Landlord and tenant – Misrepresentation – Deceit – Damages – Claimant tenant serving notice on defendant landlord requesting new tenancy of business premises – Defendant landlord opposing new lease relying on section 30(1)(g) of Landlord and Tenant Act 1954 – Court making order terminating lease – Claimant seeking compensation under section 37A of 1954 Act and/or damages at common law in deceit – Claim allowed in part
The claimant was the former tenant of ground-floor and basement premises within the Riverside Building, County Hall, Belvedere Road, London SE1, pursuant to an underlease granted on 8 December 1997 for a term of 20 years. The defendant landlord was a company incorporated in Japan. Its business included property holdings and property dealings.
The claimant’s lease was protected by Part II of the Landlord and Tenant Act 1954. The claimant served a notice on the defendant pursuant to section 26 of the 1954 Act requesting a new tenancy of the premises. The defendant opposed the grant of a new lease in reliance upon section 30(1)(g) of the 1954 Act and applied to the court, pursuant to section 29(2) of the Act, for an order for the termination of the lease.
The county court determined, as a preliminary issue, that the defendant had proved the required intention to occupy the premises under section 30(1)(g) and made an order terminating the lease. The claimant did not challenge the order and vacated the premises. However, it subsequently sought a substantial award of compensation pursuant to section 37A of the 1954 Act and/or damages at common law in the tort of deceit on the basis that the defendant had secured the termination order by deliberate and/or reckless misrepresentation to the court of its intention to run its own restaurant from the premises. Further, the defendant had breached an undertaking which it gave to the court, promising to give effect to its stated intention.
Held: The claim was allowed in part.
(1) The general purpose of section 37A was to encourage fair dealing between the parties. The 1954 Act put a landlord in a special position because the disposition of legal rights was determined at least partly by reference to its subjective intentions. That was open to abuse unless the landlord acted responsibly and in good faith. The landlord was entitled under the Act not to say anything; and if it took that position, the tenant would have to do its best to make dispositions on the basis of what it knew, and it might be forced to apply to the court. But section 37A recognised that it was desirable to encourage the parties not to invoke the jurisdiction of the court, and to settle matters outside it. The importance of the landlord acting responsibly and in good faith and the need to avoid abuse of the Act applied generally to claims for compensation: Inclusive Technology v Williamson [2009] EWCA Civ 718; [2009] PLSCS 244; [2010] P & CR 2 considered.
(2) Section 37A contained a self-contained right of statutory compensation. On the natural reading of the section, there had to be misrepresentation or the concealment of material facts, which was not required to be deliberate or reckless. In theory, an innocent misrepresentation could found a claim for compensation under section 37A. However, in a section 30(1)(g) case involving a misrepresentation of a landlord’s intention, it was difficult to see how a landlord could either innocently or negligently misrepresent its intention. A landlord could be expected to know what was in its mind when representing its intention. In the present case, the alleged misrepresentations of the defendant’s intentions were alleged to have been made deliberately or recklessly, and were relied upon also to found the claim in deceit.
(3) Where, as here, an order for termination of the current tenancy had been made, the wording of section 37A(1) clearly required it to be demonstrated that the relevant court order was “obtained” by misrepresentation or the concealment of material facts. The reference to “obtained” meant that the misrepresentation or concealment must have been causative (in the sense of an operative cause) of the order. In that sense, causation had to be demonstrated by the claimant tenant to establish a right to compensation under section 37A.
On the evidence, the court was satisfied that the defendant misrepresented its intentions to the court at the preliminary issue trial, deliberately, knowing that they were false. The defendant did not say that it intended to operate a restaurant from the premises, in respect of which the identity and programme remained to be determined. The county court had been induced to refuse to grant a new tenancy by the defendant’s misrepresentation as to its true intentions at the time.
Accordingly, the termination order was obtained by misrepresentations within section 37A and the defendant was liable to pay compensation to the claimant; the amount was to be determined at a subsequent trial on quantum.
(4) The tort of deceit contained four ingredients: (i) the defendant made a false representation to the claimant; (ii) the defendant knew that the representation was false or reckless as to whether it was true or false; (iii) the defendant intended that the claimant should act in reliance on it; and (iv) the claimant acted in reliance on the representation and in consequence suffered loss: ECO3 Capital Ltd v Ludsin Overseas Ltd [2013] EWCA Civ 413 and Abbar v Saudi Economic & Development Company (Sedco) Real Estate Ltd [2013] EWHC 1414 (Ch) considered.
Save for the requirement to prove loss, which would be for the quantum trial, the four required elements of the tort of deceit were satisfied in the present case, subject to one critical qualification: the defendant was asking the court to act in reliance on the representations, by making the termination order. The elements of deceit were only made out if one substituted “court” for “claimant”.
In those circumstances, the claim in deceit could only succeed if the required elements of deceit were broad enough to accommodate a situation where the defendant made a false representation to the court, intending that the court should act in reliance on it; and the court did act in reliance on the representation and in consequence the claimant suffered loss. The burden was on the claimant to satisfy the court, as a matter of law, that the tort of deceit was sufficiently flexible to accommodate such a situation. However, the court was not satisfied, based on the legal materials before it, that the tort of deceit was sufficiently flexible. Accordingly, the claim in deceit failed.
Alexander Hill-Smith (instructed by Knights) appeared for the claimant; David Holland KC (instructed by Mills & Reeve LLP) appeared for the defendant.
Eileen O’Grady, barrister
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