New lease of Soho restaurant
The following reserved judgment was given by his Honour Judge JB Blagden at Westminster County Court recently in the case Nihad v Chain:–
This was an application for a new tenancy under Part II of the Landlord and Tenant Act, 1954, by Hassan & Neriman Nihad, who are husband and wife and together carry on business as restaurateurs at 50, Greek Street and 3a, Bateman Street, Soho, which adjoining premises constitute the premises now in question and hereinafter together called “the premises.” They consist of a main building containing a basement, ground and three upper floors, fronting on and being 50, Greek Street, which runs approximately north and south, a yard and certain outbuildings and a two-floor building connected by a passage on ground floor with Bateman Street, which runs at right angles to Greek Street and to the approximate north of the premises.
The main building is at least 250 years old and may well be older and is scheduled as a building of historic interest under the Town and Country Planning Act, 1947.
On June 2, 1927, one Sir Philip Edward Pilditch demised the premises to one Bartolomeo Rinaldi for 28 years from June 24, 1927, at £300 per annum, payable quarterly in advance, the lessee covenanting (inter alia) to paint in every third year of that term with two coats at the least all outside work previously or usually painted, and in every seventh year all the inside work previously or usually painted, and throughout the term to repair and keep in repair the premises and landlord’s fixtures so as to render the same fit for the occupation of the tenant at a rack rent and so at the determination of the term to deliver them up. The foregoing is an abridged version of a rather elaborate covenant, but contains, I think, the gist of it.
Rinaldi assigned his tenancy to a third party, who on November 7, 1949, in turn assigned to the present applicants.
Early in 1950 the respondent, Mr Moise Chain, acquired the reversion, and he proceeded with remarkable despatch to serve in March of that year a schedule of dilapidations, the demands of which were on any view of the matter greatly in excess of the tenants’ obligations, even allowing for the covenant to maintain in repair. For example, he demanded painting here, there and everywhere, although it was neither a third nor a seventh year of the term, and at several points demanded three coats of paint, although if he had been entitled to any paint at all (which he was not) he would only have been entitled to two coats. Above all, under the head “Generally” he directed as follows: “Cut out and renew defective lengths of floor board throughout. Carefully check for any sign of dry rot or worm infestation. Cut out the defective parts and reinstate and protect surrounding surfaces.”
The Schedule of Dilapidations
Now the idea of a schedule of dilapidations is, as I understand it, this: The landlord says, and is entitled to say, to his tenant: “This, that and the other is wrong: put it right.” But this schedule goes far beyond that and savours of the unreasonable mother’s direction to her eldest child: “Go and see what little Tommy is doing and tell him not to.” I do not recollect having seen a demand quite like it, and if it is a proper demand under the present or any other covenant which could be made between sane persons I can see no limit to the matter. Carrying it to its logical conclusion, it seems to me that the landlord may at any moment during the term — and not merely at its determination — say to his tenant, and expect to be obeyed: “Raze the house to its foundations. Carefully examine these to see if there is anything the matter with them. If there is, put it right: and in any event rebuild the house.” This means that a landlord having in 1927 let a building, then 222 years old, for a term of 28 years, is entitled under the present covenants to have a brand new building at any moment and in particular to have a brand new building in 1955 — and so long as he can find a tenant of it under the present covenant — so ad infinitum. He has, in other words, an investment quite beyond price, endowed, as it is, not only with perpetual life but with perpetual youth, like Peter Pan and unlike Tithonus. This it seems to me is too good to be true, and a very poor bargain for the tenant, who may be required to spend the whole of his time and money demolishing and rebuilding and have no profitable use of his term whatsoever. In fine, it is obviously absurd.
It is unnecessary, and therefore undesirable, that I should express a positive opinion on the point, but I think it is clear that the landlord could never have proceeded by way of forfeiture — whatever other remedies might have been open to him — for complete disregard by the tenant of a notice so unreasonable as that of March, 1950. Strictly, it may be that it was incumbent on the tenants to regard it as something different in kind from the curate’s egg and to have complied with its valid parts — of course, undoubtedly there were quite a number. The tenants did, in fact, go quite a long way towards doing so, and if they did not quite go, so to speak, the whole hog, I really do not think that it is reasonable to hold that for that reason only they should be denied the benefits of the 1954 Act.
The schedule which I have just been discussing demanded certain other very substantial, and probably excessive, repairs, but the need of these is in controversy, and for that reason I propose to leave them for the moment.
A correspondence between the parties’ solicitors began as a result of the notice and has continued until the present proceedings. I need only say of it that though there have, as one would expect in a long argument between human beings (as opposed to angels), been faults on both sides, the attitude taken up by and on behalf of the tenants has been on the whole much more reasonable — in my opinion — that that taken up on behalf of the landlord.
The latter was, and is, an experienced and successful speculator in property. This I mention not with a view to suggesting that I have any prejudice against him, which I have not. His operations have, as far as I know, always been completely legitimate, and if and in so far as they have yielded him a golden harvest he is to be congratulated. I mention it simply because of the rather wide considerations which it seems to me are imported into this case by the use of the word “ought” in Section 30(1)(a). Prima facie, the question whether something “ought” to be done or not depends on legal or ethical considerations; but where, as in this case, both the tenant and the landlord wish to use the premises for purposes which, though different, are equally legal and equally moral, the only standard one can apply is that of reasonableness, regard being had first and foremost to the state of the premises but secondarily to the surrounding circumstances, not excluding the conduct of the landlord, whose reasonableness is imported into this. The respondent has for years been playing a risky game, with full notices of the risks, including the risk — no new thing, but an increasing risk in recent years — that legislation might prevent his using his property precisely as he would have wished. If, in the events which have here happened, he cannot make quite the profit out of the premises which he hoped to make when he acquired the reversion, that is to be regretted. But he no more deserves any particular sympathy than the bridge player who is dealt a Yarborough. It would be easy to think of landlords of a different type whose case might perhaps merit consideration of the question of reasonableness from a rather different standpoint. Plainly, however, the just standard to apply to Mr Chain is that of Sarah Battle: “A swept hearth and the rigour of the game”.
Happily, things are not quite as bad as in the illustration I have just put. In any view of the matter the respondent — even if he has not got a slam in no trumps — does not hold a Yarborough. It is satisfactory to think, or rather to know — for it is an inescapable fact — that even if the applicants’ claim (as finally presented) succeeds in full, Mr Chain will be getting a very satisfactory return from his investment in the premises, and in my view as good security for his capital as any man getting that return could in these days reasonably expect. His position would still, in my opinion, be better than that of the purchaser at the same price and time of (say) industrial equities.
The applicants (and so far as I know their predecessors in title) traded at all material times as restaurateurs as the “Romano Santi” Restaurant, although the applicants are Cypriots, and, as their names imply, Moslems. I do not, however, suppose that the most devout of Roman Catholics or other Christians (being sensible) go to a restaurant because it has a name suggesting any particular branch of their faith — there may be a few fools who do but I suspect their number to be negligible. Sensible people of any faith go to a restaurant to get the sort of food and drink they want at the sort of price they are prepared to pay, and for a Soho restaurant the standards of the “Romano Santi” seem to be to be high. The rooms open to the public are comfortable and — at least apparently — clean, while behind the scenes there is on inspection very little — certainly nothing to worry about — in the way of a skeleton in the cupboard. I have no doubt that a wholesome and pleasant meal can be obtained and enjoyed there at quite a reasonable cost, with quite good wine at a similar price. I have no doubt that a lot of people do go there because they like the type of refreshment they get at that place, and at its price, and have formed a habit of going there. These people consequently would, if a new restaurateur reigned in the stead of the present applicants, continue to go there at least for a time. In other words a new restaurateur tenant, if there were to be one, would get the benefit of such adherent goodwill as the applicants have created, that is to say, of something in the nature of an invisible improvement to the landlord’s property. To prevent this happening — where it can be prevented without injustice to the landlord — is presumably one of the objects of Part II of the 1954 Act, as it was an object of its 1927 predecessor.
Incomplete Compliance
The applicants’ tenancy expired by effluxion of time on June 24 last, and (all necessary formalities having been complied with) they have since been holding over under the provisions of the 1954 Act. In July the respondent served a second schedule of dilapidations, in which he again demanded levelling of the floors and insertion of RS joists, and repeated his demand for a general search for dry rot or worm infestation in and under the floor boards. The applicants asked for and obtained in the present proceedings particulars of their alleged breaches of covenants, and the effect of the particulars given is that the respondent relies on incomplete compliance with this schedule.
The applicants were represented by Mr Ackner and the respondent by Mr Rougier. One of the happy results for all concerned of the opposition of learned counsel of such calibre has (as one would expect) been a considerable simplification, as the case developed, of previously complicated issues. It is unnecessary, thanks to the most valuable services of both counsel, to refer except most briefly and in passing to the events of a rather long and involved history. Again the matter has been greatly simplified because, at |page:141| the invitation of both parties, I have myself viewed the premises and have a clear recollection founded on a note (which I wrote with my own hand immediately after the view) of what I saw with my own eyes. I am sure most judges who have to administer the 1954 Act would agreed with me in adopting from Roderick Random the words “A fig for theory — give me ocular demonstration.”
The Issues
The issues which I have finally to determine might be, I hope, accurately formulated thus —
1. Ought the applicants, by reason of their failure or failures to fulfil their obligations as tenants, to be refused a new tenancy?
2. Does the respondent intend to “reconstruct” the premises?
3. If the answer to both the foregoing is “No”
(a) At what rent and (b) on what conditions and (c) for what term should the new tenancy be granted?
Before proceeding further I should, I think, say that I accept Mr Rougier’s argument as against Mr Ackner’s as to the relationship of the first two questions. It is perfectly true that if the landlord really intends to demolish, etc, the premises, his reversion is not damaged by mere non-repair of those premises. But in this case it can hardly be that the tenant can say “I have failed to comply with my obligations; that, however, has not harmed you, since you intend to demolish the premises: therefore I ought to be allowed to stay in the premises despite your intention.” That is a most obvious non sequitur. Conversely, however, the case might easily and practically arise of an absolutely ideal tenant who has fulfilled to the letter every one of his obligations as such but who still ought to be refused a new tenancy because the landlord genuinely intends, eg, to demolish. This seems to me the reasonable construction of the section, for if the landlord really thinks that at the expiry of the tenancy he can more profitably (after reconstruction) let premises which have been (say) a cinema, for some other purpose (say) as a garage, it is but right that he should be allowed to use at his own risk his own property for what he thinks will be the more profitable purpose irrespective of the merits of the tenant whose term is expiring. The real answer is that if the landlord proves the facts set out in Clause (f), the merits or demerits of the tenant as regards Clause (a) do not enter into the picture. I do, however, feel that the use by the legislature of the word “intends” in Clause (f) envisages a very positive and clear-cut idea or scheme in the landlord’s mind. I do not think that Clause (f) of Section 30(1) of the 1954 Act applies if it be the fact that all the landlord really and presently intends to do is something in the nature of a minor exploratory operation followed by such (if any) “repairs or reconstruction” as that operation may suggest to be necessary.
Turning to the first question and considering it on its own, it is noticeable that mere breach of a covenant by a tenant does not of itself render the Court powerless to grant him a new tenancy. The Court is forbidden to do so only if it is satisfied of two things. First, the existence of the breach and, second, that by reason thereof the tenant ought not to be granted a new lease. Each part of the first question is itself a question of fact.
On part of the first question in the present case I have been greatly assisted by the evidence of the applicants’ witness, Mr Martin French, which in the small area where the two are in conflict I prefer to that of the respondent’s expert, Mr Garner. All else apart, Mr French has the enormous advantage of having known the premises well for a number of years. The tenant’s obligation is not that he will maintain an antiquidated building “as new,” or anything of the kind, but “so as to render the same fit for the occupation of a tenant at a rack rent.” Now it is true, for example, that the upper floors are sagging at several points, but not, I think, more than one would expect in a house of comparable antiquity. Mr French is confident, not having observed any progressive deterioration in the years he has known the building, that this is simply due to anno domini and not to anything more serious, such as woodworm or dry rot. There is a certain very small amount of visible dry rot elsewhere in the building, but I feel bound to shut my eyes to it, as it is not in the landlord’s second schedule of dilapidations nor, consequently, is it pleaded; in any event the maxim “de minimis” would apply to it. The respondent in his schedule of dilapidations has asked for reinforced steel joists to replace the sagging beams on all floors. Even assuming — contrary to what I think to be the probability — that the floors do need levelling, I very much doubt if this very drastic and expensive method of dealing with them is the right one: it savours very much of putting new cloth into old garments. I am not surprised at Mr French’s apprehension that the existing walls would not stand for it.
In point of fact, if the building is to continue in use as a restaurant, the sagging floors, provided they do not get appreciably worse, are probably a positive asset and a potential dollar earner: witness the extent to which visitors, and especially trans-Atlantic visitors, to London patronise cramped, stuffy, expensive and not over-clean chop houses merely because of their apparent antiquity. Similarly, the very words “Ye Olde” appear to have some sales value no matter how ridiculous their context. A friend of mine (whom I believe to be truthful) assures me that she once saw a fascia reading “Ye Olde Wirelesse Shoppe.”
The sagging floors constitute one of the two major alleged breaches of covenant. On the evidence I have, and accepting that of Mr French, I am not satisfied that there is any breach in this connection, but if there is, it would still be possible adequately to protect the landlord’s interests by a suitable covenant in a new lease.
The other major complaint about the main building is the kitchen floor, which is partly tiled and partly cobbled and somewhat uneven. It must be rather tiring and uncomfortable to work on, and difficult to keep clean, and I am sure that the chef de cuisine at Claridges, whosoever that dignitary may be, would emphatically refuse to stand it or rather on it. But the dignitary in question will not be the chef at the Romano Santi, and the chef or chefs who work or have worked there do not seem to have made any trouble. I do not doubt at all that a reasonable Soho restaurateur would not by reason only of the kitchen floor refuse to take the premises at a rack rent. If this is so, there is no breach of covenant. Actually, the floor could easily, and not very expensively, be levelled by laying a layer of concrete, and this would be a very great improvement, but, the existing floor probably having been in very much its present condition since the building was erected, it would still be an improvement and not a repair.
There are undoubtedly a number of small matters still to be attended to in the back premises (Bateman Street) and a few in the main building, but — ignoring the levelling of the floors with reinforced steel joists which (assuming it can safely be done) would undoubtedly run well into four figures — to do all that the landlord wants would, according to
Mr French, whose evidence I accept, cost only some £250, while the repairs necessary to fulfil the tenant’s actual covenant would run altogether to about half of this, or a little less. Mr French quotes the figure £120. That, at least, is how matters stood on July 13, the date of Mr French’s evidence. A good deal of the work had been done since June 24, so the relevant figure as at that date must have been appreciably higher.
Turning to the second part of the first question, it follows from what I have just said that Mr Rougier is quite right in saying that the applicants even at July 13, and still less on June 25, had not fully observed their obligations as tenants. In so far as they had done so, they had done so in part, too late; and he suggests they only did so at all in the hope of getting a new tenancy. But I do not think I can profitably consider their motives; there may be many people who have not murdered others simply and solely because they do not want to be hanged themselves, but the important fact from the legal point of view is that they have not murdered them. And as against this I must bear in mind the respondent’s conduct. It is but human to treat the warnings of a person who cries “Wolf, wolf,” less seriously than those of a person who does not.
In this particular case — I do not say for a moment that this would be so in every case of this kind — the matter is, in my view, clinched by the applicants’ willingness that any new lease should contain not only a repairing covenant and proviso for re-entry and forfeiture in the terms of the expired lease but also a covenant by the tenants —
Forthwith to put the premises into repair so as to comply with the repairing covenants in the lease made 2nd June 1927 between Sir Philip Edward Pilditch of the one part and Bartolomeo Rinaldi of the other part any dispute or question as to the due performance of this covenant to be determined by a single arbitrator in accordance with the Arbitration Act 1950 to be appointed in default of agreement by the Registrar of Westminster County Court.
In all the circumstances, and especially the circumstances I have just mentioned, my answer to the first question as a whole is “No.”
Turning to the second question, Mr Chain’s case is that he wishes to adapt the premises and to let them, when so adapted, as offices. It is to be said in his favour that there is a certain demand for offices in Soho. The district is not, and never was, exclusively devoted to catering and ancillary trade, but many other businesses and professions have always been carried on there. Mr Chain himself had a happy experience with another building in Greek Street, No 54, which he reconstructed at considerable expense and let — most profitably — as offices to a business connected with films, though Wardour Street, the main centre of that industry, lies appreciably further west. But there the necessary demolition had largely been done for him by the late and unlamented Adolf Hitler. The present building, with all its imperfections on its head, has, I am satisfied, a life of not less than 50 years in it, and as it stands is quite peculiarly unsuitable for use as offices. I do not say that it could not be so used. Probably some unfortunate country solicitors, for example, are housed in no less inconvenient old buildings in many cathedral towns, but then the tub in which Diogenes lived could hardly be called “ideal bachelor quarters.” Unless the premises are to be pretty completely reconstructed at great expense, I am quite sure their most economical use is as a restaurant, with living quarters over; a very great advantage to the restaurateur. All else apart, any other use will mean a complete waste of the kitchen fittings, and a nearly complete, and most deplorable, waste of all the basement space, including that at present devoted to storing wines.
Mr Chain was, of course, the only possible witness as to his own intentions and I did not regard him as a very satisfactory one. He did, however, admit that he realised that to put in steel joists to level the sagging floors would cost over £2,000, and that he had no intention of doing even this unnecessarily. Whether it be necessary or not, I cannot conceive that these premises could be made reasonably attractive to a tenant as an office building and/or showrooms at any less costs than this, and I am quite sure that Mr Chain is the very last man to expend money in a manner |page:143| that was not in his own best interests. Incidentally, he might find it difficult to carry out any radical alterations owing to action by the appropriate authorities under the Town and Country Planning Act, 1947. I do not believe that he really has at the moment any intention — in the sense I tried to indicate earlier — to do any more, if he gets vacant possession, than minor exploratory operations plus such, if any, work of repair or reconstruction as that exploration may show to be necessary. An intention to reconstruct to an extent presently unascertainable in some — in this case I think unlikely — contingencies is not in my opinion an “intention to reconstruct” within the meaning of Section 30(1)(f) of the 1954 Act. If Mr Chain were to have vacant possession, the very strong probability is, in my opinion, that in a short time he would be reletting the premises to another restaurateur. The answer to the second question is therefore also “No.”
That brings me to the third question. If there is to be a new tenancy, it should be on the conditions (except as to rent and term) of the old, with the addition of the covenant I mentioned in dealing with the first question. Having regard to the proposed covenants and proviso for re-entry, I see no valid reason for making the new term one of less than 14 years. There remains the somewhat vexed question of rent.
The old rent of £300 per annum is, of course, far too low. Even the rent of £450 per annum originally offered by the applicants admittedly cannot be justified. The applicants’ expert, again Mr French, puts the figure at £650, and this on the face of it is more near the mark. Mr French seems to me to have taken every relevant factor into account and no irrelevant factor. He gave his evidence in an admirable manner, and was well qualified to form an opinion, both on account of his great natural ability and knowledge of his subject, more particularly in its relation to the catering trade. The respondent’s expert, Mr Arnold, was also well qualified as experience goes, and his demeanour in the box left nothing to be desired, and he puts the figure at about £1,700. There is thus a four-figure difference, but I see no justification for the lazy course of splitting it. The so-called “judgment of Solomon” was in reality a proposal to convey the summons for custody into an action for partition, and though it was justified by its results there would have been no justification for carrying the proposal into effect. I must make up my mind which evidence I prefer, and I note two weaknesses in the contention put forward by Mr Arnold.
If he is right, it necessarily follows — it is, indeed, part of his testimony — that property such as the premises could be acquired with vacant possession for about £15,000; it would then take, perhaps, six months to find a suitable tenant. The minute he was found the value of the property would leap to £31,000. This must, I think, be fallacious, for it is too good to be true — like the philanthropy of the gentleman one sometimes meets on racecourses who, having at 2.30 pm certain knowledge as to the identity of the winner of the 3 o’clock, is yet willing to sell this absolutely invaluable information to any member of the public who will give him a paltry half-crown for it. Were it correct, no man with capital to invest would invest it otherwise then in properties in West London and the Stock Exchange would long have come to a standstill. Mr Ackner is, I think, undoubtedly right in saying “there must be a fallacy somewhere.”
Mr Arnold has also based his conclusion on his firm’s experience in relation to nine properties (apart from 54, Greek Street, which, as already pointed out, is not a really comparable case). Two in Soho Square, four in Greek Street and three in Old Compton Street, all well within a quarter of a mile of the premises, which his firm was recently invited to try to let, and he quotes the rents they were instructed to ask. In no one case out of the nine were they successful, and consequently he cannot say of his own knowledge at what rent they ultimately were let. It is hardly necessary to point out that the price at which a commodity is first offered bears no necessary relation to the price eventually paid for it. I have no hesitation in preferring Mr French’s evidence, and I accept his figure of £650 per annum.
There will, therefore, be an order for a new tenancy for 14 years, on the old covenants and provisos, plus the one new one I have mentioned, at £650 per annum, payable quarterly in advance, and, in case there is any difficulty in drawing it up, liberty to apply.
I have not heard counsel on the question of costs, but it has always seemed to me that the general rule that they follow the event cannot always justly be applied to proceedings under the Act or its predecessor. To take a phrase aptly used by Mr Rougier in his final speech, it would seem very unfair if the unwilling party to a shot-gun marriage had to pay even the parson’s fee, let alone the price of the bride’s trousseau or the wedding breakfast. In some cases it would, I think, be right to order the successful applicant as a term of getting a new tenancy to pay the respondent’s costs, but in all the circumstances of the present case I think (subject to what counsel may say) that the just order as to costs is no order.
May I, in conclusion, express my gratitude to both learned counsel for the great assistance they have given me.
Mr Desmond Ackner (instructed by Messrs Herbert Oppenheimer, Nathan & Vandyk) appeared for the applicants; Mr GR Rougier (instructed by Messrs George Brown, Son & Vardy) appeared for the respondent.
