Manson v Duke of Westminster and others

Leasehold Reform Act 1967 — Tenant’s right to enfranchise — Whether condition as to ‘low rent’ was satisfied — Application of proviso to section 4(1) of Act that a tenancy granted between end of August 1939 and beginning of April 1963 was not a tenancy at a low rent if at the commencement of the tenancy the rent exceeded two-thirds of ‘the letting value of the property’ — Tenancy in this case commenced in 1945 at an annual rent of £100 a year (the standard rent) and a lawful premium of £500 — Meaning of ‘letting value’ — Whether letting value was simply £100 a year, in which case the rent was not a low rent (as the landlords contended), or whether it included the premium decapitalised, or ‘rentalised’, in which case the rent was a low rent (as the tenants contended) — Held that the latter view was correct and the tenant was consequently entitled to acquire the freehold — Brandon LJ considered that, if the point had been free from authority, he would have held that the ‘letting value’ meant the rent obtainable in the open market irrespective of any limit imposed by the Rent Acts, but he was precluded from taking this view by Gidlow-Jackson v Middlegate Properties Ltd — Appeal from county court judge’s decision dismissed This was an appeal by the landlords, the Duke of Westminster, John Nigel Courtenay James and Patrick Geoffrey Corbett, trustees of the Grosvenor Estates, from a decision of Judge Corcoran at West London County Court in which he held that the tenant of 92 Chester Row, London SW1, Louis Joshua Manson, the respondent, was entitled to acquire the freehold of the house under the Leasehold Reform Act 1967. E G Nugee QC and T Etherton (instructed by Boodle, Hatfield & Co) appeared on behalf of the appellants; Kenneth J Farrow (instructed by Mansons) represented the respondent. Giving judgment, STEPHENSON LJ said: This is an appeal by the landlords of a leasehold house, 92 Chester Row, London SW1, against an order of Judge Corcoran made in the West London County Court on November 5 1979 declaring their tenant to be entitled to acquire the freehold of the house pursuant to the Leasehold Reform Act 1967. Section 1(1)(a) of that Act conferred on a tenant of a leasehold house, occupying the house as his residence, a right to acquire on fair terms the freehold or an extended lease of the house and premises where ‘his tenancy is a long tenancy at a low rent and the rateable value of the house and premises on the appropriate day is not (or was not) more . . . if it is in Greater London, than £400’. For tenancies created on or before February 18 1966 section 118(1) of the Housing Act 1974 raised that figure to £1,500 and altered the appropriate day from March 23 1965 to April 1 1973. A ‘long tenancy’ means a tenancy granted for a term of years certain exceeding 21 years: section 3(1). The meaning of ‘low rent’ is given in section 4(1), on the proviso to which this appeal turns. The subsection provides: 4(1)  For purposes of this Part of this Act a tenancy of any property is a tenancy at a low rent at any time when rent is not payable under the tenancy in respect of the property at a yearly rate equal to or more than two-thirds of the rateable value of the property on the appropriate day or, if later, the first day of the term: Provided that a tenancy granted between the end of August 1939 and the beginning of April 1963 otherwise than by way of building lease (whether or not it is, by virtue of section 3(3) above, to be treated for other purposes as forming a single tenancy with a previous tenancy) shall not be regarded as a tenancy at a low rent if at the commencement of the tenancy the rent payable under the tenancy exceeded two-thirds of the letting value of the property (on the same terms). On May 12 1978 the tenant gave notice of his claim under the Act and on July 3 1978 the landlords gave notice in reply that they did not admit ‘your right on the grounds that the tenancy is not a tenancy at a low rent in that at the commencement of the tenancy rent payable under the tenancy exceeded two-thirds of the letting value of the property (proviso to section 4(1) of the Leasehold Reform Act 1967)’. The tenant applied to the county court pursuant to section 20 of the Act on March 7 1979 for an order determining that he was entitled to acquire the freehold. By their answer the landlords put him to proof of the occupation of the house as his residence, which the Act requires, and denied that the rent of £100 per year payable under the lease was a low rent as defined by section 4 of the Act. At the hearing the tenant admittedly satisfied every statutory requirement except one. He was a tenant of this house pursuant to a lease dated July 12 1945 granted for a term of 40 years and one half of another year from September 29 1945 at a rent of £100 per year, which he acquired by an assignment dated January 8 1973 for a premium of £18,500. He has occupied it as his residence since May 1973. Its rateable value on April 1 1973 was £1,076. His rent of £100 a year was payable at a yearly rate much less than two-thirds of that rateable value. But his tenancy was granted between the end of August 1939 and the beginning of April 1963 otherwise than by way of a building lease. So the judge had to decide the question whether at the commencement of the tenancy — in 1945 — the rent payable under it ‘exceeded two-thirds of the letting value of the property (on the same terms)’. If it did exceed that proportion of that value the tenant was not entitled to acquire the freehold because the rent was too high. If it did not, it was a low rent and he was entitled to acquire the freehold. That was the only issue ultimately left for the judge to decide. It depended on the meaning of the words ‘the letting value’ in their context. He accepted the tenant’s construction of the words and decided the issue in his favour. The landlords ask this court to accept their construction of the words and decide in their favour that he is not entitled to the declaration granted by the judge. The landlords’ case is that the ‘letting value of the property (on the same terms)’ means simply the rent which the landlords could have obtained in the open market if they had offered the property for letting on the terms of the lease. And that means in this case the rent of £100 a year, which is the maximum rent they could have lawfully obtained. The tenant’s case is that that value means the whole consideration for which the landlords could have let the property in the open market, including a premium in addition to the rent. And that means in this case a sum to be calculated by decapitalising the obtainable premium which, when added to the79 £100 rent, would bring the obtainable consideration above the minimum amount required to prevent the £100 exceeding two-thirds of that consideration. The rent of £100 a year was admitted to be the highest rent which the landlords could exact in 1945. Tenancies of dwelling-houses within the Act of 1967 are not generally tenancies controlled by the Rent Acts because the rent of the former must not equal or exceed two-thirds of the rateable value whereas the rent of the latter must. But this house is subject to new control under the Rent and Mortgage Interest Restrictions Act 1939, £100 a year is the standard rent and there were no permitted increases entitling the landlords to recover more. It was also common ground that as the law stood in 1945 there was nothing to prevent the landlords charging and recovering a premium, as the term of this lease was not less than 14 years. Furthermore, the landlords did not challenge, and the judge accepted, the evidence of an experienced valuer and chartered surveyor called by the tenant that 7 per cent was the correct percentage to apply to a premium in order to obtain its annual equivalent by decapitalisation and that to produce by this means the £50 a year necessary to keep the £100 a year rent down to two-thirds of the sum of those two amounts the minimum amount required as capital premium was £581. Finally, it was conceded by the landlords that they could not call evidence to discharge the burden imposed on them by section 4(5) of proving that less than £581 could be lawfully exacted from a tenant in the open market on September 29 1945. So the tenant’s right to acquire the freehold rests on the single question whether the court can take into account a premium in assessing ‘the letting value of the property (on the same terms)’. My first impression was that the court can and should take it into account as the judge did, because the natural and ordinary meaning of the words would not be limited to the rent but would include any other consideration — certainly any other consideration in cash — which the landlords would get for letting the house. The expression is not defined in the Act. The industry of counsel has not found it in any other statute. The expression ‘the lettable value of the premises’ occurs in the Liabilities (War Time Adjustment) Act 1944, section 6, where it was defined as ‘the rent at which in the opinion of the court the premises might reasonably be expected to let, or, as the case may be, might reasonably have been expected to let, under a tenancy for one year granted upon the same terms and conditions (so far as applicable) as those upon which the debtor is holding the premises’. But ‘the letting value’ is not an expression of legal art, as Stamp LJ said in Gidlow-Jackson v Middlegate Properties Ltd [1974] QB 361 at p 376; and though he went on to use ‘letting value’ and ‘lettable value’ as apparently convertible terms, I derive no more help from the definition in the Act of 1944 than from the absence of any definition in the Act of 1967. In that case this court held that the letting value of the property could not exceed the amount of rent at which the property could lawfully be let and the standard rent was the letting value. But there was no premium for the lease granted in that case and no possibility of lawfully exacting it and so no question whether a premium could be included in that value was raised or considered, let alone decided. Unhelped and unhampered by any statutory definition or judicial authority I would have thought a landlord who had been paid a good-sized premium by the tenant of his property would be astonished if he were told by an estate agent or his legal adviser, or by a judge, that the letting value of the property was confined to the rent. That value is what the property would be worth to him if he let it: and I agree with Mr Farrow for the tenant that if the landlord had asked an estate agent what it would be worth to him if he let it, the estate agent would surely reply: ‘You can get a rent of no more than £100 a year, but you can charge a premium if you are prepared to give up possession of it for 14 years’. The letting value of a property is its value to the landlord in annual or perhaps other periodic terms. Its value to him as a landlord is what he is paid for it by his tenant, and all that he is paid, and until I heard Mr Nugee’s cogent submissions I wondered, reacting as did Sir George Jeffreys CJ three centuries ago to an attempt to introduce hearsay evidence (R v Braddon and Speke (1684) 9 St Tr 1127, 1189) ‘to hear any man that wears a gown, to make a doubt of it’. But a doubt of it Mr Nugee certainly has made. His submissions in the form in which he recorded them for our assistance are these: 1. The natural meaning of ‘letting value’ is rental or annual value and that is the meaning of those words in section 4(1) of the 1967 Act. 2. If the natural meaning of ‘letting value’ is the total consideration for which a property can be let, nevertheless for the purposes of section 4(1) the meaning of the phrase ‘letting value’ is restricted to rental or annual value. 3. The conclusion in 2 above is based upon the following reasons: (1)  Parliament cannot have intended that rent should be compared with something other than rental value, for that would be to compare like with unlike. It would also be unfair to the landlord, for whose very benefit the proviso to section 4(1) was inserted, because the proviso requires the actual rent to be compared with ‘the letting value’. (2)  In the only other statutory provision in which the phrase ‘letting value’ appears, namely section 15(2) of the 1967 Act, letting value means and can only mean the rental or annual value. (3)  The ‘building lease’ exception in section 4(1)(d) of the 1967 Act is only explicable on the basis that a premium cannot be taken into account in ascertaining the ‘letting value’. (4)  The proviso to section 4(1) requires the rent to be compared with the letting value on the same terms. One of the terms of the letting is the payment of a premium, and that shows that ‘letting value’ in the section is something other than a premium. Further, to take into account the actual premium is inconsistent with the contention that ‘letting value’ means the best consideration that could have been obtained and not the actual consideration obtained. (5)  If letting value meant total consideration, there would be great and possibly insuperable problems of valuation. It would mean reduction to an annual value of the best consideration that could have been obtained regardless of what was actually obtained; eg an infinite variety of combinations of premium and rent. It would also pose extraordinary problems of valuation where part of the consideration for the letting was or might have been the execution of works to the premises. Parliament cannot have intended these difficulties of valuation: see the simple treatment of premiums for income tax purposes. (We were referred to the Income and Corporation Taxes Act 1970, section 80). (6)  When Parliament enacted the 1967 Act, it must be taken to have been aware that premiums had formerly been chargeable and had in fact been charged in respect of Rent Act premises, and Parliament would have dealt specifically with premiums if it had intended premiums to be taken into account in ascertaining the letting value. (7)  In the long history of rent restrictions and landlord and tenant legislation since 1914, the court has always drawn a sharp distinction between a genuine premium and a mere commuted rent. (We were referred to Samrose Properties Ltd v Gibbard [1958] 1 WLR 235). If Parliament had intended that in the 1967 Act a premium should be decapitalised for the purposes of section 4(1), it would have said so and provided how it should be done. Further, if it is proper to treat the premium as a commuted rent, then the commuted rent would exceed the standard rent under the Rent Act and would not be enforceable as rent. (8)  The intention of Parliament, as disclosed by the Command Paper (referred to in the judgment of Lord Denning MR in Gidlow-Jackson v Middlegate Properties Ltd at p 370E of the report in [1974] QB 361, was to distinguish between long tenancies at a low rent and long tenancies at a high rent: this is also borne out by the long title to the 1967 Act. The tenancy in the present case is a tenancy at a rack rent because it reserved the best rent obtainable at the grant of the tenancy. (9)  The 1967 Act is an expropriatory Act, and if there are genuine doubts as to the meaning of ‘letting value’ that phrase should be construed in favour of the landlord. Further the proviso to section 4(1) was inserted for the benefit of the landlord, and for that reason, if there is genuine doubt as to the meaning of ‘letting value’, the phrase should be construed in favour of the landlord. (We were referred to Methuen-Campbell v Walters [1979] QB 525 at pp 529 G, 536 F, 541 G and 542 F and to Jones v Wrotham Park Estates [1980] AC 74, 113). Mr Nugee’s argument has not altered my first impression and I do not accept his first submission. His second submission I find formidable, in particular the first two reasons which he has submitted for restricting the natural meaning of the words. (1)  I agree that the value to be compared with the rent must be in80 one sense an annual or rental value. It is not expressed as ‘the full net annual value of the house’, the phrase considered in Rawlance v Croydon Corporation [1952] 2 QB 803; but the ‘yearly rate’ expressed in subsection (1) must, I think, be implied in the proviso. It is however, in my judgment, fallacious to conclude that the value to be compared cannot include a lump sum capable of being decapitalised, or ‘rentalised’ (to use Mr Nugee’s alternative). A premium is the capital value of the difference between the actual rent and the best rent that might otherwise be obtained: King v Earl Cadogan [1915] 3 KB 485, 492. Decapitalisation is an exercise carried out whenever an annuity is bought or in reverse whenever judgment under Lord Campbell’s Act is delivered. It is an exercise which these landlords carry out when they grant a lease for any term from 21 to 60 years at a standard rent: they require in addition to an undertaking to carry out tenant’s repairs a ‘cash payment (representing part of the annual value capitalised)’. It was agreed that the tenant would have signed an acceptance of an offer of the 1945 lease in those terms (though the particular document had been destroyed); and the unchallenged evidence of the tenant’s surveyor was that the annual equivalent of the premium was obtained by dividing it by the years’ purchase figure in Parry’s Valuation Tables for 40 1/2 years at 7 per cent — though the landlords used 6 per cent — with a sinking fund of 2 per cent (untaxed). (2)  The Act of 1967 gives the tenant who qualifies for purchase of the freehold the alternative right to acquire a 50 years’ extension of his lease. Section 15(2) provides: The new tenancy shall provide that as from the original term date the rent payable for the house and premises shall be a rent ascertained or to be ascertained as follows: (a)    the rent shall be a ground rent in the sense that it shall represent the letting value of the site (without including anything for the value of buildings on the site) for the uses to which the house and premises have been put since the commencement of the existing tenancy, other than uses which by the terms of the new tenancy are not permitted or are permitted only with the landlord’s consent: (b)    the letting value for this purpose shall be in the first instance the letting value at the date from which the rent based on it is to commence. . . . (c)    the letting value at either of the times mentioned shall be determined not earlier than twelve months before that time (the reasonable cost of obtaining a valuation for the purpose being borne by the tenant). . . . It was rightly conceded by Mr Farrow for the tenant that the letting value there referred to is a hypothetical rent and nothing else. But that letting value is ‘the letting value of the site’, which would be the ground rent. No premium would be payable for the site in the circumstances postulated in section 15, and what we have to interpret is ‘the letting value of the property’, where payment of a premium for the lease of the property would often be payable, even when the property and the lease were controlled by the Rent Acts. Premiums could lawfully be exacted from the tenants of such properties from 1920 to 1949 if the term was 14 years or more and from 1957 to 1967 (and 1969 onwards) if the term was 21 years or more; but no premium was lawful between 1949 and 1957 or between 1967 and 1969: see the Rent Act 1920 section 8(3); the Landlord and Tenant (Rent Control) Act 1949 section 2; the Rent Act 1957 section 21; the Leasehold Reform Act 1967 section 39; and the Housing Act 1969 section 81. I am accordingly of the opinion that there is nothing in section 15(2) to restrict the meaning of the words used in the proviso to section 4(1), and to give ‘the letting value of the property’ in section 4 a wider meaning than the ‘letting value of the site’ in section 15 would not involve a difference of definition. I find less force in the rest of Mr Nugee’s reasons. (3)  Mr Nugee’s argument on the building lease exception is that if a premium is to be decapitalised then the cost of building the house must be treated in the same way. If this were done the rent under the building lease would almost always be under two-thirds of the rent plus the decapitalised value of the house, so the exception is unnecessary. Mr Farrow’s answer is that the value to be taken into account is not the cost to the tenant but the value to the landlord and that the value to him of the reversion will be far less than the cost of building the house (indeed with a 99-year lease it will be a very small sum) and there may well be cases where the rent would exceed two-thirds of the rent plus the decapitalised value of the reversion. Both arguments proceed on the basis that the hypothetical lease is a building lease. On that basis, which I think must be right, I find Mr Farrow’s answer convincing. (4)  I understood Mr Nugee to concede in his reply that the payment of a premium was not one of the ‘terms’ of the lease but the consideration for the grant of the lease, as Mr Farrow had argued in reliance on Hill v Booth [1930] 1 KB 381. Though there are difficulties in either interpretation, I prefer Mr Nugee’s second thoughts on this point. Since letting value is to be assessed on the basis of a hypothetical letting and since rent and premium are mutually dependent on each other, it seems right to consider a hypothetical premium as well as a hypothetical rent. If the premium is one of the ‘terms’ referred to in the parenthesis and if the hypothetical premium has to be the same as the actual premium, there will be hardly any tenancies granted in the years covered by the proviso in which the actual rent is less than two-thirds of the hypothetical rent. (5)  The problems of valuation which the judge’s interpretation of letting value would create are not, in my opinion, great enough to drive me to the landlords’ interpretation and are certainly not insuperable. The combinations of rent plus premium actually obtained are nothing like infinite; and I would confine the total consideration to the total consideration in cash and exclude from the letting value of the property any other part of the consideration such as the execution of works of repair undertaken as a condition of the grant of the 1945 tenancy. (6)  and (7) The history of premiums charged for Rent Act premises and the presumption that Parliament had them in mind when enacting this proviso do not lead to the conclusion that by not mentioning them or providing for their decapitalisation Parliament intended to exclude them from the letting value of such premises. It would indeed be odd if Parliament had lost sight not only of such an important factor as premiums in causing low rents to be charged but of all the enactments dealing with such premiums to which I have already referred. After all, for every tenancy granted in the 24 years to which the proviso applies, a premium could lawfully be charged except for tenancies controlled by the Rent Acts which were granted in either of those years. But if Parliament had premiums in mind it is difficult to suppose that it would not have regarded them as an obvious part of the letting value of Rent Act premises requiring specific exclusion rather than specific inclusion. To have disregarded them would have produced an anomaly arising from Parliament’s alternating intention to allow them, on which Mr Farrow relied. The tendency would be for rents to be nearer the permitted rent during those years when premiums were forbidden than at other times. So if one house with a permitted rent of £100 a year were let in 1948 on a 30-year lease at a rent of £20 a year with a premium of £2,000 and an exactly similar house with the same permitted rent were let in 1950 on a 30-year lease at a rent of £100 a year with no premium it might well be that if letting value is to be tested by rent alone the first tenant would be able to enfranchise and the second would not. I think there is some force in Mr Farrow’s argument that this would be an unacceptable anomaly. (8)  and (9) It is plain that the Act of 1967 is an expropriatory Act, that the proviso to section 4(1) was inserted for the benefit of landlords and, without recourse to the White Paper, that it expressed the intention of Parliament to distinguish between long tenancies at a low rent and long tenancies at a high rent (and, of course, to exclude short tenancies at any rent). The landlord is being required to submit to a compulsory purchase of his freehold property by a leaseholder who has a long tenancy at a low rent. The dividing line between low rents within the Act and high rents outside it is not fixed at any boundary between ground rents and rack rents but by the figure of two-thirds of the rateable value. But as inflation operating upon that figure between 1939 and 1963 would have ‘enfranchised’ leases at a rent which could not have been considered low at the commencement of the tenancy, the proviso introduced the letting value instead of the rateable value to prevent injustice which the landlords would have suffered without that substitution. I would, however, respectfully follow the judgments in this court81 and in the House of Lords in the cases cited by Mr Nugee and regard the expropriatory nature of the Act as of little weight in construing its provisions, and I would not regard the standard rent of £100 a year, to which the Rent Acts restricted the rent of this house, as a rack rent even in 1945. There is therefore nothing in those last reasons submitted by Mr Nugee that weighs against Mr Farrow’s construction which the judge accepted. I return therefore to Lord Wensleydale’s golden rule cited by Lord Blackburn in River Wear Commissioners v Adamson (1877) 2 App Cas 743 at p 764: . . . that we are to take the whole statute together, and construe it all together, giving the words their ordinary signification, unless when so applied they produce an inconsistency, or an absurdity or inconvenience so great as to convince the court that the intention could not have been to use them in their ordinary signification, and to justify the court in putting on them some other signification, which, though less proper, is one which the court thinks the words will bear. It may be that in inserting the proviso to section 4(1) and replacing the value to the tenant (rateable value) by the value to the landlord (letting value) as the basis of distinction between high and low rents Parliament gave inadequate consideration to that alternative basis and to an important class of tenancies within which this tenancy and (we are told) a number of others granted by these landlords fall, and, like this court in Gidlow-Jackson v Middlegate Properties Ltd [1974] QB 361, did not have premiums in mind. In doubt whether it did or did not, the right course for the courts is to apply the golden rule. Its application leads to no inconsistency or absurdity or inconvenience so great as to be contrary to Parliament’s intention. Not to apply it would have the absurd result of making a property which could be let at £100 a year with a premium of £2,000 of equal letting value to another similar property which could be let at £100 a year with no premium. Either construction may give rise to anomalies but to none greater than that. Balancing them as best I can I conclude that the judge was right to come down in favour of what I agree is the natural meaning of the proviso. I would accordingly dismiss the appeal. Agreeing, BRANDON LJ said: The question to be decided on this appeal is what meaning is to be given to the expression ‘the letting value of the property (on the same terms)’ appearing at the end of the proviso to section 4(1) of the Leasehold Reform Act 1967. The proviso was inserted for the benefit of landlords, in order to exclude from the enfranchisement provisions of the 1967 Act houses the rents of which had been proper market rents at the times when the relevant tenancies of them were granted, but which, as a result of inflation between 1939 and 1963, had become less than two-thirds of the rateable values of such houses on the appropriate day, namely (subject to later statutory provisions) March 23 1965. In the present case the relevant tenancy was granted on July 12 1945 for a term of 40 1/2 years commencing on September 29 1945 at a rent of £100 a year on payment of a premium of £500. The house was subject to new control under the Rent and Mortgage Interest Restrictions Act 1939, and £100 was the standard rent under the provisions of that Act. The premium of £500 paid by the tenant was a lawful payment, since there was at that time no statutory prohibition on the taking of a premium by a landlord on the grant of a lease for 14 years or more. In construing the expression ‘the letting value of the property (on the same terms)’ in relation to these facts two potentially interlocking questions arise. The first question is whether the words ‘letting value of the property’ mean (a) the annual rent obtainable in the open market, irrespectively of any limit imposed in the form of a standard rent or otherwise by the Rent Acts; or (b) the annual rent obtainable in the open market having regard to such limit, without any addition for the decapitalised value of any premium lawfully obtainable; or (c) the annual rent obtainable in the open market having regard to such limit, but with an addition for the decapitalised value of any premium lawfully obtainable. The second question is whether the words in brackets ‘on the same terms’ include or exclude the payment by the tenant of the premium of £500. I think it convenient to answer the second question first. In my view the words in brackets ‘on the same terms’, though capable of including the payment of the premium, should, in the context in which they are found, be construed as not doing so. The payment of the premium should rather be regarded as the consideration for which the lease was granted; see Hill v Booth [1930] 1 KB 381. I take that view because the contrary view would, as it seems to me result in relatively few tenants satisfying the requirements of a tenancy at a low rent under the proviso to section 4(1). Turning to the second question, I shall examine it first of all as an ordinary question of statutory construction, without regard to any authority on it which may be binding on me. In my view meaning (a) above, namely the annual rent obtainable in the open market, irrespectively of any limit imposed in the form of a standard rent or otherwise by the Rent Acts, is the meaning which fits best with the purpose of the proviso to section 4(1). This proviso was inserted, as I indicated earlier, for the benefit of landlords. Its purpose, as it seems to me, was to substitute for a comparison of the annual rent payable under the tenancy with a rateable value fixed perhaps many years after the commencement of the tenancy, and therefore a value much increased by inflation, a comparison with a value which would more nearly accord with that which would have been the rateable value of the property at the commencement of the tenancy if an up-to-date revaluation of rateable values had taken place at a reasonable time before or after such commencement. Meaning (a) is the only one of the three possible meanings referred to above which is capable of achieving this result, or something approximating to it. It follows that, unhampered by any authority binding on me, I should be disposed to adopt meaning (a). Section 4(5) of the 1967 Act puts on a landlord the burden of proving that a tenancy coming within the proviso to section 4(1) is not a tenancy at a low rent. In the present case the landlords called no evidence to show that, at the time of the commencement of the tenancy on September 29 1945, the annual rent obtainable for the house in the open market on the same terms, irrespectively of any limit imposed by the Rent Acts, was less than £150. It follows that if meaning (a) were to be adopted, the tenant’s claim would succeed, although on a different basis from that relied on by the learned county court judge, who adopted meaning (c) for the expression concerned. While this would be my approach to the case if the matter were free of authority, it seems that I am precluded from adopting meaning (a) by the earlier decision of this court in Gidlow-Jackson v Middlegate Properties Ltd [1974] 1 QB 361. In that case it was held that the ‘letting value of the property’ for the purposes of the proviso to section 4(1) of the 1967 Act could not exceed the amount of rent lawfully exigible by the landlords under the Rent Acts. The lease there concerned had been granted in 1952, at which time it would have been unlawful for a landlord to require the payment of a premium on a lease of whatever length. It follows that the court was not concerned with, and did not have present to its mind, the complications arising from a premium having been paid by the tenant on the grant of the lease concerned, or of the landlords, though constrained by the Rent Acts with regard to the maximum amount of rent exigible by them, being lawfully entitled to require the payment of a premium on the grant of a long lease of the property. It was, accordingly, without regard to such complications, that the court rejected meaning (a) and gave no consideration at all to the choice between meanings (b) and (c). I am not at all sure that, if the complications arising from a premium lawfully paid by a tenant, and lawfully exigible by a landlord, had been raised in Gidlow-Jackson v Middlegate Properties Ltd, the decision of the court to reject meaning (a) would have been the same. I recognise, however, that I am bound by that decision and am therefore precluded from adopting meaning (a) in the present case. It seems to me desirable, nevertheless, that the decision in Gidlow-Jackson v Middlegate Properties Ltd should be reviewed by the House of Lords as soon as a suitable case for such review arises. On the footing that this court is precluded from adopting mean-82 ing (a), I agree with the view of Stephenson LJ that meaning (c) should be preferred to meaning (b), as it was by the learned county court judge. I agree with that view mainly because it seems to me that it would be contrary to commonsense, and to the realities of the matter, in assessing the letting value of a rent-controlled house, to regard the maximum rent exigible by the landlord under the Rent Acts as the sole benefit derived by him from the tenancy, and to disregard the further benefit (which may be very substantial) obtainable by him in the form of a premium lawfully exacted by him from the tenant in consideration of the grant of a long lease. Although, with meaning (a) excluded as a possibility by authority, I prefer meaning (c) to meaning (b), I think it right to point out that the adoption of meaning (c) produces some strangely anomalous results, because of the repeated changes during the material period in the law relating to the right of a landlord to require the payment of a premium on the grant of a lease. The relevant period for the purposes of the proviso to section 4(1) of the 1967 Act is the end of August 1939 to the beginning of April 1963. During this period the situation with regard to a landlord taking a premium on the grant of a lease was this: from 1939 to 1949 premiums were lawful in the case of leases for 14 years or more; from 1949 to 1957 premiums were unlawful in the case of any lease for however long; from 1957 to 1963 premiums were lawful again in the case of leases for 21 years or more. It follows that, if meaning (c) is adopted, a tenant’s chances of acquiring the freehold of a house let to him on a long lease were and are much better if his lease was granted between 1939 and 1949 or between 1957 and 1963, when premiums were lawful, than if it was granted to him between 1949 and 1957, when premiums were unlawful. For the reasons which I have given I should prefer, if not bound by authority, to support the decision of the learned county court judge on a basis different to that on which he relied. Bound by authority as I am, however, I agree with Stephenson LJ that the decision of the learned county court judge should be supported on the basis on which it was given, and that the appeal should be dismissed accordingly. Agreeing that the appeal should be dismissed for the reasons given by Stephenson LJ, SIR DAVID CAIRNS said: I agree with Brandon LJ that the question whether Gidlow-Jackson v Middlegate Properties Ltd was rightly decided might well, on a suitable occasion, be considered by the House of Lords, but I express no conclusion as to whether, if the decision of the Court of Appeal in that case were not binding on us, I should have held that the effect of the Rent Acts should, in the case of a rent controlled house, be taken into account for the purposes of the proviso to section 4(1) of the Leasehold Reform Act 1967. The appeal was dismissed with costs. Leave to appeal to the House of Lords was given on the terms that the orders for costs in the Court of Appeal and the county court were not disturbed.