Wolverhampton shop premises damaged by fire–Clause in lease allowing landlords to determine in such event–Tenants remove stock, etc, and landlords serve notice purporting to exercise power in clause–Tenants held to have evinced an intention to exert their right of occupancy to an extent entitling them to apply for a new lease under the Landlord and Tenant Act 1954
This was an
appeal by Morrison Holdings Ltd against a decision of Judge Davison at
Wolverhampton County Court of February 6 1975 holding that they had no locus
standi to pursue an application for the grant of a new tenancy of business
premises at 31 Dudley Street, Wolverhampton, from the respondents, Manders
Property (Wolverhampton) Ltd.
Mr G Godfrey
QC and Mr M Rich (instructed by Paisner & Co) appeared for the appellants,
and Mr J Mills QC and Mr D A McConvill (instructed by Manby & Steward, of
Wolverhampton) represented the respondents.
Giving the
first judgment, SCARMAN LJ said that the appeal raised a short question which
might be put in this way: did these applicants for a new tenancy have the locus
standi to make their application under Part II of the 1954 Act? The appellants applied for a new tenancy by
an application dated October 17 1974. The respondents filed an answer in which
they first set out one of the statutory grounds for opposing the grant of a new
tenancy, namely, that they intended to demolish and reconstruct the premises.
That issue had not yet been considered by the county court judge, for the
reason that at the invitation of the parties he directed his attention to a
preliminary point also raised in the landlords’ answer, the argument that the
appellants were not entitled to the grant of a new tenancy, since prior to the
issue of their application they had vacated the whole of the premises and were
no longer in occupation of the whole or any part. Other matters alleged in the
answer did not fall for consideration in the present appeal. The proceedings
had taken a strange and unusual course before the judge, who dealt with two
preliminary points. The first of these was dealt with on January 31 1975, when
he held that the landlords were within their rights in serving a notice under
clause 6 (4) of the lease. That point was no longer the subject of litigation.
The second preliminary point was the point on which the appellants had come to
the Court of Appeal, since the judge found that they were no longer in occupation
and therefore had no locus standi to apply for a new tenancy under the
1954 Act.
The appellants
were tenants pursuant to an underlease dated July 6 1972, under which they held
a tenancy running from March 25 1972 until December 24 1977 at a rent of £4,750
a year. The premises consisted of a shop on the ground floor and a basement.
They were part of a larger building known as the Central Arcade. That was a
large structure consisting of shops, four of them facing Dudley Street and some
11 facing the arcade, which lay to the west of Dudley Street and ran from
Dudley Street towards the rear of the landlords’ other property known as the
Manders Centre. The tenancy was a business tenancy in that the underlease
contemplated the tenants carrying on a retail business of clothiers. The
landlords owned a large area–the court was told some four acres–in the centre
of Wolverhampton, including the arcade. They had in mind a large redevelopment
scheme, had redeveloped a good deal of the area behind the arcade and were
working towards Dudley Street. It was undoubtedly because the landlords had in
mind their redevelopment programme, and because of their desire at some time to
recover possession of their Dudley Street frontage, including no 31, that the
lease was framed in the way it was. It included a break clause which enabled
the landlords to give notice determining the tenancy on December 25 1975 or at
any time thereafter. It also contained some not very unusual clauses in regard
to insurance against certain risks, including fire, but clause 6 (4), already
mentioned, which was one not frequently found, was clearly dictated by the
particular situation in which the landlords found themselves. It had figured
largely in the present appeal. By its terms, the rent due under the lease was
to be suspended, if the premises were destroyed or damaged by fire or any other
insured risk, until they were made fit for occupation once more; and the clause
continued:
Provided that
in the event of the said Central Arcade being so substantially damaged by fire
or other insured risks as to render it in the opinion of the lessors’
architects economically incapable of rebuilding or reinstatement in its
existing form and layout the lessors may at any time following such damage give
to the lessees notice in writing forthwith terminating this demise whereupon
this lease shall immediately be cancelled and all obligations by either party
brought to an end.
The landlords
by May 19 1974 had got their demolition contractors right up to the back of
these premises and were intending to demolish the area immediately in the rear,
but not of course 31 Dudley Street, which was then in the occupation of the
appellants for business purposes. On May 20 a fire occurred. The county court
judge described it as devastating; Mr Mills (for the landlords) as catastrophic
and disastrous. The fire burned down the arcade itself. It did not wholly
destroy 31 Dudley Street, but it did considerable damage to the roof and to the
upper storeys, which were not, of course, in possession of the appellants and
not included in the demise. The judge said that he was satisfied that no actual
part occupied by the appellants was actually burned by fire, but that he was
satisfied, nevertheless, that the structure of the whole building was affected.
The walls were affected by water. The premises were also affected by smoke. The
judge found that the building was rendered wholly and completely unfit for
occupation as business premises on May 20. It was, in his finding, quite
impossible for the tenants to carry on the business in the premises at that
date. He added as a further factor that all the services, ie the drains and the
electricity supply, had been destroyed in the fire.
The landlords
had to consider the situation. So did the tenants. The attitude of the latter
was that they were insisting on retaining their right of occupation,
recognising for the time being that physical occupation for business purposes
was not possible and inviting the landlords to act under the lease to reinstate
the premises so that they could resume trading. Their subsequent actions were
consistent with that interpretation of their letter to the landlords on May 21.
The judge found that the tenants never gave up possession of the keys, and that
they left some fixtures and fittings even after the bulk of the stock had been
salvaged; but that they
June 17, the date on which, on one view of the case, the landlords took the law
into their own hands and demolished what was left of no 31. The landlords
received an honest and competent report from their architects, on which they
acted perfectly bona fide under clause 6 (4), giving an immediate notice
terminating the contract under that clause. As it happens, the tenants’ letter
of May 21 and the landlords’ clause 6 (4) notice, which they gave on May 22,
crossed in the post and this led to some confusion. In the course of the
confusion each party in fact reiterated and emphasised their respective attitudes.
During this period the premises were boarded up and made reasonably safe so far
as passers-by were concerned. On June 17 the landlords went into no 31 with
their bulldozers and knocked the premises down. Since that date 31 Dudley
Street, even to the extent that it was left by the fire, had disappeared save
for the land on which the premises were built. The court was told that there
had been rebuilding on the site to a plan quite different from the 31 Dudley
Street which was the subject-matter of the demise. The judge never did get so
far as to consider the merits of the substantive plea by the landlords that
they required the premises for demolition and reconstruction and that therefore
a new tenancy should not be granted. That issue remained, with all its
difficulties, to be considered if the tenants were successful in this appeal
and were found to have the locus standi to make their application.
The point now
before the court turned on the construction of sections 23 and 24 of the 1954
Act and on the proper inference to be drawn as to the relationship of the
tenants to the property after the devastating fire on May 20. Mr Mills, for the
landlords, submitted that from the date of the fire these applicants were not
tenants under a tenancy to which the Act applied, because they no longer
occupied these premises, and certainly no longer occupied them for the purposes
of a business carried on by them. This question had been considered by the
courts, and in particular by Cross J in I & H Caplan Ltd v Caplan
(no 2) [1963] 1 WLR 1247. To be able to apply for a new tenancy
under the Act, a tenant had to show either that he was continuing in occupation
of the premises for the purposes of a business carried on by him or, if events
over which he had no control had led him to absent himself from the premises,
that he continued to exert and claim his right of occupancy. In the present
case the absence of the tenants from the premises after the fire was not their
choice but was brought about by the state in which the fire had left the
premises–a state which was none of their own making. Nevertheless, they
exhibited immediately after the fire and continued to exhibit an intention to
return and to claim their right of occupancy, and reminded the landlords from
time to time of what they thought were the landlords’ obligations to reinstate.
The judge was
so impressed with the devastating nature of the fire that he was not prepared
to draw the inference that the absence of the tenants from the property was
temporary. He though the reality of the situation was that the tenants had gone
for ever. Mr Mills submitted that that was an inference which indeed he was
right to draw because of the catastrophic nature of the fire. He (his Lordship)
thought that when events such as he had detailed arose, and a tenant was faced
with difficulties of occupation such as confronted these tenants, it must be a
question of fact whether the tenant intended to cease occupation or whether he
was (as the judge found these tenants were) cherishing the hope of return but
making it quite clear that he regarded himself as possessing a right of
occupancy and calling upon the landlord to reinstate. Mr Mills said that the
whole of that was quite unrealistic because these landlords had, immediately
following the fire, given a notice under clause 6 (4) indicating that the
Central Arcade was economically incapable of being reinstated to the old design
and terminating the tenancy. But one had to look at the matter as the tenants
were then looking at it. They had premises which themselves had not been
destroyed. The judge expressly found that the part held by the appellants still
stood. They (the appellants) also must be assumed to have appreciated their
position under the Landlord and Tenant Act 1954. That was this, that the
landlords could not bring the contractual tenancy to an end save by taking
steps detailed in Part II of the Act. In particular, the landlords could not
bring the tenancy to an end merely by serving a notice under clause 6 (4) if
the tenants were still in occupation or claiming their right of occupation at
the time it was served, because in terms it was not a notice as required by the
Act. It was to be observed, moreover, that these difficulties created no
technical problem for the landlords in this case, because at a later date, on
July 1 1974, realising that there might be argument as to the effectiveness of
the clause 6 (4) notice, they did serve an appropriate notice under section 25.
That led to a
further question arising on this appeal. As Cross J recognised in I & H
Caplan Ltd v Caplan, the applicant for a new tenancy had to continue
in occupation, or maintain his right to occupy, right up to the date of the
order made by the court. Were these applicants still occupiers after the
demolition in June and at the time, some two weeks later, when the section 25
notice was served? He (his Lordship)
would find it surprising if action which, on the view of the case he had
formed, was action not lawfully open to the landlords, but was nevetheless taken
by them, could be said to destroy the appellants’ locus standi to apply
under this part of the Act. He did not think the court was driven to such an
unjust conclusion. It was plain that the cesser of occupation in this case was
not to be regarded as an abandonment of occupation by the tenants. They had at
all times indicated not only their hope but their intention to go back as soon
as the premises were fit for occupation. Nothing he (Scarman LJ) had said bore
upon the substantive ground in the landlords’ answer, namely, that they
required the premises for reconstruction. It might be that they had a strong
case. All that the court was concerned to determine was whether the appellants
had a right to apply to the court. For the reasons he had given, he (his
Lordship) could find nothing in the facts of the case and nothing in the 1954
Act to debar them from pursuing their application. He would allow the appeal.
SIR GORDON
WILLMER said that he had come to the same conclusion. The question was whether
the appellants had shown such continuing occupation as to give them a locus
standi to assert any rights under the 1954 Act. This was a mixed question
of fact and law. After the fire the appellants as tenants enjoyed the same
right to occupy the premises as they had enjoyed before. The premises, although
damaged, were still in existence. The appellants had, during the first day or
two following the fire, exercised their rights by going into the premises in
order to save as much stores and equipment as they could. It seemed to him (his
Lordship) that the tenants, who had been in continuous occupation up to the
fire and immediately after the fire and who retained the intention to occupy,
remained both in fact and in law the occupiers of the premises at the relevant
time. They retained the keys; they were thus in a position to exclude the
public or to open the door and invite the public to come in. If some person had
been invited to come in, he (Sir Gordon Willmer) apprehended that the tenants
would have had some difficulty in escaping their liabilities under the
Occupiers’ Liability Act 1957. He did not see how the subsequent demolition of
the building at the instance of the landlords could possibly have affected one
way or the other such rights as the tenants had.
STEPHENSON LJ
agreed, and the appeal was allowed. The appellants were awarded costs above and
below.
