Landlord and Tenant Act 1954–Question as to rent at which premises might reasonably be let in the open market by a willing lessor–Evidence called by tenant from other traders disappointed with the trading area as to the rents they considered reasonable for their shops–Such evidence admissible as to trading position of area but not as to rent to be determined for subject premises–Discussion about admissibility of evidence of fact given by valuer–Judge wrong to rely on opinions given by other traders as to what they thought their rents should be as evidence of rent for applicant’s premises–New trial ordered
This was an
appeal by the landlords, Rosedimond Investments Ltd, from a decision of Deputy
Judge Millar at Ilford County Court in regard to the rent of shop premises at 7
The Arcade, East Street, Barking, Essex, held on a monthly tenancy by John
Richard Rogers, the respondent to this appeal, who was the applicant in the
county court proceedings.
K Lewison
(instructed by Berwin Leighton) appeared on behalf of the appellants; K
Reynolds (instructed by Joseph Collyer) represented the respondent.
Giving
judgment ROSKILL LJ said: The appeal is brought by the appellant landlords from
a decision of Mr W J K Millar, sitting as a deputy county court judge at Ilford
County Court on May 10 1977. The learned deputy judge had before him a dispute
between the tenant of Unit 7 The Arcade, East Street, Barking, Essex, and the
landlords of that property. The tenant was Mr John Rogers and the landlords a
property company named Rosedimond Investments (Blakes Market) Ltd.
Mr Rogers had
become the tenant of the landlords on July 1 1975 on a monthly tenancy, the
annual rent being £1,500 a year. That was the first letting to Mr Rogers. The
premises, we are told, had previously been let to somebody else. This unit was
one of a dozen or so units in Blakes Market, and we have been told by counsel
that that market–of which we have a floor plan–was rebuilt following a
fire when the old market had been destroyed. When one compares that plan with
what I imagine to be an enlargement of the relevant part of an ordnance survey
map, one sees that the market is situated in a shopping area just to the
south-east of East Street on the borders of Ilford and Barking. Our copies of
the plan show a number of well-known names like Marks & Spencer, Boots, and
so on, as having premises in or just off East Street:
The problem
which was before the learned deputy county court judge was how much the rent
should be for the ensuing 14 years from March 1 1977. The existing rent, as I
have said, was £1,500 a year. The tenant was willing to pay £2,000 a year
subject to a rent review clause probably at seven years, but the landlords
wanted more, they wanted a rent of the order of £2,500.
It is not, I
think, necessary to go through the dates of the various documents which were
properly served by the parties. Ultimately when the matter came before the
learned deputy judge he had to fix the rent in accordance with section 34 of
the Landlord and Tenant Act 1954, which provides: ‘The rent payable under a
tenancy granted by order of the court under this Part of this Act shall be such
as may be agreed between the landlord and the tenant or as, in default of such
agreement, may be determined by the court to be that at which, having regard to
the terms of the tenancy’–and I leave out some words–‘the holding might
reasonably be expected to be let in the open market by a willing lessor,’ and
then the statute provides under the letters (a) to (d) certain matters which
the court is enjoined to disregard.
The learned
deputy judge had the benefit of certain evidence. There was called before him,
first of all, the tenant himself. Mr Rogers gave evidence; the burden of his
evidence was that his trading results at no 7 had not come up to his
expectations; he thought a rent of £2,500 was too high. I am looking at the
judge’s note of his evidence. He is recorded as having said ‘£2,500 too high.
Prepared to pay £1,800–not acceptable. Offer £2,000 per annum–no matter what
the user is.’ Then: ‘Just breaking even.
Managed to build up.’ He was running a
shop there as a retail trader in children’s wear.
Mr Rogers
called two of his neighbours. One was a Mr Brooks, who was the tenant of 6 The
Arcade, and the other was a Mr Bolton, who was the tenant of no 9. Mr Brooks
was paying £2,500 a year and so was Mr Bolton. Indeed, it seems from the
evidence that all those various units had been let at £2,500 a year except what
I might describe as the two corner units, that is the two nearest East Street,
which were let for £3,500 a year. Not surprisingly, therefore, the landlords
were pressing for a new rent for no 7 at the same rate as was being paid for
the others–subject, of course, to a rent review clause.
The learned
deputy judge heard the evidence from these two gentlemen and I will deal with
this point first before I come on to deal with the other points. Each was–and I
use this phrase in no pejorative sense, of course–an interested party. Each
came along, in effect, to say that he was paying, from his point of view, too
high a rent at £2,500 because the trading position in The Arcade was not what
each had hoped it would be. Now it was perfectly legitimate for each to say
that The Arcade was not as good a trading area as he had hoped, but what each
of these two gentlemen thought was the right rent for him to pay for nos 6 and
9, was not relevant to the learned deputy judge’s inquiry into what was the
right rent for no 7. Yet Mr Bolton was allowed to say, apparently without
objection, that he thought a reasonable rent for his shop (that is no 6) would
be between £1,800 and £2,000. One has, as Cumming-Bruce LJ points out, only to reflect
on this evidence to realise its very limited value. It was relevant, as I say,
to show that the trading position was less advantageous than might otherwise
have been expected and a valuer, seeking to help the court with evidence of his
opinion as to the relevant market rent, would be entitled to take that fact, if
it were a fact, into account. But, as the court pointed out to Mr Reynolds, it
does not necessarily follow that, because a particular tenant was finding the
rent economically too high for himself, that rent was above the relevant market
rent. All sorts of factors would then come into play whether that rent were the
proper rent or not, including the particular tenant’s own efficiency in running
his own business and other considerations of that kind.
One problem is
that the learned deputy judge reached the conclusion, on the evidence, that the
proper rent was £1,750, though he increased that figure to £2,000 because the
tenant had said that he was willing to pay £2,000: see the last paragraph of
the judgment which the learned judge added afterwards in order to explain his
decision. But he arrived at that decision by relying to a very large extent on
the evidence of Mr Brooks and Mr Bolton, which he used not only to help him
arrive at the relevant market rent, but also to enhance, if I may use that
phrase, his preference for the evidence of the tenant’s expert witness, Mr
Rona, against that of the landlord’s expert, Mr Cooper.
We have got a
note of the judgment which the learned deputy judge has approved. I ought to
read the relevant passage to make the objection to the judge’s conclusion
plain:
At first I
was inclined to think that The Arcade was a valuable shopping area. But I heard
evidence from Mr Brooks, the tenant of no 6, and Mr Bolton, the tenant of no 9.
Both are businessmen. Mr Brooks has four other properties. Mr Bolton has three
other properties. Both were reliable witnesses and both said that they had made
bad bargains. Mr Bolton said that a reasonable rent would be £1,800–£2,000 per
annum and said that he was disappointed with the trading position
I think that
means for his own shop.
I heard
evidence from Mr Cooper. He said that The Arcade was a good shopping area. But
I don’t think that there is better evidence than that of Mr Brooks and Mr
Bolton. This is not an area comparable to East Street itself.
Then on the
next page
I rely on the
evidence given by Mr Brooks and Mr Bolton.
Mr Reynolds
argued before this court that the sentence I have just read, ‘But I don’t think
that there is better evidence than that of Mr Brooks and Mr Bolton,’ was
directed not to what they said as the proper rental to be paid, but to what
they had been saying about the adequacy of The Arcade as a trading area. If one
only looks at that sentence in isolation it is just possible that it bears that
construction, but the trouble lies in the learned deputy judge’s subsequent
reference to his reliance on the evidence of Brooks and Bolton. As
Cumming-Bruce LJ said, evidence which was admissible for the very limited
purpose only which I have mentioned was used by the learned deputy judge for a
very different purpose, for he allowed himself to be influenced by the
particular trading results of two tenants, Mr Brooks and Mr Bolton, in order to
award a lower rent than that for which the landlords were contending. In other
words, the learned deputy judge used this evidence for a different purpose from
that for which alone it was legitimately admissible. It was, as I have already
said, admissible for one purpose only, but it was inadmissible in so far as
each was allowed to say what he thought the proper rent was for his own
particular shop, and we think the learned deputy judge certainly did use it for
the purpose of helping him assess what the proper rent was for Mr Rogers to
pay.
It is only
fair to the learned deputy judge to say that apparently no objection was taken
to this evidence at the time. One sympathises with counsel. Objections to
evidence are very
judge’s attention was, we are told, drawn to the inadmissibility of this
evidence, save to this limited extent, in counsel’s closing speech.
Notwithstanding that, he appears to have used this evidence for an inadmissible
purpose and that, with very great respect to him, vitiated his conclusion. On
that ground alone I would hold that this judgment cannot be supported and we
have no alternative but to order a new trial.
There was a
second point taken on admissibility of evidence. This related to the evidence
given by Mr H Rona, who was a surveyor of obviously wide experience in this
particular area. He was a Fellow of the Royal Institution of Chartered
Surveyors and carried on business at 225 Cranbrook Road, Ilford. He had no less
than 40 years’ experience. There was, of course, the usual reference to
comparables. Mr Rona used four different comparables in East Street, nos 54,
58, 60 and 83. As appears from the judge’s note–of which we have a copy–there
was nothing to suggest in the evidence-in-chief that much of the information he
was giving about these properties was based on hearsay. But it is said that it
subsequently emerged that this gentleman had not seen the actual leases which
provided for the rents that he said were being paid for these comparables.
Accordingly, founding himself on a decision of the present Vice-Chancellor in English
Exporters (London) Ltd v Eldonwall Ltd [1973] Ch 415 Mr Lewison said
that this evidence was inadmissible. On the other side it is said by Mr
Reynolds that while some of the evidence may conceivably have been inadmissible
in so far as it purported to be evidence of fact, most of it was admissible in
so far as it purported to be evidence of opinion and that in any event any
original inadmissibility was cured by the fact that Mr Cooper, the landlords’
expert, had some first-hand knowledge of at least two of these properties.
For my part if
this were the only point in the case, I would long hesitate before I would be
willing to order a retrial on a matter of this kind, for had this point been
taken fairly and squarely at the trial–and here again we are told no question
was raised until final speeches–the learned deputy judge might well have said
to counsel, ‘Now how real is your objection based on hearsay? Are you not prepared to accept hearsay
evidence of what the rent for nos 54, 58, 60 or 83 is?’ If Mr Lewison had shown good reason for
saying, ‘No, I really must be satisfied by admissible evidence that those are
the true rents’ the learned deputy judge might well have offered an
adjournment, albeit at the landlords’ risk. On the other hand, Mr Lewison,
under pressure as to costs, might have felt it was reasonable to allow this
evidence, albeit hearsay, to be admitted.
As I say, if
this were the only point, I would greatly hesitate to order a new trial on this
point alone, but I do not rest my decision on that. I rest my decision on the
fact that, with all respect to him, I think the learned deputy judge founded
himself upon evidence which to a large extent was inadmissible and which to the
extent that it may conceivably have been admissible was of little, if any,
weight in order to support his preference for the evidence of Mr Rona as
against that of Mr Cooper. I do not think, therefore, that his conclusion can
be supported. In those circumstances, I see no alternative but to order a new
trial and in due course we can consider where that new trial should take place.
I would allow the appeal.
Agreeing,
CUMMING-BRUCE LJ said: There were features about this problem which made it
rather more difficult than many such applications, which is probably why the
dispute reached the county court judge. The particular difficulty was that The
Arcade in which this unit was sited had fairly recently been built and had a
short trading history. There was the problem as to whether the trading
opportunities of a site in The Arcade were comparable with those in East Street
or, if they differed, in what respect and to what degree they differed.
That being one
of the problems posed by the case, Mr Reynolds has satisfied me, contrary to my
expectation when I was hearing Mr Lewison’s submissions, that the two tenants
in The Arcade, Brooks and Bolton, who were called, could give admissible
evidence as to the trading conditions in The Arcade. Such evidence might well
prove difficult to analyse in its effect, because their personal trading
experience is evidence to some degree of trading conditions, but equally of
their individual trading capacity and the trading opportunity for the
particular businesses that those two tenants were undertaking in The Arcade.
Thus quite apart from the personal interest that such witnesses must have in
minimising the appropriate rent, such evidence, though admissible, has to be
carefully and critically considered by a judge in order that he may avoid the
confusion of the personal trading aspect of the witness with the trade
generally in The Arcade.
Having regard
to the way in which the learned deputy judge expressed himself in his judgment,
it does appear to me that he fell into that confusion, because after quoting
the views of those two gentlemen about what they thought their rent should
be–evidence which they gave in addition to the evidence they had given about
their disappointment in the market–the learned judge simply contented himself
with saying that he relied upon the evidence of those two gentlemen. In my
reluctant view, it cannot be said with any confidence that the approach of the
learned deputy judge to that evidence was correct and, therefore, a new trial
appears to be unavoidable. Whether, of course, the result of the new trial will
prove to be exactly the same as the last one is something on which we do not
have to speculate.
On the second
point, namely the complaint that the applicant’s witness gave inadmissible
evidence of fact, I would content myself merely with saying that, in my view,
the statement of the correct principles by the learned Vice-Chancellor in the English
Exporters case (the passage which appears at p 423 of his judgment) appears
to me a concise and accurate summary of the principles. I find it unnecessary,
in view of the opinion I have formed on the first point, to express any view on
the question whether the admission of inadmissible evidence by one expert has
been shown to have had any influence on the decision of the learned judge.
For these
reasons I agree that the appeal should be allowed and a new trial ordered.
Also agreeing
STAMP LJ said: On the ground that the judge wrongly attached importance to the
views of Messrs Brooks and Bolton as to the reasonable rent of their respective
premises, I too would allow the appeal. I say nothing about the point taken on
the admissibility of Mr Rona’s evidence. I too would allow the appeal and order
a new trial.
The court’s order
was as follows: appeal allowed and judge’s order discharged except as to
interim rent; new trial to take place before a different judge; expert evidence
as to comparables to be exchanged, setting out particulars of site,
measurements, rents and relevant terms of leases of comparable properties;
costs in Court of Appeal to be reserved to the judge at the new trial and no
costs in court below.
