Landlord and Tenant Act 1954, Part II–Appeal by landlords from decision of county court judge on preliminary issues–New lease opposed by landlords under section 30(1)(f) satisfied–Whether section 31A(1)(a) applicable–Judge decided section 30(1)(f) issue in favour of landlords, but section 31A(1)(a) issue in favour of tenant–Held by Court of Appeal, following Redfern v Reeves, that judge was wrong in giving too wide an interpretation to section 31A(1)(a) by taking account of effect on business after completion of works–Held also, on issue of section 30(1)(f), that on true construction of tenancy agreement landlords were entitled to enter to carry out the works–Hence, applying the Heath v Drown principle, they did not require to obtain ‘possession’–Judge’s decision correct in result, but for wrong reasons–Appeal dismissed
This was an
appeal from a decision of Judge Thomas in the Croydon County Court in favour of
the tenant, Peter Donald Price, the applicant in proceedings for a new tenancy
of premises known as the Whitgift Service Station in Brighton Road, Croydon.
The landlords were Esso Petroleum Co Ltd, the present appellants. The facts and
the issues are set out in the judgment of Megaw LJ.
Derek Wood QC
and Kirk Reynolds (instructed by Durrant Piesse) appeared on behalf of the
appellants; Quentin Edwards QC and Michael Brooke (instructed by Peard, Son
& Webster, of Croydon) represented the respondent.
Giving
judgment, MEGAW LJ said: This appeal from the judgment and order of Judge
Thomas in the Croydon County Court, given on February 8 1980, arises out of a
claim for the grant of a new tenancy of business premises under Part II of the
Landlord and Tenant Act 1954. Two issues have been argued before us–one by way of
appeal, one by way of cross-notice. They, together with a third issue, with
which we are not concerned, were dealt with as preliminary issues in the county
court.
Mr Peter
Donald Price (to whom I shall refer as ‘the tenant’) has carried on the
business of a petrol service station for some 15 years at Whitgift Service
Station, Brighton Road, Croydon. He has been the tenant of the appellants in
this appeal, Esso Petroleum Co Ltd (whom I shall call ‘the landlords’) for
about 12 years. We are not concerned with any earlier tenancy agreements during
those 12 years. The tenancy agreement with which we are concerned is dated June
24 1976. It was for a term of three years, from June 8 1976 to June 7 1979. I
shall have to refer hereafter in rather more detail to some of the terms of
that agreement.
On January 18
1979 the landlords served on the tenant a notice under section 25 of the
Landlord and Tenant Act 1954 to terminate the business tenancy. The landlords
stated that they would oppose an application to the court by the tenant for
the grant of a new tenancy on the ground that they (the landlords) intended to
demolish and reconstruct the premises comprising the holding and that they
could not reasonably do so without obtaining possession of the holding: that is
to say, they gave notice that, if the tenant were to apply for a new tenancy
under the Act, the landlords would resist that application by reference to
section 30(1)(f) of the Landlord and Tenant Act 1954.
The tenant, on
March 30 1979, made application in the Croydon County Court for a new tenancy.
By their answer, dated May 1 1979, the landlords stated their opposition on the
ground which I have already indicated and need not repeat. The application was
heard by Judge Thomas from January 21 to 24 this year. Evidence was given.
Three preliminary issues were defined and decided by the learned judge. We are
not concerned with the third of them, an issue as to promissory estoppel, which
the judge decided in favour of the landlords and in respect of which there is
no appeal by the tenant.
The first
issue was whether, having regard to the terms of the existing tenancy
agreement, the landlords satisfied the requirements of section 30(1)(f) of the
1954 Act as a ground of opposition to the tenant’s application for a new
tenancy. The second issue, which arose if the first issue were to be decided in
favour of the landlords, was whether, on the facts, the tenant could rely on
the provisions of section 31A(1)(a) of the 1954 Act (which was introduced into
that Act by section 7 of the Law of Property Act 1969) so as to defeat the
landlords’ opposition, which would otherwise succeed under section 30(1)(f).
The learned judge decided the first issue in favour of the landlords, but he
decided the second issue in favour of the tenant. Hence, on the preliminary
issue as a whole, the tenant won: he would, on the judge’s decision be entitled
to the grant of a new tenancy. The terms would, of course, have to be decided
by the court, in the absence of agreement between the parties. Hence, the
learned judge’s formal order, on the basis of his decision of the preliminary
issues, was that the application should be adjourned.
The landlords
appeal, contending that the second issue should have been decided in their
favour. The tenant, by notice served under Order 59, rule 6(2) of the Rules of
the Supreme Court, asks this court to hold, if we should decide that the
learned judge was wrong in deciding the second issue in the tenant’s favour,
that the judge was wrong also in deciding the first issue in the landlord’s
favour. But if we were to uphold the judge’s decision on that second issue,
then the correctness or otherwise of the judge’s decision on the first issue
would be an academic matter–in the sense in which the word ‘academic’ is sometimes
used, as meaning a question the decision of which one way or the other would
not have any practical effect in the circumstances.
I think,
although logically the first issue comes first, it is preferable, since the
landlords are the appellants, to consider first the second issue–the issue on
which the burden rests on the landlords as appellants. For the purpose of the
decision of the second issue–and, indeed, also of the first issue–it is
necessary to refer to certain further facts. They are not in dispute before us.
They are fairly and accurately summarised in the clear and careful reserved
judgment of Judge Thomas. Expressing my indebtedness to him, I propose to adopt
that summary. It is as follows:
Whitgift
Service Station occupies a small site, about one-eighth of an acre, on the east
side of the Brighton Road opposite Whitgift School. It is ideally situated to
catch southbound traffic. No doubt it has enormous site goodwill as well as
some personal goodwill built up by Mr Price. On the site is a small office
building; there is a lubricating bay; there are three petrol pumps with a
canopy over; five underground petrol storage tanks; the surface is concrete and
tarmacadam and under the surface run pipes, cables, conduits and drainage
ducts. The present layout is shown in a drawing and photographs which have been
produced in evidence.
Esso propose
to demolish and reconstruct the premises. The proposed redevelopment involves
the demolition of existing buildings and installations. There are to be four
petrol pumps, instead of three, with a different pump layout, which involves
the relocation of pipes, cables, conduits and drainage ducts and the erection
of a larger canopy in a different place; there will be a new office building in
a different position; the lubricating bay goes; the surface will largely be
excavated, removed and relaid; the underground petrol storage tanks are the
only installations which will remain. The proposed works are detailed in a
number of drawings which have been produced in evidence. It is conceded on
behalf of Mr Price that the works are extensive and cannot be carried out
without letting Esso’s contractor into sole occupation of the site.
I pause there
to say that it is said on behalf of the tenant, and accepted on behalf of the
landlords, that the learned judge, in a minor degree, misunderstood the
concession that was made. It was not conceded that the contractor had to have
sole occupation for 16 weeks. It was accepted that it made commercial sense for
him to be given it. I do not think that it affects the issue in this case. I
continue with what Judge Thomas said:
The
contractors are ready to proceed and it is estimated that it will take 16 weeks
to carry out the works. During that period the business of the Whitgift Service
Station will close down. Before the contractors move in there will be a
run-down period of two weeks during which existing stocks will be sold.
Planning permission for the redevelopment was granted on June 9 1978.
It is by
reference to those facts, and, so far as relevant, the terms of the tenancy
agreement, that the questions of law in the two issues fall to be decided.
The second
issue arises, as I said, on section 31A(1) of the 1954 Act, but as that
section, in its turn, refers back to section 30(1)(f), I shall first recite
that statutory provision. Section 30(1) sets out the grounds, under paragraphs
(a) to (g), on which a landlord may oppose an application by the tenant under
section 24(1) for the grant of a new tenancy. Paragraph (f) reads:
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.
Section
31A(1), so far as relevant for the purposes of this appeal, reads:
Where the
landlord opposes an application under section 24(1) of this Act on the ground
specified in paragraph (f) of section 30(1) of this Act the court shall not
hold that the landlord could not reasonably carry out the demolition,
reconstruction or work of construction intended without obtaining possession of
the holding if–(a) the tenant agrees to the inclusion in the terms of the new
tenancy of terms giving the landlord access and other facilities for carrying
out the work intended and, given that access and those facilities, the landlord
could reasonably carry out the work without obtaining possession of the holding
and without interfering to a substantial extent or for a substantial time with
the use of the holding for the purposes of the business carried on by the
tenant.
I need not
read paragraph (b) or subsection (2) of that new section.
I am bound to
say that I find it difficult to make good sense of section 31A(1)(a) in certain
respects, despite the valiant efforts by counsel on either side to advocate
possible solutions. But I do not think any useful purpose would be served by
including in this judgment an exposition of those difficulties. I say that,
because there is a decision of this court, by which we are bound, the ratio
decidendi of which appears to me to be fatal to the tenant’s submission and
to the learned judge’s acceptance of that submission, whatever doubts may
remain as to the meaning and effect of the paragraph in other respects. The
decision in question is Redfern v Reeves reported only in (1978)
37 P&CR 364. It was decided on July 24 1978. It was not cited to Judge
Thomas at the hearing before him. If it had been cited I have little doubt but
that he would have felt obliged to decide this issue in the opposite way from
that in which he did decide it. If it is of any comfort to the learned judge, I
may say that, until Redfern v Reeves was cited to us and the
three judgments therein carefully analysed to arrive at the ratio decidendi,
I was minded to think, with a fair degree of confidence, that Judge Thomas was
right on this issue.
The question
whether the planned works could reasonably be carried out (to use the words of
the section) ‘without interfering to a substantial extent or for a substantial
time with the use of the holding for the purposes of the business carried on by
the tenant’ is indeed a question of fact and degree, as Judge Thomas rightly
said. But, in approaching that question, he clearly directed himself that, in
deciding as to the substantiality, he was not obliged to put himself (as it
were) in blinkers by assessing the interference by reference only to the period
during which the works were actually being carried out. He took into account,
in his assessment of the time and the extent of the interference, the future of
the business after the works would be completed. He said, for example, and I
quote from the text of his judgment, ‘After completion of the redevelopment
what is essentially the same business will be carried on for many more
years.’ The learned judge was thus
considering, and was basing his decision on, the interference with the business
or with the goodwill of the business. That, as appears in the judgment of
Lawton LJ in Redfern v Reeves at p 373, and the judgment of
Geoffrey Lane LJ (as he then was) at p 374, and the judgment of Stephenson LJ
at p 375, is not permissible.
So far as the
second issue is concerned, I would therefore hold in favour of the landlords.
If that were the only issue, I should not have thought it right, for myself, to
remit the case for further consideration, because, on the facts, the decision
on the basis of the law as there laid down could be only one way, that is, in
favour of the landlords, when the ratio decidendi of Redfern v Reeves
is applied to the facts of this present case.
So I have come
back to the first issue raised by the cross-notice. While I do not say that the
answer on that issue is simple, I do say that the question can be simply stated
and that it is not really, in my view, susceptible of elaborate argument. It is
a question of the construction, essentially, of a few words in the tenancy
agreement in relation to facts which are not now in dispute. Of course, the
meaning of the words has to be looked at in relation to the agreement as a
whole and to any other particular terms of it in so far as they shed any light
on the meaning of the words in question. Since the question is a question of
construction, it is a question of law to be decided by reference to facts which
are not now in dispute.
I have already
read section 30(1)(f) of the 1954 Act. There is no dispute but that the works
which the landlords intend to carry out in this case come within the words of
paragraph (f), ‘to demolish or reconstruct the premises comprised in the
holding or a substantial part of those premises.’ But to avail themselves of this exception,
the landlords have also to show they ‘could not reasonably do so’ (that is,
could not reasonably carry out the intended works) ‘without obtaining
possession of the holding.’ The tenant
says that the landlords can reasonably carry out the intended works without
obtaining possession of the holding. The landlords say No. The judge decided in
favour of the landlords on his view of the construction of the tenancy
agreement.
It has been
held by the House of Lords, in Heath v Drown [1973] AC 498, that
if the terms of the existing contract between the parties–here the tenancy
agreement–entitle the landlords to carry out the works in question, then the
landlord cannot successfully oppose the tenant’s application for a new tenancy
by reliance on paragraph (f): for the word ‘possession’ in this paragraph means
not mere physical occupation but the legal right of possession. The fact that
the landlord may reasonably have to deprive the tenant of physical occupation
for a time, when the landlord enters upon the premises in order to carry out
the works, does not destroy the tenant’s ‘possession’: the landlord can do the
works without obtaining possession, though he may have dispossessed the tenant
of occupation. Hence, as a matter of law, the landlord fails to satisfy the
requirement of the concluding 14 words of paragraph (f), if the contract
entitles him to carry out the works.
So the
simply-stated question, by the answer to which this issue falls to be decided,
is: on the terms of the tenancy agreement, would the landlords have been
entitled to enter upon the Whitgift Service Station in order to carry out the
intended works?
I now come to
the terms of the tenancy agreement of June 24 1976. In that agreement the
landlords are described as ‘Esso’ and the tenant as ‘the Dealer.’ Clause 1, so far as is relevant, provides:
‘1. The Letting. Esso agrees to let and the Dealer agrees to take: (a) the
service station premises described in the Schedule hereto (which together with
all buildings and erections now or at any time erected thereon are hereinafter
called ‘the Service Station’).’ Then
there is subparagraph (b), which I need not read. Then the clause goes on: ‘but
Esso reserves the right to enter the Service Station at any time with workmen
and others for the purpose of carrying out such improvements, additions and alterations
to the Service Station as Esso may consider reasonable, after consultation with
the Dealer.’
The schedule
referred to in subparagraph (a), so far as is relevant, reads: ‘The Schedule.
The Service Station. All that piece or parcel of land situate at Brighton Road,
South Croydon’–and then there is a description of what that piece of land
is–‘together with all buildings erected thereon and known as Whitgift Service
Station.’
The vital
words in the latter part of the clause, which have been referred to in argument
in this appeal as ‘the reservation clause,’ are ‘improvements, additions and
alterations.’ Of course, those words
have to be read in the context of the surrounding words and of any other of the
contractual provisions which may shed light on them. Are the planned works
‘improvements,’ ‘additions’ or ‘alterations’ or all three of them? If so, the landlords cannot rely on paragraph
(f), because, if so, the landlords can reasonably do the works without obtaining
possession of the holding, on the interpretation of ‘possession’ in Heath
v Drown. I can see no valid reason, with great respect to the sustained
submissions for the landlords, why it should be said that the intended works
are not, at least, improvements, and it may well be also, in whole or in part,
alterations and additions. The landlords would not lose their right of entry if
each of the items of the planned works fell within one or other of those heads,
merely because they did not all fall within one and the same head. But, as I
see it, the tenant does not need to rely on that proposition here, for the
totality of the planned works are property within the word ‘improvements.’
For the
landlords, it is said that the words ‘The Service Station,’ where capitals are
given to the words ‘Service’ and ‘Station,’ are a definition which relates the
service station to the particular superstructures which are upon the surface of
the land at the time when the application of the clause comes to have to be
considered: the time when the landlords would be entering, if they have a right
to enter. For myself, I do not see any magic in the use of the capitals, in the
use of the words ‘Service Station,’ or anything particular in the form of the
definition which helps here.
For the
landlords, it is said that, to come within the clause, the word ‘improvements’
must be improvements to existing buildings and structures, not the creation of
new ones; ‘additions’ must be additions to existing buildings: ‘alterations’
must be alterations to existing buildings. The clause does not, it is said,
permit Esso to enter in order to carry out works which are, in effect, the
demolition of all the existing structures above the surface of the land covered
by the tenancy agreement and the replacement of those demolished buildings by
other, fresh, buildings.
For the
tenant, it is pointed out that, if and in so far as any help is to be gained by
consideration of the extent to which the planned works involved demolition and
new structures, the essential part of the petrol service station, as distinct
from an ordinary shop or an ordinary factory, is the forecourt, with its petrol
pumps and with its underground tanks and supply lines from tanks to pumps. The
structures at the back of the forecourt may be important but are ancillary to
the essential part of the premises for the retail petrol supply business, that
is, the tanks, the lines and the pumps on the forecourt, where the customers’
cars come in and station themselves in order to draw petrol from the pumps.
Those essential parts will not be materially changed. The tanks will remain,
the lines from the tanks to the pumps may, at any rate in some degree, be
capable of being retained. The pumps themeselves will change in number and
location. But essentially it is the same; there will not be a material change.
For myself,
apart from any help which one may gain from the context of the vital words and
from the agreement as a whole, I find it impossible to regard the planned works
as not falling within the ordinary, commonsense meaning of ‘improvements to the
Service Station.’ I am glad to find what
I regard as being complete confirmation of that view from the high authority of
the judgment of Morton J in National Electric Theatres Ltd v Hudgell
[1939] 1 Ch 553. The headnote, in its holding no 1, at p 554, says ‘that the
proposed works would be an improvement on the holding in any ordinary use of
the word ‘improvement’.’ The works in
question there, which Morton J held were an improvement in the ordinary sense
of the word, involved the demolition of what had been a theatre, and the
building in its place of a row of buildings, which, when built, would be used
for shops and offices. It is perfectly true that Morton J’s decision was a
decision, not on the words of a particular covenant nor on the words of any
section of Part II of the Landlord and Tenant Act 1954, but related to
provisions of the Landlord and Tenant Act 1927. There were statutory provisions
there which Morton J, in his judgment, referred to as supporting his view that
the planned works (in that case works to be carried out by the tenant) were
properly to be regarded as being improvements. But that does not in any way
affect the fact that Morton J, without reference to the consideration of the
particular statutory context, expressed the view, at the outset of his
judgment, in these words:
It seems to
me that these works–that is, the works I have briefly described–would be an
improvement on the holding in any ordinary use of the word ‘improvement.’ When the works have been carried out, the
plaintiffs can say: ‘We have pulled down the cinematograph theatre which was no
longer of any use. We have substituted for that a row of shops with residential
flats over them. The result is that the letting value of the holding has been
greatly increased, both immediately and at the end of the term.’ It would surely be a natural use of words if
the plaintiffs went on to say: ‘We have carried out an improvement of our
holding.’
We were
referred also to a decision of this Court in the case of Little Park Service
Station Ltd v Regent Oil Co Ltd [1967] 2 QB 655. That is a case in
which the facts were, in many respects, similar to the facts with which we are
here concerned. I confess that I find it difficult to extract the ratio
decidendi of the three judgments. Counsel for the landlords, in a careful
analysis of those judgments, has submitted that, so far from supporting the
tenant’s propositions on this issue, it supports the landlords’ propositions.
Counsel accepts that that involves the submission that the view which was taken
of the ratio decidendi of that case by Lord Kilbrandon in his speech in Heath
v Drown [1973] AC 498 at p 516, was wrong. In that case, Lord
Kilbrandon, with whose speech Lord Diplock and Lord Simon of Glaisdale
concurred, said this, in relation to the decision in the Little Park
case:
It is clear
from the judgments in that case that the current lease contained a clause under
which the landlord could have carried out the intended work of reconstruction;
and it is implicit in the reasoning of Russell LJ ([1967] 2 QB 655 at p 673),
when he paraphrased the final words of the paragraph ‘without obtaining
possession of the holding’ as meaning ‘if a new tenancy is granted’, that he
was contemplating a new tenancy incorporating similar terms as respects the
landlord’s right of entry for the purposes of reconstructing the premises as
were contained in the current issue.
In so far as
any guidance can properly be deduced, in relation to the issue in the present
case, from the Little Park case, I would respectfully agree with the
analysis there made by Lord Kilbrandon and would express the view that it tends
to support the submissions of the tenant rather than the landlords in the
present case. It is fair to point out that a part of the difficulties which are
involved in analysing the Little Park case is that it was decided before
the decision of the House of Lords in Heath v Drown and,
therefore, before there had been an authoritative decision as to the meaning of
the word ‘possession’ in the relevant statutory provision.
Then it is
said for the landlords that the right given to the landlords, if it were to be
held applicable in the present case, would be unduly and unfairly extensive in
the effect that its exercise by the landlords could have on the tenant and
that, therefore, it ought not to be widely construed. In particular, stress was
laid on the fact that the tenant could be deprived of physical occupation of
the service station for a period of 16 weeks or perhaps even longer, during which
time he would be unable to carry on his business or earn any money from the
functioning of the petrol service station: yet he would remain liable to pay
the landlords the full contractual rent during the whole time. There is no
provision in the tenancy agreement for the suspension of rent during such a
period for such a reason.
I have some
difficulty in seeing how that argument assists in the construction of the words
used in the reservation clause. For it is not suggested, on behalf of the
landlords, as I understand it, that the tenant would have any escape from his
full payment of rent if the business of the petrol service station were to be
interrupted, whether completely or partially, whether for a short time or a
long time, by the carrying out of works of improvements, additions or
alterations of a kind which the landlords accept, or contend, would be within
the clause as interpreted by them. At most, it seems to me, this argument is
one of degree: as to the probable duration and extent of the interruption and
the unrequited loss of revenue. I do not find it a persuasive argument.
In any event,
however, it seems to me that there are two considerations arising out of other
terms of the tenancy agreement, which go far to invalidate the suggested
uncommercial consequences of a decision that the word ‘improvements,’ if not
also the other words, covers a scheme of works such as the scheme with which we
are here concerned. First, this is a so-called ‘solus site’ agreement. By
clause 4 of the tenancy agreement, the tenant has bound himself to buy from his
landlords ‘the Dealer’s total requirements of motor fuels for resale at the
Service Station.’ The landlords’
business profits depend on wholesale sales to retail sellers such as the
tenant. The landlords would be unlikely to cut off their nose to spite their
face–to put this service station out of action as a revenue-producer for them,
unless, in the longer term, any temporary interruption which would result from
the doing of the works would also result, when the works were done, in
increased sales or would result in long-term commercial benefit. The interests
of the landlords and of the tenant are, to a considerable degree, interrelated.
That may help to provide a commercial explanation of the, at first sight,
potential injustice to the tenant in agreeing to possible interruption of his
business without a provision for interruption of rent. Secondly, ‘the
improvements, additions and alterations to the Service Station’ are required by
the terms of the contract to be ‘such as Esso may consider reasonable, after
consultation with the Dealer.’ True,
Esso are entitled to override the dealer’s objections if, on consultation, he
expresses objection. But Esso’s determination of ‘reasonableness,’ I should
have thought, cannot ignore the dealer’s interests, otherwise the provision for
consultation with the dealer would be misleading. The entry of the landlords to
carry out work would be a breach of contract if the dealer, the tenant, were
able to show that the landlords’ plan was so unreasonable that no reasonable
landlord, taking due account of the tenant’s interest (whatever that may be),
could have made such a decision. On that ground also there is some measure of
check, at any rate, upon the wholly unfair use of the power of entry given by
the reservation clause.
It was further
argued for the landlords that the provision in clause 3 of the tenancy
agreement as to increase of rent made it clear that it would be unfair that the
landlords should have the right under the tenancy agreement to carry out works
such as are now contemplated. Clause 3 contains these words, ‘and if Esso carry
out any additional or subsequent improvements additions or alterations to the
Service Station or the Equipment Esso shall be entitled to charge the Dealer a
reasonable increase in rent from the date of their completion.’ True it is that that clause does not provide
for a reduction of rent for the future because of disturbance to the tenant
during the carrying out of the works. But I find it impossible to accept the
submission which I understood was made on behalf of the landlords, that if a
dispute were to arise under that clause as to what, if anything, was a
‘reasonable increase,’ the court or arbitrator, whoever it might be who had to
decide that issue, would not be entitled to take into account the fact, and the
quantum, of lost income of the tenant during the period when the works were
being carried out, to be set against the cost to the landlords of those works
and the potential increased profitability to the tenant in the future as a
result of the works having been carried out.
In my opinion,
on the true construction of this tenancy agreement, the landlords were
entitled, under the tenancy agreement, to carry out the contemplated works. Hence,
on the doctrine of Heath v Drown, section 30(1)(f) of the 1954
Act is not available to the landlords. Thus, it follows that I would be against
the landlords on that issue. What precise form the order of this court should
take can remain for consideration after my brethren have delivered their
judgments.
Agreeing,
TEMPLEMAN LJ said: So far as the ground of appeal is concerned, the reasons
given by this court for their decision in Redfern v Reeves, to
which my Lord has referred, apply to this appeal. It is true that in Redfern
v Reeves the works of reconstruction could do no good to the tenant and
must, to some extent, interfere to a substantial extent, or for a substantial
time, with the use of the holding for the purposes of the business carried on
by the tenant, however that phrase may be construed. It is also true that, if
section 31A of the Landlord and Tenant Act 1954 is construed in the manner
indicated in Redfern v Reeves, the legislature may, in large
part, have given away, in the last portion of paragraph (a), that which they
have conferred on tenants by the first part. However that may be, Redfern
v Reeves, in my judgment, decides the ground of appeal in favour of the
landlord Esso in the present instance.
So far as the
cross-notice is concerned, Esso demised a specified parcel of land expressly
‘together with all buildings and erections now or at any time erected thereon,’
and defined all those demised premises as ‘the Service Station.’ Esso were careful to reserve ‘the right to
enter the Service Station at any time . . . for the purpose of carrying out
such improvements, additions and alterations to the Service Station as Esso may
consider reasonable, after consultation with the Dealer.’
Esso now
propose to carry out works designed to improve the service station as a service
station and comprising additions and alterations. Counsel for Esso was unable
to point to anything which could not be described as an improvement, addition
or alteration. He relied on the fact that the works involved demolition, but
then many improvements involve demolition, as my Lord has said and as Morton J
decided. Counsel also relied on the magnitude of the works and the time
required to carry them out and the fact that the tenant could not carry on the
tenant’s business during the execution of the works. But in my judgment, Esso’s
present anxiety to safeguard the tenant by reducing the ambit of the
reservation made by Esso in favour of Esso is misplaced. Esso must consider the
works to be reasonable and the dealer must be consulted.
In these
circumstances, it is unnecessary to speculate what might happen if Esso
attempted to exploit their reservation powers for some extraneous purpose, such
as getting rid of, or making life difficult for, a dealer with whom they were
at odds. Works which are improvements, alterations or additions in common
parlance do not cease to be such because they may take some little time to
execute or because they interfere with the operations of the tenant during the
period of execution.
For these
reasons, and for the reasons given by my Lord, with which I am in full
agreement, I agree that the appeal must be dismissed.
Also agreeing,
SIR PATRICK BROWNE said: I agree that we should decide what has been called issue
2 in favour of the landlords and issue 1 in favour of the tenant. I agree so
entirely with the reasons given by my Lords that there is very little I can
usefully add.
So far as
issue 2 is concerned, I agree with my Lords that, though, like them, I find the
decision of this Court in Redfern v Reeves somewhat puzzling, it
is fatal to the decision of the judge below on this issue. As my Lord, Megaw
LJ, has said, that case was not cited to Judge Thomas and if it had been, I
have little doubt, like my Lord, that he would have felt bound to decide this
issue otherwise. Like my Lord I confess that my first impression, before Redfern
v Reeves was cited, was that the judge was right about this point.
However, we are plainly bound by that decision.
So far as the
first issue is concerned, this, as my Lord has said, simply turns on the
construction of these few words in this particular tenancy agreement in
relation to the now undisputed facts of this case. It seems to me quite
impossible to say that, in the ordinary meaning of words, the proposed works
which Esso have suggested are not ‘improvements to the Service Station.’ They may well also be ‘additions’ or
‘alterations.’
The judge
found as follows: ‘The ‘work intended’ is demolishing completely the existing
buildings and erections comprised in the holding and replacing them with new
buildings and erections designed to carry on the same business of a petrol
filling station. No doubt it will be carried on with greater efficiency and
with an increased turnover, but nevertheless it will be essentially the same
business.’ On that finding as to the
result of the works, it seems to me that, in the natural meaning of the word,
they are plainly an ‘improvement.’ For
the reasons given by my Lords, I cannot find anything in the context of this
tenancy agreement to cut down that ordinary meaning.
I confess that
during the argument I did feel some anxiety as to the possible consequences to
other tenants of giving a wide meaning to the words in the reservation clause;
but, as my Lords have said, there are substantial safeguards against abuses of
the provision by Esso, which no doubt Esso will be very careful to observe.
I agree,
therefore, as I have said, that the second issue should be decided in favour of
the landlords and the first issue in favour of the tenant. We shall, no doubt,
hear argument as to the result of those findings on the actual appeal and the
order made by the judge.
The appeal
was dismissed with costs.