Landlord and Tenant Act 1954, Part II — Appeal by tenant from county court order striking out tenant’s application for the grant of a new tenancy — Premises used as a restaurant — Landlords opposed the grant of a new tenancy on the grounds mentioned in section 30(1)(a) and (b) of the 1954 Act, but subsequently applied to strike out the tenant’s claim on the ground that he had not occupied the premises as required by section 23(1) of the Act — Section 23(1) required that the premises should be ‘occupied by the tenant’ and so occupied ‘for the purposes of a business carried on by him or for those and other purposes’ — On the findings of the county court judge the premises had been occupied as a restaurant by a series of companies which had been incorporated and after a short time wound up — The tenant himself took only a minor part in the running of the restaurant, although holding shares, 50 out of 100 in the last of the companies — It was submitted that at least the last two companies were the alter ego of the tenant and that occupation by them could be regarded as occupation by him for the purposes of the 1954 Act — A dictum by Sir Raymond Evershed MR in Pegler v Craven was cited in support of this view — Held that the judge was correct in holding that the alter ego contention was quite unsustainable in the light of the recent decision in Cristina v Seear and the facts of the present case — The business carried
on by the companies was not the same as a business carried on by the tenant or applicant — He did not fulfil the fundamental condition of section 23(1) — Appeal dismissed
The following
cases are referred to in this report.
Cristina v Seear [1985] 2 EGLR 128; (1985) 275 EG 898, CA
Pegler v Craven [1952] 2 QB 69; [1952] 1 All ER 685; [1952] EGD
207; (1952) 159 EG 215, CA
Tunstall v Steigmann [1962] 2 QB 593; [1962] 2 WLR 1045; [1962] 2 All
ER 417; [1962] EGD 278; (1962) 182 EG 459, CA
This was an
appeal by the applicant, Manoocher Nozari-Zadeh, from an order by Judge Harris
at West London County Court striking out the applicant’s originating
application for the grant of a new tenancy of restaurant premises at 9-10
Phillimore Gardens, London W8, under Part II of the Landlord and Tenant Act
1954. The respondents were the landlords, Pearl Assurance plc.
R Moshi
(instructed by A J Bond & Co) appeared on behalf of the appellant; Paul de
la Piquerie (instructed by R W Bevitt) represented the respondents.
Giving
judgment, SLADE LJ said: This is an appeal by Mr Manoocher Nozari-Zadeh (whom I
will call ‘the applicant’) from an order made by His Honour Judge Harris in the
West London County Court on September 12 1986. By that order he struck out the
applicant’s originating application for the grant of a new tenancy of premises
known as 9/10 Phillimore Gardens, London W8 (which I will call ‘the premises’),
pursuant to Part II of the Landlord and Tenant Act 1954.
By a lease of
November 25 1970 Manor Developments Ltd had demised the premises to a company,
E A Pillon Ltd, for a term of 15 years and 67 days from October 19 1970 to
December 24 1985. Subsequently, Pearl Assurance plc acquired the reversion to
the premises, and they are the respondents to this appeal.
On December 23
1980 the benefit of the lease became vested, by virtue of an assignment, in the
applicant who, as the judge found, paid over £50,000 for the goodwill of a
restaurant being carried on on the premises at the time, together with certain
fixtures and fittings. The judge found that the rent payable under the lease
for the three years from December 25 1982 until December 24 1985, when the term
of the lease was due to expire by effluxion of time, was £10,000 per annum.
On March 12
1985 the respondents served on the applicant a notice terminating his tenancy
on December 25 1985 and stating that the landlords would oppose the grant of a
new tenancy on the grounds mentioned in paras (a) and (b) of section 30(1) of
the Act.
By his
application of July 5 1985 the applicant asked for a new 14-year tenancy on the
same terms as the current lease.
On December 25
1985 the term duly came to an end. By their answer of January 30 1986 the
respondents opposed the grant of a new lease on the grounds set out in section
30(1)(b) of the 1954 Act, which entitles a landlord to oppose an application on
the grounds that the tenant ought not to be granted a new tenancy in view of
his persistent delay in paying rent which had become due.
On February 24
1986 the registrar in the county court ordered that the point raised by the
respondents in reliance on section 30(1)(b) be tried as a preliminary issue.
The case came on for hearing on this issue. However, in the light of an
entirely new ground of opposition raised at a very late stage of the hearing on
behalf of the respondents, an adjournment was granted so that they could apply
to strike out the application on this new ground.
On August 1
1986 the respondents duly applied to strike out the applicant’s application for
a new tenancy on the grounds that:
the applicant
did not prior to the term date and has not thereafter occupied the demised
premises within the meaning of section 23 of the Landlord and Tenant Act 1954
and accordingly is not entitled to the benefit and protection of the said Act.
Section 23(1)
of the 1954 Act defines the tenancies to which Part II of the 1954 Act, giving
security of tenure for business tenants, applies. It provides:
Subject to
the provisions of this Act, this Part of this Act applies to any tenancy where
the property comprised in the tenancy is or includes premises which are
occupied by the tenant and are so occupied for the purposes of a business
carried on by him or for those and other purposes.
It will be seen
from the wording of the section that, for a tenant to bring his premises within
the protection of the section, he has to surmount two hurdles. First, he has to
show that the property comprised in the tenancy is or includes premises which
are ‘occupied by the tenant’. Second, he has to show that they are so occupied
for ‘the purposes of a business carried on by him or for those and other
purposes’.
On the
findings of the learned judge, there is at least at first sight some difficulty
for the applicant in the present case in surmounting even the first of these hurdles.
On p 6 of his judgment, the learned judge describes ‘the company’ (Greenham Ltd
or Sharnaz Ltd, to which I shall refer below), and not the applicant, as the
‘actual occupier’. On the same page he refers to a concession made on behalf of
the applicant that:
. . . there
is no valid point of a Trust holding [sic] the premises which assists the
applicant in his claim.
On p 7 the
applicant is described since 1986 as having taken:
. . . only a
minor part in the running and management of the restaurant.
In these
circumstances, it seems to me that there is at least doubt whether, on the
findings of fact made by the learned judge, the property comprised in the
tenancy was or included premises which were ‘occupied by the tenant’ within the
meaning of section 23 of the 1954 Act. Indeed this appears to have been the
point primarily taken in the form of the striking-out application to which I
have referred. However, the argument before the learned judge and his judgment
clearly appear to have centred principally on the second hurdle to which I have
referred. Were the premises occupied ‘for the purposes of a business carried on
by the tenant’ at the relevant times? As
to the relevant times, I think it has been accepted by Mr Moshi on behalf of
the applicant that that condition must be satisfied from the date of the expiry
of the lease on December 25 1985 until the date of the hearing before the
learned judge, on September 12 1986.
In the light
of this background of law, I refer to the relevant findings of primary fact
made by the learned judge. In the course of a full and careful judgment he
traces the history of the various restaurant businesses which have been carried
on on the premises since the applicant became tenant of them in 1980. For the
sake of the record, I should mention one point. At p 3 of our note of his
judgment he refers to five companies which had been concerned in the running of
restaurant businesses on the premises. However, only four companies are then
listed. There appears to have been a mistake in transcription. It is, I think,
common ground that the five companies should have been listed as follows:
1 The Dervish Restaurant Ltd. That was
incorporated on August 3 1976, dissolved on December 16 1983.
2 Timeward Ltd. Incorporated on November 9 1979
and went into voluntary liquidation on November 11 1982.
3 Ritchell Ltd. Incorporated on June 28 1982
and was wound up by the court on April 19 1984.
4 Greenham Ltd. Incorporated on April 19 1984
and was wound up by the court on May 8 1986.
5 Sharnaz Ltd. Incorporated on February 19 1986
and is still operating and running this restaurant, Sharnaz of India.
I can now take
up the story on April 19 1984, when according to the judge’s findings, Ritchell
Ltd went into liquidation. It had previously been running a French-style
restaurant business on the premises known as Manouche or La Manouche. A company
called Greenham Ltd was incorporated that same day. It took over the operation
of the restaurant business then being operated on the premises. It had an issued
capital of £100 of which 99 £1 shares were held by the applicant and one by his
wife.
Then on
February 19 1986, according to the findings of the learned judge, Sharnaz Ltd
was incorporated. The judge made the following findings:
On March 25
1986 the applicant entered into a partnership agreement with Mr Mohammed
Mohuiddin and Mr Makbul Miah. This agreement provided the three of them to run
this restaurant which we now know is called the Sharnaz of India.
I pause to say
that I understand that the Sharnaz of India is an Indian or Bangladeshi cuisine
restaurant.
Clause 3 of
that partnership agreement provided that the applicant would use his best
endeavours to secure the renewal of the lease to him, and Mr Mohuiddin and Mr
Miah would assist as offering themselves as guarantors. Clause 5 provided that
during the continuance of the leasehold interest held by the applicant he
should stand possessed thereof in trust for the firm and they would indemnify
him against the rent payable. It was also agreed by clause 6 that if Mr
Mohuiddin and Mr Miah should jointly ask the applicant he should assign any
lease granted in his name subject to the consent and licence to assign on the
landlords. Clause 24 of this partnership deed is that the partners agreed, if
so advised, that a limited liability company will be formed to take
over the liabilities of the running of the partnership business and in such
event the partners shall all be appointed directors of such limited liability
company and the shareholding shall be to the applicant 50%, Mr Mohuiddin 30%
and Mr Miah 20%. In fact as I have said the company envisaged by Clause 24 of
the partnership deed had been formed on February 19 and those three gentlemen
became shareholders of that company in the proportions set out in clause 24 —
50, 30 and 20 — and the three gentlemen became directors of this new company.
The judge’s
findings continued:
There is now
no dispute that this company Sharnaz Ltd ran the restaurant business on these
premises. It has been conceded on behalf of the applicant that at the material
dates the business of a restaurant was carried on firstly by Greenham Ltd and
secondly by Sharnaz Ltd and that the applicant himself did not carry on any
other business on his own on the premises at those times. The applicant also
concedes that there is no valid point of a trust holding the premises which
assists the applicant in his claim. There was no formal agreement between the
applicant as lessee and the company as actual occupier and operator of the
business other than that deed of partnership.
The only
further findings of fact to which I need refer, I think, are to be found at p 7
of the judgment:
I am
satisfied, on the evidence and by the concessions made, that since the lease
was assigned to the applicant the various restaurant businesses carried on on
the premises were carried on not by the applicant personally but by those
series of limited companies. That as each company failed it was wound up or
passed into desuetude, ceased to operate and trade and a new company was formed
to take its place to run either a new or the old restaurant business. It
cannot, in my judgment, be said, and to be fair it was not suggested by counsel
for the applicant, that on the facts here the companies at the time of the
expiry of the lease and since April 1986 when Sharnaz Ltd took over the
restaurant were acting as managers or agents for the applicant. In fact the
applicant in any event since April 1986 took only a minor part in the running
and management of the restaurant. It was managed it seems by Mr Mohuiddin who
had the expertise for this type of restaurant which expertise the applicant did
not have.
It was
conceded before the learned judge, and has been conceded before us, that
between December 25 1985 (the date of expiration of the term created by the
lease) and September 12 1986 (the date of the hearing) the business on the
premises was carried on first by Greenham Ltd and then by Sharnaz Ltd. However,
the findings of the judge show that the applicant held 99 of the 100 issued shares
of Greenham Ltd and was the managing director of Sharnaz Ltd and held 50% of
its shares. In these circumstances, Mr Moshi on behalf of the applicant, while
not disputing the primary findings of fact made by the learned judge, has
submitted to us, as he submitted to the learned judge, that these two
companies, Greenham Ltd and Sharnaz Ltd, were (as he put it) the alter ego
of the applicant and that occupation of the premises by each of these two
companies has been equivalent to occupation by the applicant for the purposes
of applying the provisions of section 23(1) of the 1954 Act, so as to enable
the applicant to surmount both of the two crucial hurdles to which I have
referred.
In this
context, Mr Moshi referred us in particular to the decision of this court in Pegler
v Craven [1952] 2 QB 69. That case concerned section 20(1) of the
Leasehold Property (Temporary Provisions) Act 1951. On the particular facts it
was held that the plaintiff was not the occupier of the shop in question, in as
much as the business of that shop was the business of a company and was not the
tenant’s business. However, Sir Raymond Evershed MR did suggest that the
position might have been different if the tenant had been beneficial owner of
all, or substantially all, the shares issued by the company. He said (at p 79):
It may be
that in some circumstances it could be said that a company in actual occupation
was but the alter ego of the tenant. It is possible that such a
conclusion might be arrived at in some cases; but it cannot, in my judgment, be
arrived at in this case; for, as my brother has pointed out, the company here
cannot be said to be a mere alter ego of the applicant Pegler.
I hope it will
not seem disrespectful to Mr Moshi’s clear and helpful argument if I say
briefly that it seems to me, as it seemed to the learned judge, that what I may
call the alter ego contention is quite unsustainable, at least in this
court, in the light of the recent decision of this court in Cristina v Seear
[1985] 2 EGLR 128. That case might have been distinguishable if in the present
case the learned judge had found that Greenham Ltd or Sharnaz Ltd had been
merely the agent or manager of the applicant. But the findings which I have
quoted from p 7 of his judgment are directly to the contrary; and those
findings of primary fact are not challenged.
Mr Moshi
pointed out that in Cristina v Seear Purchas LJ, who delivered
the leading judgment, appeared to have regarded himself bound, in reaching the
conclusion that he did reach, by the decision of this court in Tunstall
v Steigmann [1962] 2 QB 593. Mr Moshi has observed that the Tunstall
v Steigmann decision was concerned not with section 23 of the 1954 Act
but with section 30(1)(g), to which he submits that different considerations
apply.
For my part,
with respect, I see no reason to doubt the correctness of the decision in Cristina
v Seear. As Willmer LJ pointed out in Tunstall v Steigmann
at p 605:
There is no
escape from the fact that a company is a legal entity entirely separate from
its corporators — see Salomon v Salomon & Co [1897] AC 22.
Here the landlord and her company are entirely separate entities. This is no
matter of form; it is a matter of substance and reality.
Be that as it
may, we in this court are bound by the decision in Cristina v Seear.
On the facts of the present case I see no escape from the conclusion that the
business which the learned judge found had been carried on on the premises,
first by Greenham Ltd and then by Sharnaz Ltd, is not the same as a business
carried on by the applicant himself, and cannot be so treated when applying the
provisions of section 23(1) of the 1954 Act to the facts of the present case.
I feel some
sympathy for the applicant, who it seems has put a lot of energy and money into
the restaurant businesses which have been carried on successfully in the
premises and is probably now to be deprived of much of the benefit of this
expenditure by what may seem to him to be a legal technicality. But I think it
has to be said that, as Danckwerts LJ said in Tunstall v Steigmann
at p 607:
. . . if
persons choose to conduct their operations through the medium of a limited
company with the advantages in respect of responsibility for debts thereby
conferred, they cannot really complain if they have to face some disadvantages
also.
Whether or not
the applicant has failed to surmount the first of the two hurdles to which I
have referred — and I am inclined to think that he has — he has in my judgment
certainly failed to surmount the second hurdle which he has to surmount if he
is to claim the protection of Part II of the 1954 Act for these premises. I see
no escape from this conclusion in the light of the judge’s findings of primary
fact and in the light of the decision in Cristina v Seear.
For these
reasons, I would dismiss this appeal.
HOLLIS J
agreed and did not add anything.
The appeal
was dismissed with costs. Leave to appeal to House of Lords was refused.
