Landlord and Tenant Act 1954 — Tenant giving up occupation before expiration of contractual term — Whether tenancy continues — Whether section 27(2) notice required to determine term
By an
underlease the defendant tenant occupied premises for a term of years expiring
on June 21 1994. By a letter dated April 25 1994 the tenant informed the
plaintiff landlord that it would be leaving the premises at the end of the
underlease. The tenant occupied the premises for the purposes of its business until
May 21 1994; on that date it quit the premises. The parties agreed that if it
was necessary to serve a notice under section 27(2) of the Landlord and Tenant
Act 1954, the tenant’s letter of April 25 1994 had the effect of determining
the tenancy on September 29 1994. The landlord claimed that it was necessary
for the tenant to serve a section 27(2) notice.
accordingly the tenancy determined on September 29 1994.
This was a
hearing of an application by the plaintiff, Provident Mutual Life Assurance
Association, for the determination of certain issues in relation to the
determination of a lease held by the defendant, Greater London Employers’
Association Ltd.
Philip Rainey
(instructed by Rowe & Maw) appeared for the plaintiff; Charles Utley
(instructed by Hughes Watton) represented the defendant.
The following
cases are referred to in this report.
Esselte
AB v Pearl Assurance plc [1995] 2 EGLR 61;
[1995] 37 EG 173
Long
Acre Securities Ltd v Electro Acoustic
Industries Ltd [1990] 1 EGLR 91; [1990] 06 EG 103
Giving
judgment, Lightman J said:
This action raises questions as to the proper construction of the sections of
Part II of the Landlord and Tenant Act 1954 relating to the continuance of
business tenancies after the expiration of their contractual terms.
The parties’
counsel have conveniently agreed the relevant facts, the rival contentions and
the issues as follows:
Statement of agreed facts
1. The
Defendant (‘the Tenant’) was underlessee of premises at 4th Floor, Victoria
Station House, Victoria Street, London SW1 (‘the Premises’) under an underlease
for a term of years from 29th September 1986 to 21st June 1994. The Plaintiff
(‘the Landlord’) was underlessor by succession under that underlease.
2. On 25th
April 1994 the Tenant wrote to the Landlord in the following terms: ‘We
formally notify you that we will be leaving Victoria Station House at the end
of our lease …’
3. The Tenant
occupied the Premises for the purposes of its business until 21st May 1994. On
that date, the Tenant quit the Premises.
The contentions of the parties
4. The
parties are agreed that, if, on those facts, it was necessary for the Tenant to
serve a notice under Section 27 (2) of the Landlord and Tenant Act 1954 (‘the
Act’) in order to bring the tenancy to an end, the Tenant’s letter of 25th
April 1994 had the effect of determining the tenancy on 29th September 1994.
5. The
Landlord contends that it was necessary for the Tenant to serve such a
notice and that, accordingly, the tenancy came to an end on 29th September
1994. The Tenant contends that it was not necessary to serve such a
notice and that, accordingly, the tenancy came to an end by effluxion of time
on 21st June 1994.
The issues
6. Is a
notice pursuant to section 27(2) of the Act required to be given by the Tenant
in order to determine the tenancy in circumstances where he ceased to occupy
the premises for business purposes at or before the expiry of the contractual
term of the tenancy and where the Landlord has not served notice under section
25 of the Act?
7. Did the
tenancy:
(a) determine
on 21st June 1994 on the expiry of the contractual term,
or
(b) continue
after the contractual expiry date and determine on 29th September 1994?
The landlord
issued the writ in this action on June 12 1995. It is common ground that on May
9 1995 on the same facts these same issues were decided in favour of the
landlord by Judge Colyer QC (sitting as a deputy High Court judge) in the case
of Esselte AB v Pearl Assurance plc [1995] 2 EGLR 61* (‘Esselte‘).
An appeal was promptly lodged in Esselte by the tenant against this
judgment. By letter dated the July 11 1995 the solicitors for the tenant in Esselte
wrote to the solicitor for the tenant to the effect that the appeal would enter
the list of forthcoming appeals on April 9 1996 and undertaking to keep the
tenant’s solicitors informed of any material development. The target date for
hearing the appeal is December 1996.
*Editor’s
note: Also reported at [1995] 37 EG 173
On the hearing
of the summons for directions before Deputy Master Burton on September 4 1995,
with a view to saving costs, the tenant applied for an order deferring trial
until after the hearing of the appeal in Esselte. The master was told
that the case would be in the list of forthcoming appeals on April 9 1996, but
was not told of the target date or likely date for hearing the appeal. The
landlord strenuously opposed the application. The master was evidently sympathetic
to the application for deferment and he ordered that the issue whether the term
determined on June 21 1994 or September 29 1994 be determined by a judge as an
issue of law and that the landlord set down the issue in the non-witness list
for trial in London not before April 9 1996. I think it plain that what was
anticipated was that when the likely date for the hearing of the appeal was
ascertained on the appeal appearing in the list of forthcoming appeals a
further application would be made (and viewed sympathetically by the master)
for a further deferment of trial until after judgment in the appeal.
The landlord
appealed against this deferment of the trial date and this appeal came before
me on February 21 1996. At this hearing I made clear to the parties that I
considered the decision to defer the trial date to be wrong. There were no
sufficient exceptional circumstances as justified precluding the landlord from
trial of his claim on the first available date. A possible saving of costs was
not sufficient. The period of deferment was long and there could be no
certainty that the appeal would in fact ever be heard, for the parties might
settle or the appeal might be abandoned. To make up for the time lost by reason
of the application and appeals, I directed that I would try the issue the
following day. The parties then agreed that the costs of the hearing before the
master remain (as directed by the master) costs in the cause. The only question
to be decided on the appeal was the incidence of the costs of the appeal before
me. I have no doubt that the landlord should have its costs of the appeal on
which it succeeded and which it perfectly properly pursued. The parties agreed
that at the trial I should treat the hearing of the issues as the first stage of
the trial of the action determining the question of liability, and that any
question as to the quantum of the sum payable by the tenant to the landlord
should be determined at a later stage (I think conveniently by the master).
As I have
said, the issues to be tried are ones on which there is direct first instance
authority in favour of the landlord in the case of Esselte. But beyond
this, Esselte itself was decided on the ground that the issues were the
subject of an express decision to like effect of the Court of Appeal in Long
Acre Securities Ltd v Electro Acoustic
Acre (as Mr Charles Utley, counsel for the tenant concedes) are for all
practical purposes identical to those in this case and in Esselte save
that in Long Acre before service by the tenant of his notice under
section 27(2) of the Act the landlord had served a notice under section 25 of
the Act which expired at a later date than the tenant’s notice. Mr Utley
submits that the determinative factor in Long Acre which impelled the
Court of Appeal to hold that the tenant continued to be liable until expiration
of the tenant’s notice was the existence of the prior notice served by the
landlord.
*Editor’s note:
Also reported at [1990] 06 EG 103
The relevant
passage in the judgment of Dillon LJ (with which the other members of the court
agreed) setting out his reasoning reads as follows:
I come to
section 27, which provides:
‘(1) Where
the tenant under a tenancy to which this Part of this Act applies, being a
tenancy granted for a term of years certain, gives to the immediate landlord,
not later than three months before the date on which apart from this Act the
tenancy would come to an end by effluxion of time, a notice in writing that the
tenant does not desire the tenancy to be continued, section 24 of this Act
shall not have effect in relation to the tenancy’
— then added
by amendment —
‘unless the
notice is given before the tenant has been in occupation in right of the
tenancy for one month.
(2) A tenancy
granted for a term of years certain which is continuing by virtue of section 24
of this Act may be brought to an end on any quarter day by not less than three
months’ notice in writing given by the tenant to the immediate landlord,
whether the notice is given … after the date on which apart from this Act the
tenancy would have come to an end [or before that date, but not before the
tenant has been in occupation in right of the tenancy for one month] …’
It is quite
plain therefore, under subsection (1), that the tenant for a fixed term who
does not want to continue his tenancy under the Act and will be ceasing to
carry on business in the premises on the expiration of the fixed term is
expected to give notice to his landlord not later than three months before the
date on which, apart from the Act, the tenancy would come to an end by
effluxion of time. That is in line with the need for a landlord to have
reasonable notice of his tenant’s departure, which one can find recognised in
other provisions in the Act, such as section 24(3)(a), to which I have already
referred. It is inconsistent, in my judgment, with the view adopted by the
judge that if the tenant ceased carrying on business on the contractual date
and left the premises he could do so without any notice at all because the
provisions of the Act would automatically fall away.
To my mind
the key provision is that in section 24(1) which provides that ‘a tenancy to
which this Part of this Act applies shall not come to an end unless terminated
in accordance with the provisions of this Part of this Act’. It follows that
the tenancy, which was a business tenancy that the tenant took under the
compromise agreement of December 1987, was a tenancy which could be terminated
only in accordance with the provisions of the Act, even during its fixed term.
When one comes to section 27(2) one has the opening phrase ‘A tenancy granted
for a term of years certain which is continuing by virtue of section
twenty-four of this Act’. It is submitted that, in the present case, could
apply only after March 25 1988 if the tenant was still in occupation, but the
tenancy by virtue of section 24 is continued by the Act and is from the outset
a continuing tenancy. Moreover, section 27(2) envisages a notice under the
subsection being given before, as well as after, the date on which apart from
the Act the tenancy would have come to an end; that is to say, in the present
case, before March 25 1988. That necessarily shows that you cannot look at the
tenancy as merely continuing by virtue of the Act after the date on which apart
from the Act the tenancy would have come to an end. Subsection (2) envisages
the notice being given before that date, yet the tenancy is still a tenancy
which is said to be continuing by virtue of section 24. That to my mind picks
up the opening words of section 24, to which I have already referred, in the
manner which I have mentioned.
In the
present case, therefore, my conclusion is that it was open to the tenant to
serve the notice under section 27(2). The tenant was not bound to await the
expiration of the landlord’s much longer notice. There is no reason why the
tenant should be regarded as locked in by the duration of the landlord’s
notice. But the tenant was not entitled to bring its liability to pay rent to
an immediate end just by quitting the premises on the original contractual term
date. That term date is subject to the provisions of section 24(1).
I can find in
this reasoning no basis for any suggestion that the existence of the prior
notice under section 25 had any significance on the question whether the
tenancy expired on the contractual date. I am confirmed in this view by the
like conclusion reached by Judge Colyer in Esselte as to the ratio
decidendi of the Court of Appeal decision. If this is correct (while
reserving his right to argue the contrary on any appeal) Mr Utley concedes that
I am bound by the decision in Long Acre to decide the issues in favour
of the landlord, and in particular (in answer to the question posed in para 6)
that the tenant is required to serve a notice pursuant to section 27(2) of the
Act to determine the tenancy; and (in answer to the question posed in para 7)
that the tenancy determined on September 29 1994.
That leaves
only the question as to the costs of the proceedings to date. The landlord has
succeeded and accordingly in the ordinary way is entitled to its costs. Mr
Utley has however argued that a different order should be made because the
tenant offered in the course of correspondence (expressed to be ‘without
prejudice save as to costs’) to enter into an agreement whereby the proceedings
would be stayed on terms that the money in issue would be paid to the landlord,
but be repaid with 8% interest if the tenant in Esselte succeeded in the
Court of Appeal or House of Lords. In the course of this correspondence the
tenant’s solicitors initially suggested a Tomlin form of order, but by letter
dated December 20 1995 the landlord’s solicitors stated that it was
inappropriate to deal with the proposed payment in the form of a court order
and requested a draft form of agreement. On January 10 1996 the tenant’s
solicitors sent a draft agreement, and despite a reminder dated February 19
1996 the landlord’s solicitors did not even acknowledge receipt, let alone
respond.
I am told by
the landlord’s counsel that there was other acrimonious correspondence between
the solicitors with which I have not been troubled. I do take a dim view none
the less of the landlord’s solicitors’ failure to respond. But whatever the
merits of this altercation between solicitors, I do not think that the
correspondence or the landlord’s refusal to enter into the proposed agreement
precludes the landlord from obtaining the normal order for costs. The landlord
was not obliged to agree to defer proceeding to trial or obtaining judgment. It
is to be noted that the tenant’s counsel did not before me tamely accept that I
was bound by the decision in Long Acre and Esselte: he vigorously
argued the contrary, albeit unsuccessfully.
I shall
therefore order that the tenant pay the landlord’s costs of the action down to
the date of this judgment. The question of quantum is to be decided by the
master who will also decide all questions as to the costs of that exercise.
Since my
judgment is a final judgment, no leave to appeal is, in my view, required. But
in case I am wrong, I grant the tenant leave to appeal.
