, that the works proposed on the Berkeley Square premises
were such that they did not amount to demolition or reconstruction of a
substantial part of the building; secondly, that they did not amount to
substantial works of construction of the holding; and, thirdly, that much of
the work was work which National Westminster was undoubtedly entitled to carry
out under the terms of the underlease. In other words, Mr Glass suggested that
the section 25 notice, though indicating National Westminster’s reliance on the
section 30(1)(f) grounds of opposition, was specifying grounds which Mr Draper
well knew were illfounded in law and in fact.
Mr Draper, in
his affidavit in reply, specifically denied that he had any such knowledge as
alleged by Mr Glass. For the purpose of the present application I do not
propose to examine all the evidence in this context. I will merely say that, on
its present state, I do not think it would be right to find or assume in favour
of National Westminster that Mr Draper had any such knowledge or indeed that
National Westminster itself was serving a section 25 notice which specified
grounds of opposition to a new tenancy, which it knew to be wholly without
substance in law or in fact.
On receipt of
this notice, the plaintiffs gave further consideration to the matter and, in
due course, on August 20, decided that both their Greater London (North)
regional head office and Greater London (South) regional head office, which
occupied other nearby premises, should be relocated in premises elsewhere.
On September 5
1980, however, to protect their position, the plaintiffs’ solicitors gave
notice to National Westminster that they were not willing to give up possession
of the Berkeley Square premises on the date mentioned in the notice of July 30.
On October 14
1980 Mr Draper wrote to Mr Glass telling him of the plaintiffs’ decision to
vacate the Berkeley Square premises, but asking him whether National
Westminster would allow the plaintiffs to keep them for up to three months
after March 25 1981 to facilitate their move. By November 20 Mr Draper still
had not received confirmation that the plaintiffs would be permitted to hold
over after March 25 1981. On that day, the plaintiffs, again to protect their
position, issued the Berkeley Square action, seeking the grant of a new tenancy
pursuant to Part II of the Act. In view of the timelimit imposed by section
29(3) of the Act, these proceedings had to be issued, if at all, by the end of
November 1980.
After the
service of this summons, further negotiations took place between the parties
which, so far as the plaintiffs were concerned, were principally designed to
enable them to remain in the Berkeley Square premises for a few weeks after
March 25 1981 and, so far as the National Westminster were concerned, were
principally designed to enable them to obtain the necessary access
to the premises for the purpose of carrying out the contemplated works. As a
result, the plaintiffs, without objection from National Westminster, remained
in the premises for a few weeks after the end of March. They have now
surrendered the keys to the premises, though they have not formally surrendered
possession. A summons under section 24A of the Act was issued by National Westminster
on March 4 seeking interim rent.
In all the
circumstances, the plaintiffs wish to withdraw their application for a new
tenancy, but National Westminster have proved unwilling to consent to its being
withdrawn, save on the terms that the plaintiffs abandon their claim to
statutory compensation.
I hope that Mr
Rich, who appeared on behalf of National Westminster, will not regard it as
discourteous if I deal quite briefly with his attractive argument. Essentially,
I think the same reasons apply for rejecting it as apply in rejecting the
corporation’s argument, but a fortiori.
He submitted
that when National Westminster served its notice, of July 30 1980, relying on
ground (f) set out in section 30 of the Act, it, in effect, made an offer to
the plaintiffs that, if they accepted it and vacated the premises accordingly,
National Westminster would pay them statutory compensation. Instead, however,
the plaintiffs elected to take proceedings and thereby gain the advantage of a
continuation of their tenancy, by virtue of section 64 of the Act. The
landlords, on the other hand, suffered the correlative disadvantages of
uncertainty as to the date of determination of the tenancy and delay. In these
circumstances, Mr Rich submitted that the court could reasonably take the
attitude that a tenant who has taken advantage of section 64 in such
circumstances should either continue with his proceedings until the end or, if
he does not wish to continue with them, should be allowed to withdraw at a date
of his choice only on terms which do not leave him compensation for a removal
which he has elected to make and has not been forced on him. Why, he asked
rhetorically, should the plaintiffs complain in such circumstances, if the
court now holds that they should not have compensation for a loss which, he
submitted, they have not suffered and which, he submitted, they would not get
if they took their proceedings to their conclusion?
This question
is thus based on two hypotheses of fact, namely, that (1) the plaintiffs have
suffered no loss through National Westminster’s reliance on its statutory
rights and (2) the plaintiffs would in the end inevitably fail to obtain
compensation if they were compelled to pursue the Berkeley Square action.
I answer Mr
Rich’s rhetorical question in this manner. Even if the two hypotheses of fact
upon which it is based are correct, the plaintiffs could, I think, justifiably
complain if the court were to take this course, for much the same reasons as I
have indicated in the part of this judgment relating to the Broad Street
motion. The court could not, in my view, by reference to any supposed intention
of the legislature, justifiably deprive the plaintiffs of the statutory
compensation to which they are prima facie entitled. Nor, in my view,
are there sufficient special facts to necessitate such a deprivation in the
interests of justice to National Westminster. Though Mr Glass, in his
affidavit, says that the delay in the vacation of the premises has imposed ‘an
extremely tight programme’ on National Westminster’s contractors, it has not
asserted any special damage or given any particulars of financial loss. It now
has the access to the premises which it requires for the purpose of carrying
out its works. It has not been asserted that the plaintiffs abused the process
of the court in issuing their application for a new tenancy or acted in any way
improperly in relying on their statutory rights.
An element of
tactical manoeuvring is inevitably introduced by the system of the Act; and, as
I see the position, the plaintiffs’ application to the court in this case was
no more and no less of a tactical manoeuvre than the landlords’ section 25
notice. I do not criticise either of them. In so far as National Westminster
may have lost rent through the exercise of the plaintiffs’ statutory rights, it
will have the benefit of interim rent assessed under section 24A of the Act in
accordance with the measure which the legislature has deemed appropriate in
such circumstances.
Even on the
two hypotheses of fact Mr Rich invites me to make, I thus see no sufficient
grounds for imposing the desired condition, particularly when the amount of the
statutory compensation, of which he seeks to deprive the plaintiffs, bears no
relation in monetary terms to any pecuniary loss which National Westminster may
have suffered.
I should,
however, add that on the facts of this case I am by no means convinced that
either of these two hypotheses of fact is necessarily correct. As to the first,
though Mr Rich invited me to infer that National Westminster’s section 25
notice was not the cause of the plaintiffs’ decision to vacate the premises, I
am not satisfied on the evidence that the notice may not have been at least one
of the contributory causes. Inquiries of this sort into motivation, particularly
on the basis of affidavit evidence, are an exercise of very doubtful value;
this is an issue of fact which I regard as being an open one on the evidence
before me. I feel equal doubts as to the correctness of the second hypothesis
of fact put forward by Mr Rich. It is at least theoretically possible that, if
I were to refuse the leave now sought, the plaintiffs would reconsider their
position and pursue their application for a new tenancy. Mr Gaunt made it plain
that they were reserving their rights to take this course. It is no less
theoretically possible that, in this event, National Westminster would oppose
the grant of a new tenancy on the grounds set out in its section 25 notice and
oppose it successfully, in which event, the plaintiffs, on vacating, would
qualify for statutory compensation. Mr Rich suggested, in effect, that the
section 25 notice should not be taken seriously, that National Westminster
would not want to oppose the grant of a new tenancy because, under the existing
tenancy, it would have all the rights which it needed to do the additional
works to Berkeley Square House and because it could not establish the section
30(1)(f) ground anyway. These submissions may or may not be well founded. They
would be relevant matters for consideration if and when an application by the
plaintiffs for a new tenancy came before the court for hearing. However, they
are not, in my view, suitable to be prejudged on this application by the
plaintiffs for leave to discontinue and in any event, as I have already
indicated, are not in my view clearly established by the evidence before me.
In these
circumstances, on the facts of this case, I am not satisfied that the
inevitable outcome of refusing the plaintiffs the leave now sought would be
that they would in the end be left without statutory compensation. On this
ground, the Berkeley Square motion is, in my view, distinguishable from the Young,
Austen case on its facts. For this additional reason, I can see no
sufficient grounds for imposing on the plaintiffs in the Berkeley Square motion
an obligation to give the suggested undertaking not to pursue their claim for
statutory compensation, as the price of giving them leave to discontinue the
Berkeley Square action.
On all these
grounds I propose to give the plaintiffs leave to discontinue the Berkeley
Square action, subject to an appropriate condition as to costs. I will, at the
same time, direct that National Westminster’s summons under section 24A shall
stand as a counterclaim in the Berkeley Square action.
