Landlord and Tenant Act 1954, Part II — Appeal from decision of Vinelott J — Main question was whether letters passing between the appellant tenants (the applicants for a new tenancy) and the first respondents constituted an agreement for a new tenancy within the meaning of sections 28 and 69(2) of the 1954 Act — If so, the courts had no jurisdiction to grant a new tenancy under the Act — The difficulties to which this situation gave rise and resulted in this appeal were the following — The first respondents, the reversioners with whom the correspondence in question took place, had transferred their reversionary interest to the second respondents before the contractual date of termination of the tenancy — It appeared, although the judgments do not go into details on this point, that the correspondence, if it constituted an agreement, had not been registered as an estate contract — The result, unfortunate from the standpoint of the appellants, was that if the correspondence created a binding contract between the appellants and the first respondents, it effectively excluded the jurisdiction of the court to grant a new tenancy under the Act, but at the same time it was not binding as a contract on the second respondents owing to non-registration — It was therefore in the interests of the appellants to argue that the correspondence in question did not constitute a binding agreement within section 28 of the Act — It was suggested that not all the terms of the new lease had been agreed, that the terms were not sufficiently precise, that the correspondence was not intended to be legally binding until a formal lease had been executed, and that sections 28 and 69(2) envisaged an agreement drawn up with ‘due formality’ — All these objections to the binding force of the agreement were rejected by the Court of Appeal, although the court expressed sympathy with the predicament in which the appellants were placed — Appeal dismissed
This was an
appeal by R J Stratton Ltd from a decision of Vinelott J the effect of which
was to dismiss the appellants’ application for a new tenancy under Part II of
the Landlord and Tenant Act 1954 of premises at 15 Broad Street, Lyme Regis.
The first respondents, Wallis Tomlin & Co Ltd, were the appellants’
landlords at the date when proceedings under the 1954 Act began and when the
correspondence which was in issue took place. The second respondents, Ford
& Sons (Electrical & Television) Ltd, became the appellants’ landlords
by assignment of the reversion before the contractual termination of the term.
Grant Crawford
(instructed by Richard Weston & Co, of Taunton) appeared on behalf of the
appellants; C H Pymont (instructed by Michelmore Davies & Bellamy and
Pomeroy & Hunt, of Sidmouth) represented the second respondents; the first
respondents were not represented.
Giving
judgment, MAY LJ said: This is an appeal from a judgment and order of Vinelott
J of March 16 1984 whereby, in the ultimate, he dismissed the present
appellants’ application for a new tenancy of premises at 15 Broad Street, Lyme
Regis, pursuant to the provisions of the Landlord and Tenant Act 1954.
The case has
certain unusual features. By a lease of April 1 1961 a limited company by the
name of Lym Syndicate Ltd granted the appellants a term of 21 years of the
relevant premises from March 25 1961 on the terms of the lease, a copy of which
is in our bundle but into which I think it wholly unnecessary to go.
The
conveyancing details that thereafter took place are conveniently and fully set
out in the learned judge’s judgment below which, with gratitude and respect, I
propose to adopt. In the result the first respondents in this matter became
entitled to the freehold reversion on the expiry of the term granted by the
lease on October 20 1978.
On September
16 1981 the first respondents, who were then, as I have indicated, the
landlords of the present appellants, gave notice to terminate the tenancy
pursuant to the relevant provisions of the 1954 Act. In that notice they
stipulated March 25 1982, which was the contractual date of termination of the
term, as the date of termination under the Act. That notice was served on
September 19 1981, and it produced very rapidly, on September 23 1981, a
counter-notice by the applicants (the appellants, as they are now) stating that
they were not prepared to give up possession on the termination of the lease.
At that point,
therefore, one had the very common situation which arises between the landlords
of business premises on the one hand and the tenants on the other, namely that
the only issues which arise between the parties are about the precise terms of
the new tenancy to which, under the statute, generally speaking the tenant will
become entitled. Such matters as, for instance, the new rent, the new term, and
any desired variations that there may be in the covenants that there already
are in the existing lease. In this case, in order to reach agreement (and I use
that phrase, for the moment, neutrally) on the future tenancy of these
premises, both parties instructed their respective solicitors and surveyors to
negotiate to try to arrive at an appropriate result.
Those
negotiations ended (and I am taking the matter quickly, but if reference is
required to the full history of the negotiations they are again, if I may say
so, very fully set out in the admirable judgment of the learned judge below)
with a letter dated January 4 1982 from the appellants’ surveyors to the first
respondents’, the landlords’, surveyors. That letter was headed ‘without
prejudice’, as had been all the other letters in the course of the
negotiations, and it read as follows:
I refer to our
telephone conversation shortly before Christmas. As arranged I am now writing
to confirm the revised terms that have been agreed in respect of the new lease
which I understand will commence on March 26 1982.
(1) The new rent is to be £2,750 pa.
(2) The lease is to be for a term of 21 years
with reviews after the first 5 years and 4 yearly thereafter.
(3) The restrictions contained in the existing lease
relating to the type of business which may be carried on in the demised
premises, are to be lifted so long as the business carried out in future does
not conflict with the business being carried out by your Client.
It is also
understood that a covenant will be incorporated to prevent the premises being
used for an offensive trade, such as the preparation and sale of fish &
chips, fried chicken, Chinese food, etc.
In so far as
the existing terms of the lease dated April 1 1961 are not inconsistent with the
above, we imagine that the Solicitors will incorporate them into the new lease.
Upon hearing
from you that the contents of this letter are acceptable I will confirm the
details to my Client’s Solicitor.
That letter
was replied to by a letter of January 14 1982 (it is misdated in the bundle, as
letters in January frequently are) from the then landlords’ surveyors back to
the tenants’ surveyors, and it is in these terms:
Thank you for
your letter of January 4 and I enclose herewith copy letter received from my
client confirming his acceptance of the terms as set out in your letter.
I am very
glad that we were able to reach an amicable agreement in this matter.
The letter
which was enclosed with that letter of January 14 1982 was a letter of January
12 1982 from the managing director of the landlords, as they then were, to his
surveyors, who wrote the letter of January 14 1982. It read in this way:
Thank you for
your letter of the 5th instant and the copy letter from Humberts.
Humberts were
the tenants’ surveyors.
I have sent
this letter to Mr Mayo our solicitor for him to deal with the preparation of
the new lease and I would confirm as you have asked my acceptance of the terms
as set out in their letter with the proviso that our solicitor can prepare the
appropriate amendment to the lease as required under Item 3.
I very much
appreciate the help you have given in this matter and I look forward to
receiving your account in due course.
The letter of
January 14 1982 from the landlords’ surveyors enclosing the letter two days
earlier to the tenants’ surveyors was not headed ‘without prejudice’. It was
the first letter in the exchange of negotiatory correspondence which was not so
headed.
The matter
then took a somewhat unusual turn, and it is from that that these proceedings
have developed. Within less than a month, namely on February 8 1982, a receiver
was appointed of the first respondents’, that is to say the then landlords’,
undertaking. Fifteen days later, on February 23, the relevant premises were
conveyed to the second respondents to the tenants’ proceedings below, the
respondents to this appeal, who thus became the landlords of the
tenants/appellants under the lease, which was then still in existence and had
another month to run.
Thereafter
there were substantial interlocutory proceedings, the details of which again
are referred to in the judgment of the learned judge below and need no
repetition here. They led up to an order in the local county court that three
preliminary issues should be tried by a judge in the Chancery Division. The
order was dated November 30 1982. I think the three issues merit reading. They
were the issues which came before the learned judge below for trial. ‘(1)
Whether the applicant’ (the appellant) ‘is estopped or otherwise precluded from
denying the agreement set forth in para 2 of the re-amended answer
herein.’ The agreement there referred to
is the agreement contended for made by the letters of January 4 and 14 1982 to
which I have already referred. To that question the learned judge, for reasons
which will appear, found it unnecessary to give any answer.
The second
question was: ‘If the answer to question (1) above is ‘no’, whether
correspondence passing between the respective surveyors of the applicant and
the first respondent in the months of December 1981 and January 1982
constituted an agreement for the grant of a new lease of the premises known as
ground floor and rear yard of 15 Broad Street, Lyme Regis, Dorset, by the first
respondent to the applicant’, that is to say by the original landlords who went
into receivership and transferred their reversion to the second respondents,
the present respondents to this appeal. To that question the learned judge
below gave an affirmative answer.
The third
issue for him to decide was this: ‘If the answer to either question (1) or (2)
above is ‘yes’, whether the effect of the agreement mentioned in that question
is that the court has no jurisdiction to entertain the applicant’s application
for a new tenancy of the said premises.’
That was the original application to the local county court by the
appellants/tenants for a new lease upon receipt of the notice of termination to
which I have earlier referred. To that question the learned judge below also
gave an affirmative answer and, as will immediately be apparent from the
matters to which I refer hereafter, the only result was that the originating
application had to be dismissed and this was what occurred.
The learned
judge’s answers to the various questions were vital because of the provisions
of sections 28 and 69 of the Landlord and Tenant Act 1954. Section 28 is in
these terms:
Where the
landlord and tenant agree for the grant to the tenant of a future tenancy of
the holding, or of the holding with other land, on terms and from a date
specified in the agreement, the current tenancy shall continue until that date
but no longer, and shall not be a tenancy to which this Part of this Act
applies.
By section
69(2) it is provided:
References in
this Act to an agreement between the landlord and the tenant
except in
immaterial sections
shall be
construed as references to an agreement in writing between them.
Thus, if those
letters of January 1982 to which I have referred did form an agreement within
those provisions of the Landlord and Tenant Act, as the learned judge below
found by his answers to the preliminary questions, and if there was no
registration of the agreement thereby arrived at between the parties, the
result was that because of the timing of the transfer of the reversion the
appellants lost their rights both under the Landlord and Tenant Act and under
the agreement of January 1982 to a new tenancy of the relevant premises. It is
perhaps not surprising that in those circumstances the appellants now appeal
the decision of the learned judge below in this court.
It was
originally contended that the surveyors (and, for that matter, solicitors, but
principally the surveyors) to the parties, who negotiated at the end of 1981
and through to 1982, had no sufficient authority to conclude any legally
binding agreement. However, that point is no longer persisted in. It is
accepted that they did have the appropriate authority. Mr Crawford, who has
appeared on behalf of the appellants, who has put before us succinctly and
forcefully everything that can be said on their behalf, and for whose
assistance we are grateful, in effect has taken four points. He rhetorically
asks, in the first, whether all the terms of the new lease were indeed agreed
by the exchange of correspondence in January 1982? He bases that submission upon the suggestion
that, as appears in the correspondence, after January 1982 there did appear to
be some points which remained to be agreed between the parties which had played
some part in the negotiations, although agreement upon them had not been
ultimately reached.
However, when
one just considers that submission, the answer must be that if that exchange of
correspondence in January 1982 did amount to a binding contract between the parties,
then the point raised by Mr Crawford to which I have referred is indeed
irrelevant. It may be that there were further matters to be considered and
possibly negotiated between the parties, but those facts and matters cannot, as
I think, undo the the contract which, ex hypothesi, had already been
concluded.
The second
point which Mr Crawford takes on behalf of the appellants is to query whether,
and to submit that, the terms of the exchanged correspondence in January 1982
were not sufficiently precise to constitute a binding contractual arrangement
between the parties. He relies upon two points referred to in the letter of
January 4 which I have already read. The first was the terms of the proposed
user covenant in the new lease; and the second was not only the terms of ‘the
competing business covenant’, if I can so describe, which it was proposed
should be contained in the new lease, but also of the precise user covenant
which, it will be remembered, referred to such matters as fish and chips and
Chinese food.
In so far as
the covenant restricting future competition is concerned, although from a
conveyancing point of view the terms of the letter of January 4 1982 may need
filling out in order to give full precision and clarity to what was intended,
the position was I think made sufficiently clear in that letter to enable it to
constitute a firm offer.
In my judgment
the only real doubt that there could be on the letter of January 4 1982 is as
to the scope of the user clause. It might be said that there are two opposing
lines of judicial authority on this particular point. One is that an agreement
may nevertheless be complete and enforceable, although it has not been worked
out in meticulous detail; that is the line of authority referred to in para 103
of vol 1 of the 25th edition of Chitty on Contracts to which we were
referred. The second line of authority is to the effect that the terms of an
agreement must be sufficiently certain for there to have been a binding
contract arrived at between the parties; that line of authority is the one
referred to in paras 117 and 118 of the same volume of Chitty to which
again we were referred.
For my part,
in general, and not in relation to the circumstances of this particular case, I
have more sympathy with the second of the two approaches than with the first,
but that matters not. The point is dealt with particularly in the very
well-known dictum of Lord Wright from his speech in the case of Hillas &
Co Ltd v Arcos Ltd (1932) 147 LT 503, 514, which is printed in para
118 of Chitty and was to this effect:
Businessmen
often record the most important agreements in crude and summary fashion; modes
of expression sufficient and clear to them in the course of their business may
appear to those unfamiliar with the business far from complete or precise. It
is accordingly the duty of the court to construe such documents fairly and
broadly, without being too astute or subtle in finding defects, but on the
contrary the court should seek to apply the old maxim of English law verba
ita sunt intelligenda ut res magis valeat quam pereat. That maxim, however,
does not mean that the court is to make a contract for the parties or to go
outside the words they have used, except in so far as there are appropriate
implications of law.
The contrast
to which the learned law lord referred in that dictum between the two
approaches leads to the difficulty that often arises in cases such as the
present.
However, in
the instant case, like the learned judge below, I for my part have no doubt at
all that a court would on a construction summons or on an application for
specific performance, for instance, adequately resolve the scope of the user
clause on very much the same principles as the learned Lord Chancellor resolved
a similar problem in the case of Parker v Taswell (1858) 27 LJ Ch
(NS) 812. I do not think that I need refer to that judgment in detail.
The references
to the type of food in which the intended premises should not deal are, I
think, merely examples on the proper construction of that letter, and for my
part I deprecate any too meticulous analysis of the second paragraph under head
3 in the letter. Thus again I cannot accept Mr Crawford’s argument on this
point.
The third
argument that Mr Crawford puts forward is that in the circumstances of the
instant case the agreement, if agreement it was,
because it was as it were, in the usual phrase, ‘subject to the execution of a
formal lease’. In Rossiter v Miller (1878) LR 3 App Cas 1124
there is the very well-known dictum of Lord Blackburn at p 1152 where, after
referring to an opinion of James LJ, he said:
I infer,
though of this I am not quite sure, that he wishes it to be a canon of
construction that, wherever there is a stipulation for a farther and more
formal agreement, the previous arrangements should be held to be only of this
preliminary nature. I doubt whether such a canon of construction would not
often defeat the intention of the parties; but I think it is too late now to
introduce it. I think the decisions settle that it is a question of
construction whether the parties finally agreed to be bound by the terms, though
they were subsequently to have a formal agreement drawn up.
Of course in
this case it is common ground that the parties did expect and did intend that
there should be a formal lease drawn up and executed by them. But again I am
satisfied that the learned judge below was correct in the view which he reached
that the agreement which was come to between the surveyors in 1982 was indeed
an agreement per se and not one expressed to be subject to a formal
lease and not to be legally binding until such a formal lease had been drawn up
and executed. As the learned law lord said, ‘it is a question of construction’
of the negotiations that had theretofore taken place between the parties.
Without going through the correspondence in detail, as I have said the whole tenor
of it seems to me quite clearly to have reflected the parties’ intention that
the surveyors should come to an agreement which would bind them, the parties.
The surveyors indeed referred back to the parties and to their solicitors on a
number of occasions in the course of the correspondence. When they did reach
the agreement in January 1982 this was intended to cover and to be binding
about, as I think, all the matters which were then within their remit. It must
not be forgotten that there was the current lease there as a potential model
needing only amendment to take account of the negotiations which led to that
agreement in January 1982.
Mr Crawford
took a point (and I deal with it, I trust, not disrespectfully but swiftly) on
the proviso in the letter of January 12 1982 which was sent on in the letter of
January 14 1982. I think it is sufficient to say that that point is, in my
judgment, adequately covered by the reasoning in the case of Chipperfield
v Carter (1895) 72 LT 487 at p488.
Finally,
although this is not decisive, as Sir David Cairns said in the course of
argument it is a pointer, it did so happen that the rubric ‘without prejudice’
which had been apparent on all the prior correspondence ceased to appear on
the, as I think, acceptance of the firm offer constituted by the letter of
January 12 1982. For those reasons therefore I again respectfully cannot accept
the submissions by Mr Crawford on this third point.
He will, I
trust, forgive me if I say that his fourth and final point was probably a fall-back
position. It was based upon what he submitted was the proper construction of
and approach to sections 28 and 69 of the Landlord and Tenant Act 1954 having
regard to the intention of the Act, namely that in general a tenant should be
entitled to obtain a new tenancy of business premises, other things being
equal. The submission in effect was that when one construes the word
‘agreement’ in section 28, or ‘the agreement in writing’ in section 69, one
must construe those words with, as he put it, due formality, or as a reference
to an agreement made with due formality. Understandably, and as he realised, Mr
Crawford found it a little difficult to answer the question from the court as
to what he intended by the phrase ‘due formality’. In my opinion, an agreement
as referred to in sections 28 and 69 of the Landlord and Tenant Act 1954 is an
agreement, that is to say a binding contractual arrangement enforceable by the
parties at law. Again, I cannot accede to Mr Crawford’s fourth submission.
I have, as did
the learned judge below in the circumstances, considerable sympathy with the
appellants in the predicament in which they find themselves. It may be that it
results from the non-registration of the contract which was come to in January
1982. Whether in such circumstances reasonable solicitors would have registered
is not a matter for us, and of course it arises only, as was pointed out in the
course of the argument, because the relevant land is unregistered. For the
reasons that I have given I think that the appeal should be dismissed, and in
the circumstances it is unnecessary to consider the interesting issue, as it
appears on the documents, of an estoppel, with which the learned judge below
also, as I have indicated, found it unnecessary to deal. In my judgment this
appeal should be dismissed.
Agreeing,
LLOYD LJ said: The letter of January 4 1982 and the reply of January 14 1982
which have been read by my lord show to my mind as clearly as any letters could
that there was here a binding agreement for the grant of a new lease between
the appellants and the first respondents. Accordingly, section 28 of the
Landlord and Tenant Act 1954 took effect. Unfortunately for the appellants, the
second respondents are not bound by that agreement. If I could have found a way
of holding that the appellants’ statutory rights to a new tenancy thereupon
revived, I should have done so. But that is not a possible construction of
section 28 of the Act. Indeed Mr Crawford did not feel able to argue that it
was. It follows that section 28 applies in this case according to its terms and
this appeal must be dismissed.
SIR DAVID
CAIRNS also agreed and did not add anything
The appeal
was dismissed with costs.
