Landlord and Tenant Act 1954 — Appeal by landlord from decision of county court judge granting a new tenancy of business premises — Grant opposed by landlord under section 30(1)(f) and (g) of the Act — County court judge rejected the landlord’s case under para (f) on the ground that the works which the landlord intended to carry out were not a reconstruction of a substantial part of the premises, and rejected the landlord’s case under para (g) on the ground that the landlord’s interest had been created within the 5-year period mentioned in section 30(2) — The facts were that the landlord intended to enlarge the premises by building an extension at the rear and then to carry on the business of a laundry in combination with the existing dry-cleaning business which had been operated by the tenants — The title to the landlord’s freehold interest had at various times been vested in trustees on trust for him as sole beneficiary and in himself as trustee for his children — The Court of Appeal held that the judge had been in error in regard to the application of para (g) — The word ‘created’ in section 30(2) referred to the creation of the landlord’s interest and not to the creation of the landlord’s title to it, and this interest, which was the freehold interest in the demised premises, had not been created within the 5-year period — This was sufficient for the appeal to succeed, but as the issue as to para (f) of section 30(1) had also been argued the court thought it right to express a view on it also — It appeared that the judge had confined himself to asking whether the works would amount to a
‘reconstruction’ of a substantial part of the premises and did not consider the possible application of the second limb of para (f), namely, whether the works constituted substantial work of construction on the holding or a part thereof — The court were of the opinion that if the judge had considered the point he would have been bound to hold that the works came within para (f) — It was not, however, necessary to decide whether, if the judge had asked himself the complete question, and had still found against the landlord, the finding would have been one of ‘fact and degree’ with which the court ought not to interfere — It was, however, arguable that, if the judge below had found all the material facts, the question whether the works were substantial was a matter of law for the Court of Appeal — Appeal allowed
This was an
appeal by the landlord, Babubhai Govanbhai Chauhan, from an order of Judge
Coulson at Leicester County Court granting the tenants, Ambaram Laxman Morar
and Bhagwandas Laxman, a new tenancy of business premises at 8 Melton Road,
Leicester, under the Landlord and Tenant Act 1954.
W A Blackburne
QC and S J G Lloyd (instructed by Burton Yeates & Hart, agents for Josiah
Hincks Son & Bullough of Leicester) appeared on behalf of the appellant; J
I Winegarten (instructed by Johar & Co, of Leicester) represented the
respondents.
Giving the
first judgment at the invitation of Kerr LJ, MAY LJ said: This is a landlord’s
appeal from an order of His Honour Judge Coulson of November 28 1984 whereby he
ordered that the tenants, the respondents before us, should be granted a new
tenancy of business premises at 8 Melton Road, Leicester.
For the
purposes of the present appeal it is unnecessary for me to refer in any detail
to many of the relevant statutory provisions in the Landlord and Tenant Act
1954. This Act gives some security of tenure to tenants of business premises.
It will be remembered that in his notice purporting to determine a business
tenancy, a landlord is required to say whether he would or would not oppose a
grant of a new tenancy to the tenants upon the termination of the current one.
If he proposes to oppose the grant of such a new tenancy, he is required to
state the grounds of opposition in his notice. In this case the appellant
originally relied upon paras (c), (f) and (g) of section 30(1) of the Act, but
he did not proceed with the first of these in the court below.
The material
parts of section 30(1) of the Act read as follows:
(1) The grounds on which a landlord may oppose an
application
for a new
tenancy
are such of
the following grounds as may be stated in the landlord’s notice . . . (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; (g) subject as hereinafter provided, that on the
termination of the current tenancy the landlord intends to occupy the holding
for the purposes, or partly for the purposes, of a business to be carried on by
him therein, or as his residence.
Subsection (2)
of section 30 is also material and reads:
(2) The landlord shall not be entitled to oppose
an application on the ground specified in paragraph (g) of the last foregoing
subsection if the interest of the landlord, or an interest which has merged in
that interest and but for the merger would be the interest of the landlord, was
purchased or created after the beginning of the period of five years which ends
with the termination of the current tenancy, and at all times since the
purchase or creation thereof the holding has been comprised in a tenancy or
successive tenancies of the description specified in subsection (1) of section
twenty-three of this Act.
Finally, I
must refer to section 41(2) of the Act, which is in these terms:
(2) Where the landlord’s interest is held on
trust the references in paragraph (g) of subsection (1) of section thirty of
this Act to the landlord shall be construed as including references to the
beneficiaries under the trust or any of them; but, except in the case of a trust
arising under a will or on the intestacy of any person, the reference in
subsection (2) of that section to the creation of the interest therein
mentioned shall be construed as including the creation of the trust.
The learned
judge held that the appellant landlord had proved what I may call the
‘intention element’ required by both paras (f) and (g) of section 30(1).
However, he granted the respondents a new tenancy because he also held that the
other requirements of these subparagraphs had not been made out: as to para
(f), because he considered that the works which the appellant intended to carry
out were not properly described as ‘reconstruction of a substantial part of the
premises’; as to para (g), because he held that the landlord’s interest had
been created within the five-year period referred to in section 30(2) of the
Act.
The facts of
this case can be quite briefly stated. Between 1968 and December 1972 the
appellant was the freeholder and registered proprietor of the relevant
premises. By a transfer dated December 21 1972 he transferred those premises to
V J and M V Rajput who, by a trust deed of the same date, declared that they
held the premises in trust for the appellant in fee-simple. By a transfer dated
August 23 1979 V J and M V Rajput (in pursuance of the trust deed just
mentioned) transferred the premises back to the appellant for no consideration
in the shape of money or money’s worth. On the same day the appellant executed
a declaration of trust in respect of the premises in favour of his four
children, all of whom are now adult.
By a lease
dated June 4 1974, Messrs Rajput demised the premises to a number of lessees,
among them the present respondents, for a period of 10 years from October 2
1973. As the result of various transactions, the details of which are not
relevant to the present appeal, by May 1983 the present respondents had become
the sole lessees entitled to the benefit of the original lease of June 4 1974.
By a notice given under the 1954 Act on May 6 1983, the appellant gave these
tenants notice terminating their tenancy on November 8 1983 and, as I have
already indicated, thereby also informed them that he would oppose an
application to the court for the grant of a new tenancy on the grounds set out
in paras (c), (f) and (g) of section 30(1) of the Act. In so far as the last
two grounds are concerned, he contended in his notice that he intended to
reconstruct the demised premises or a substantial part thereof and could not
reasonably do so without obtaining vacant possession of the whole, and further
that he required possession of the whole of those premises for the purposes, or
partly for the purposes, of a business to be carried on by him. At this time
the premises were being used by the respondents, as to the ground floor for the
purposes of a dry-cleaning business, and as to the upper floors for residential
purposes. It became clear from the pleadings and proceedings in the court below
that the appellant intended to extend the premises by building on an extension
at the rear to include a small commercial laundry and thereafter to carry on
himself on the premises the combined business of a dry cleaners and such a
laundry.
The
respondents duly gave notice that they were unwilling to give up possession of
the demised premises on the date of termination mentioned in the appellant’s
original notice, and applied in the usual way to the Leicester County Court on
August 12 1983 for the grant to them of a new tenancy. No point has been taken
on either side in this case that any of the formalities required by the other
relevant sections of the 1954 Act were not complied with. It was this
application by the respondents which was heard and allowed by the learned judge
on November 28 1984 and against which the appellant now appeals.
In arguing
this appeal before us on behalf of the appellant landlord, Mr Blackburne first
made submissions in relation to his client’s ground of objection to the grant
of a new tenancy founded upon para (g) of section 30(1) of the 1954 Act. He
submitted that as the learned judge had held that the appellant had had the
necessary intention under that ground, the only question was whether he was
disentitled to rely upon the ground by reason of the application of section
30(2) of the Act. It was accepted that there was no question of the appellant’s
interest as landlord having been purchased within the relevant five-year
period and that therefore the only question was whether this interest had been created
within that period. Counsel referred us to a passage from the judgment of the
court delivered by Romer LJ in Frederick Lawrence Ltd v Freeman,
Hardy & Willis Ltd [1959] Ch 731. It is unnecessary to go into the facts
of that case, but at p 743 of the report the learned lord justice said this:
He [counsel
for the tenants]
conceded that
the ‘interest’ of the landlord, namely, the reversion expectant on the
termination of the applicants’ tenancy, had been ‘created’ by the lease,
hereinbefore referred to, of March 10 1952, and, in our opinion, this
concession was rightly made. It is true that the landlords did not acquire this
interest until 1954 but that seems to us to be irrelevant. In our judgment the
word ‘created’ in section 30(2) is referable to the creation of a landlord’s
interest and not to the creation of the landlord’s title to it. The contrary
view would appear to render the word ‘purchased’, which appears as the
alternative to ‘created’, wholly redundant.
Mr Blackburne
submitted that the landlord’s interest in the instant case had throughout been
the freehold of the demised premises and that this had certainly not been
created within the five-year period referred to in section 30(2). It mattered
not, he submitted, that at some stage the appellant had been entitled to that
freehold interest either as the beneficiary under the trust deed executed by
Messrs Rajput in December 1972 or as a trustee for the benefit of his children
by virtue of the appellant’s own declaration of trust of August 23 1979.
Counsel submitted that the learned judge erred in holding, as he appears to
have done, that section 41(2) had any relevance to the question before him. All
that this subsection seeks to do is to enable beneficiaries under a trust of
the demised premises to object to the grant of a new tenancy to business
tenants on the same grounds as a trustee landlord. When they do so, which is
not the present case, they are subject to the same five-year limitation period
as a landlord under section 30(2).
In reply, Mr
Winegarten on behalf of the respondents relied on the fact that after his own
declaration of trust of August 23 1979 the landlord’s interest in the premises
was held in trust and thus, having regard to the relevant dates and the
combined operation of the second part of section 41(2) and of section 30(2) of
the Act, the five-year ‘limitation’ period applied and this appellant could not
rely upon ground (g) in section 30(1) of the Act. Counsel submitted that the
opening words of section 41(2) applied to both the first and the second parts
of the subsection, that is to say to the parts both before and after the
semi-colon, so that to the extent that is presently relevant the latter should
be construed as reading: ‘but where the landlord is a trustee the reference in
section 30(2) to the creation of the interest therein mentioned shall be
construed as including the creation of the trust’.
On my reading
of the judgment of the learned judge below, he accepted Mr Winegarten’s submission
on this point and for this reason rejected the appellant’s defence to the claim
for a new tenancy under para (g).
With respect
to the learned judge, I prefer the contentions advanced on behalf of the
appellant on this point. I do not think that section 41(2) has any relevance in
this case, nor do I think that it can properly be construed as Mr Winegarten
has submitted. In my opinion, the intent and proper construction of the
subsection is clear. Where the landlord of business premises is a trustee for
one or more beneficiaries, then the subsection prima facie entitles
those beneficiaries as well as the landlord to oppose the grant of a new
tenancy upon the ground contained in para (g). For instance, if the beneficiary
or beneficiaries bona fide intend, upon the termination of the relevant
business tenancy, to use the premises as a residence for themselves, then they
can oppose the grant of a new tenancy on this ground. But the second part of
section 41(2) places such beneficiaries under a similar ‘limitation’ as there
would be on the landlord were he alone beneficially entitled to the reversion:
if the trust under which the beneficiaries acquired their beneficial interest
was created within the preceding five years, then they, too, are barred from
relying on para (g). In my opinion, this is an understandable and sensible
provision.
It was argued
that if this were the correct construction of section 41(2) then the position
of a donee of a landlord’s interest in the reversion to business premises was
anomalous, in that he would not be subject to the five-year limitation period,
provided always that his donor acquired that reversion, or it was created, more
than that period before the termination of the current tenancy. I am not
persuaded that even on the dictum from the judgment of Romer LJ in the earlier
case which I have quoted this would be so, but it is unnecessary for us to
decide the point on this appeal. Suffice it to say that the existence of the
potential anomaly suggested does not make me doubt the construction of section
41(2) which I have held to be the correct one.
In my opinion,
therefore, the learned judge was wrong in law to reject the appellant’s case on
para (g) of section 30(1), and this appeal should succeed for this reason.
However, as the
learned judge also found against the appellant on para (f) and this issue was
argued before us, I think it only right to express a view on it also. Mr
Blackburne’s first submission on this point was that reading the learned
judge’s judgment it is clear that he only asked himself whether the building
works, which he found that the appellant intended to have carried out, would
amount to a ‘reconstruction of a substantial part of the premises’. He did not
consider, for instance, whether the proposed building operations could be said
to be a ‘substantial work of construction on the holding or part thereof’ under
a different part of the paragraph. In this respect counsel submitted that the
learned judge erred and thus, in so far as the decision was exercise by him of
a judicial discretion, it was open to this court to interfere. Although the
landlord’s notice to terminate the tenancy referred only to his intention to
reconstruct the demised premises or a substantial part thereof, nevertheless it
did also refer specifically to para (f), and on the authority of Biles v
Caesar [1957] 1 WLR 156 the appellant was entitled to found himself on
anything which came within any part of that paragraph, notwithstanding the
specific reference only to reconstruction in the notice to determine.
Mr Blackburne
then submitted that if the learned judge had adopted this wider approach then,
on the facts found by him, he ought to have found that para (f) had been
complied with. Any other conclusion, he submitted, would in effect have been
perverse.
Mr Winegarten
submitted that it would be wrong to construe the judge’s judgment so narrowly.
He had had a view of the premises and he had evidence, which he accepted, of
the extent of the intended works. Whether these were ‘substantial’ or not
within the terms of para (f) was a question of fact and degree for the learned
judge, and this court should not disturb the answer which he gave.
For my part I
think that it is clear that the judge did decide the issue on para (f) on the
basis that the appellant’s proposed works comprised reconstruction only. In the
course of his judgment he said: ‘I find that these proposed works consist
largely of reconstruction’. He then continued: ‘I find that the proposed works
are not properly described as a reconstruction of a substantial part of the
premises. For this reason I do not find ground (f) has been established by the
landlord.’ On the judge’s own
description of the intended works earlier in his judgment, I think that he was
wrong to confine himself in this way to reconstruction. Merely to ask himself
whether the proposed works were properly described as a reconstruction of a
substantial part of the premises did not I think go far enough in that it did
not take account of the other parts of para (f) in section 30(1).
In these
circumstances, I agree that this court is entitled to look at the nature and
extent of the proposed works, as the learned judge held them to be, and to ask
itself whether, for instance, they could properly be described as a substantial
work of construction on the holding or part thereof. Although the works were
described in evidence as a ‘modest extension’, the technical witness said that
it would be a considerable improvement to the premises. Further, the works were
estimated to take about three and a half to four months to complete and to cost
between £7,500 and £8,000.
On this
material and having considered the undisputed plans of the proposed works which
are before us, I think that had the learned judge considered whether the
proposed works came within the other parts of para (f) to which I have
referred, he would have been bound to hold that they did.
I therefore do
not find it necessary to consider whether, had the judge properly asked himself
the complete question and, having had a view, had still found against the
appellant, this finding would be one of ‘fact and degree’ with which this court
ought not to interfere. Support for this view can be found in the speech of
Lord Simon in Palser v Grinling [1948] AC 291 at pp 316-7, a decision
on inter alia the meaning of the phrase ‘a substantial portion’ in the
Rent Acts. On the other hand I think it is arguable that if the judge below
finds all the necessary facts, then whether or not the works are ‘substantial’
raises a question of the construction of that word, which is a matter of law
which this court is entitled to consider. As I say, however, it is unnecessary
for me to express a concluded view on this point in this appeal.
I turn finally
to the respondents’ notice given in this appeal. In brief Mr Winegarten argued
that as the demised premises were trust property the expressed intentions of
the appellant, as landlord, could not lawfully be put into effect. Faced with
the fact that each of the appellant’s children had given evidence below that
they agreed with their father’s proposal, counsel was forced to suggest that it
could be that in a year or two’s time one of the children could seek to
interfere with what his father was doing and allege undue influence when giving
his evidence at the trial. Having regard to the ages of the children, I think
that this point is unarguable. In any event I respectfully repeat the
well-known dictum of Asquith LJ in Cunliffe v Goodman [1950] 1
All ER 720 at p 724:
An
‘intention’ . . . connotes a state of affairs which the party ‘intending’ . . .
does more than merely contemplate. It connotes a state of affairs which,
on the contrary, he decides, so far as in him lies, to bring about, and which,
in point of possibility, he has a reasonable prospect of being able to bring
about by his own act of volition.
In my opinion,
the learned judge was clearly entitled on all the evidence to find, as he did,
that the requisite intention of the appellant under both paras (f) and (g) was
made out and there is no basis whatever to disturb these findings.
For these
reasons I would allow this appeal and set aside the order of the learned judge
granting a new tenancy.
KERR LJ agreed
and had nothing to add.
The appeal
was allowed with costs; leave to appeal to the House of Lords was refused.
