Landlord and Tenant Act 1954, Part II — ‘Competent landlord’ — Whether plaintiff underlessees, seeking new tenancy, had brought proceedings against correct landlords — Whether plaintiffs’ immediate landlords had ceased to be the competent landlord at the material date — Effect of a request for a new tenancy made by plaintiffs’ immediate landlords to their superior landlords — Sections 26, 29(3) and 44(1) of the Act inter alia considered — Whether if the immediate landlords were not the competent landlord they were nevertheless estopped from denying that they were the correct defendants — Appeal from decision of Mervyn Davies J
chartered accountants, were underlessees of part of a commercial building —
They received a section 25 notice under the 1954 Act from the defendants, who
were their immediate landlords and were lessees of the whole building —
Plaintiffs duly replied to the section 25 notice within the two months required
by section 25(5), stating that they were not willing to give up possession —
Plaintiffs subsequently issued their originating summons seeking the grant of a
new tenancy and naming their immediate landlords as defendants — This summons
was served well within the time-limits prescribed by section 29(3) — Plaintiffs
assumed in carrying out the statutory procedures that the defendants
constituted the ‘competent landlord’ within the meaning of section 44(1) and
had no knowledge at that time of events which might call that assumption into
question — Later the question became a main issue in the litigation — Unknown
to the plaintiffs at the material times the defendants had served a request
under section 26 on their own landlords specifying a date for the commencement
of their new tenancy which had the effect that their existing tenancy would
terminate within the period of 14 months required as the minimum reversion for
a competent landlord under section 44 and Schedule 6 — This fact, taken by
itself, would, as a result of section 44(1)(b), have made the superior
landlords, not the immediate landlords, the competent landlord for the purpose
of the Act — However, the defendants had at the same time given notice exercising
an option contained in their lease enabling them to obtain a new 14-year term —
The effect of this became a critical point in the plaintiffs’ argument — The
only other matter that needs to be mentioned for completeness is that the
superior landlords, at the defendants’ request, had granted a new lease for a
term of 25 years of the whole building to another company
plaintiffs submitted that the defendants, their immediate landlords, remained
the competent landlord, thus preserving the validity of the plaintiffs’
application for a new tenancy — The plaintiffs argued, that although their
original lease was only a fag-end which did not satisfy section 44(1)(b), there
should be added to it the reversionary term of 14 years resulting from the
exercise of their option — This, with some assistance from the doctrine of
Walsh v Lonsdale, fulfilled the statutory requirements — The defendants, on
the other hand, submitted that for the purpose of section 44(1)(b) the interest
of the landlord consisted only of the fag-end of the original lease and that
the reversionary term should be disregarded — Mervyn Davies J accepted the
defendants’ argument; he did not feel able to treat the residue of the original
lease plus the term arising from the option as together constituting the
landlord’s ‘interest in reversion’ as defined — The Court of Appeal held, on
the contrary, that to treat the landlords’ interest as consisting only of the
residue was ‘wholly unreal’ — Consequently they held that the defendants were
the competent landlord and were properly named as such by the plaintiffs
were wrong on this issue, however, the court considered the plaintiffs’
alternative argument based on estoppel — The plaintiffs submitted that the
defendants were estopped from asserting that they were not the competent
landlord — When the defendants served a section 25 notice on the plaintiffs
they were representing that they were the competent landlord — On the
assumption that they ceased to be such when they served a section 26 notice on
their superior landlords it was their duty to correct that representation —
They failed to do so and continued to fail during subsequent proceedings — It
was no answer to say that the plaintiffs should have made inquiries — The court
agreed with the plaintiffs’ submission and held that the defendants would have
been estopped from asserting that the plaintiffs’ application for a new tenancy
was defective in not naming the correct defendants — The court differed from
Mervyn Davies also on this issue: he had rejected the submission based on
estoppel
the plaintiffs succeeded on the main issue and alternatively on the issue of
estoppel — The appeal was allowed and the order below set aside — The company
to which the superior landlords had granted a 25-year lease, MGM/UA Home Video
(UK) Ltd, was substituted for United Artists Corporation Ltd as defendants —
Reference by court to Evans Construction Co Ltd v Charrington & Co Ltd,
which both sides in the present case regarded as having been decided per
incuriam
The following
cases are referred to in this report.
Artemiou v Procopiou [1966] 1 QB 878; [1965] 3 WLR 1011; [1965] 3 All
ER 539, CA
Bowes-Lyon v Green [1963] AC 420; [1961] 3 WLR 1044; [1961] 3 All ER
843, HL
Cornish v Brook Green Laundry Ltd [1959] 1 QB 394; [1959] 2 WLR 215;
[1959] 1 All ER 373; [1959] EGD 116; (1959) 173 EG 307, CA
Evans
Constructions Co Ltd v Charrington & Co Ltd
[1983] QB 810; [1983] 2 WLR 117; [1983] 1 All ER 310; [1982] EGD 326; (1982)
264 EG 347, [1982] 2 EGLR 61, CA
Hawksley v Outram [1892] 3 Ch 359, CA
Lowther v Heaver (1889) 41 ChD 248, CA
Walsh v Lonsdale (1882) LR 21 ChD 9
With v O’Flanagan [1936] Ch 575; [1936] 1 All ER 727, CA
This was an
appeal by the plaintiffs, R C Shelley, T S Curzon and J J Pinnick, chartered
accountants, from a decision of Mervyn Davies J (reported at [1989] 1 EGLR 98;
[1989] 08 EG 115) holding that the first defendants, United Artists Corporation
Ltd, had not been correctly sued by the plaintiffs as the competent landlord
for the
number of issues arising out of the plaintiffs’ application for a new lease of
premises on the second floor of 37-41 Mortimer Street, London W1.
David
Neuberger QC and William Elland (instructed by Titmuss Sainer & Webb)
appeared on behalf of the appellants; Gavin Lightman QC and Miss Elizabeth
Jones (instructed by Wright Webb Syrett) represented the first and second
respondents, United Artists Corporation Ltd and MGM/UA Home Video (UK) Ltd.
Giving
judgment, DILLON LJ said: This appeal, by the plaintiffs in the
proceedings against an order made by Mervyn Davies J on November 2 1988, raises
issues (i) whether on the facts of this case the plaintiffs joined the right
party as defendant when they issued the proceedings by way of application to
the court for the grant to them of a new tenancy of business premises under
Part II of the Landlord and Tenant Act 1954, (ii) whether there is an estoppel
which precludes the relevant parties from taking the point that the wrong party
was joined as defendant, and (iii) whether, if indeed the wrong party was
joined in the first place, the court has, on the facts of the case, any power
to substitute another party as defendant after the statutory time-limit under
section 29(3) of the 1954 Act has expired. The judge held that the plaintiffs
had joined the wrong party as defendant, that there was no relevant estoppel
and that the court had no power to substitute another party as defendant after
the expiration of that statutory time-limit; he accordingly dismissed the
plaintiffs’ application for a new tenancy but gave the plaintiffs leave to
appeal.
I turn to
issue (i). Ord 97, r 6(2) of the Rules of the Supreme Court provides that the
person who, in relation to the plaintiffs’ current tenancy, is the landlord as
defined by section 44 of the 1954 Act shall be made defendant to the summons by
which an application to the court for a new tenancy under the Act is made.
Section 44 in
its present form provides as follows:
(1) Subject to the next following subsection, in
this Part of this Act the expression ‘the landlord’, in relation to a tenancy
(in this section referred to as ‘the relevant tenancy’), means the person
(whether or not he is the immediate landlord) who is the owner of that interest
in the property comprised in the relevant tenancy which for the time being
fulfils the following conditions, that is to say —
(a) that it is an interest in reversion expectant
(whether immediately or not) on the termination of the relevant tenancy, and
(b) that it is either the fee simple or a tenancy
which will not come to an end within fourteen months by effluxion of time and,
if it is such a tenancy, that no notice has been given by virtue of which it
will come to an end within fourteen months or any further time by which it may
be continued under section 36(2) or section 64 of this Act).
and is not
itself in reversion expectant (whether immediately or not) on an interest which
fulfils those conditions.
(2) References in this Part of this Act to a
notice to quit given by the landlord are references to a notice to quit given
by the immediate landlord.
(3) The provisions of the Sixth Schedule to this
Act shall have effect for the application of this Part of this Act to cases
where the immediate landlord of the tenant is not the owner of the fee simple
in respect of the holding.
The person who
is the landlord as defined by section 44 is commonly referred to as ‘the
competent landlord’: see the definition in para 1 of the Sixth Schedule to the
1954 Act, which also contains definitions of the ‘mesne landlord’ as meaning a
tenant whose interest is intermediate between the relevant tenancy and the
interest of the competent landlord and of the ‘superior landlord’ as meaning a
person (whether the owner of the fee simple or a tenant) whose interest is
superior to the interest of the competent landlord.
The relevant
facts are not in dispute.
The
plaintiffs, a firm of accountants, occupied the second floor of Mortimer House,
37-41 Mortimer Street, London W1, under a lease, which was in fact an
underlease, from the original defendant in these proceedings, United Artists
Corporation Ltd (‘United Artists’) for a term from December 23 1983 to June 20
1988. This was a business tenancy within Part II of the 1954 Act.
United
Artists, who are one of the respondents to this appeal and whose registered
office is at Mortimer House, held the whole building from head landlords,
originally Rathmoor Ltd, under a lease dated August 22 1967 for a term of 21
years from June 24 1967, ie to June 24 1988. At all times material for the
purpose of these proceedings the reversion on this lease of United Artists was
vested in a company called Benesco Ltd.
Under clause 6
of the United Artists’ lease United Artists had an option to take a new lease.
The relevant provisions of clause 6 are as follows:
(1) On the expiration of the term hereby granted
the lessee shall have the option of taking a further underlease of the demised
premises for a term of fourteen years commencing on the expiration of the term
hereby granted at a yearly rent to be ascertained as hereinafter provided such
further underlease to contain the same covenants conditions and provisions as
are contained herein including this clause and in addition to contain a
stipulation that provisions equivalent to this clause shall not be included in
any subsequent underlease of the demised premises granted pursuant to such
further underlease.
(2) If the lessee wishes to exercise this option
it shall give notice in writing to the lessor not less than nine months and not
more than twelve months before the expiration of the term hereby granted
whereupon the parties shall endeavour to reach agreement as to the rent to be
reserved by such further underlease but if they have not reached agreement
within two months of the service of such notice the annual rent to be received
shall be the greater of the annual rent payable hereunder or such annual sum as
a surveyor to be nominated for the purpose by the President for the time being
of the Royal Institution of Chartered Surveyors (acting as an expert and not as
an arbitrator) shall certify in writing to be the current market rental value
of the demised premises less an agreed deduction of Two thousand five hundred
pounds per annum to be made by way of an allowance to the lessee in respect of
structural improvements carried out by the lessee at its own expense at or
about the commencement of the said term hereby granted . . .
(3) Within fourteen days after the lessee is
notified of the amount of the rent to be reserved by such further underlease as
ascertained in accordance with the provisions of the preceding sub-clause it
may notify the lessor in writing that it no longer wishes to exercise the
option contained in sub-clause (1) of this clause in which event the lessee
will vacate the demised premises at the expiration of the term hereby granted
or at the expiration of six months from the date upon which the lessor receives
such notification (whichever shall be the later) but otherwise on the
expiration of the term hereby granted or on the expiration of twenty-eight days
after the lessee is informed of the amount of such rent (whichever is the
later) the lessor shall grant to the lessee and the lessee shall accept and
execute a counterpart of such further underlease in accordance with the
provisions of this clause. Any occupation of the demised premises by the lessee
after expiration of the term hereby granted shall be upon the same terms and
conditions contained in this present underlease except that the rent payable to
the lessor shall be at the rate per annum of the annual rent ascertained in
accordance with the provisions of the last preceding sub-clause.
On July 28
1987 United Artists, by their solicitors Wright Webb Syrett, gave the
plaintiffs notice to terminate the plaintiffs’ tenancy at June 20 1988. The
notice, which was in the prescribed form, stated that United Artists would not
oppose an application to the court under the 1954 Act for the grant of a new
tenancy. It is not in doubt that United Artists were the competent landlords to
give that notice and that it was a valid notice since, even though United
Artists had not yet exercised their option for a new lease under clause 6 of
their lease, neither United Artists nor Benesco had yet served any notice under
Part II of the 1954 Act to terminate United Artists’ tenancy under their lease
— see the words in section 44(1)(b) ‘no notice has been given by virtue
of which it will come to an end within fourteen months’.
On July 30
1987, United Artists gave two notices to Benesco or their solicitors. By the
one United Artists exercised their option for a new 14-year lease under clause
6 of their lease. By the other United Artists gave notice under section 26 of
the 1954 Act requesting a new lease for 14 years from June 24 1988 under Part
II of the 1954 Act. It is the contention of United Artists that the effect of
the second notice was, despite the exercise of the option, that from the giving
of the second notice Benesco and not United Artists was the ‘competent
landlord’ in relation to the plaintiffs’ tenancy. The plaintiffs accept that
that would have been so if the option under clause 6 had not been exercised
(since the notice envisaged by section 44(1)(b) by virtue of which the
tenancy will come to an end within 14 months may be a notice given either by
the landlord or by the tenant), but the plaintiffs say that because of the
exercise of the option and the provisions of clause 6 United Artists remained
the competent landlords.
What actually
happened was as follows.
By the
combined effect of section 25(5) and section 29(2) of the 1954 Act it was a
condition precedent to the plaintiffs’ applying to the court for a new tenancy
that the plaintiffs should, within two months after the giving to them of the
section 25 notice, notify ‘the landlord’ that they would not be willing at the
date of termination to give up possession of the property comprised in the
tenancy. The plaintiffs gave such a notice to United Artists by letter of
August 6 1987, and United Artists (as they were bound to under other provisions
of the 1954 Act) passed it on to Benesco, who received it
that if Benesco had become the competent landlord the notice should have been
given by the plaintiffs directly to Benesco, but there is nothing, in my
judgment, in that, since Benesco in fact received the notice within the
statutory time-limit.
Then on
October 22 1987 the plaintiffs applied to the High Court by originating summons
in the Chancery Division for a new tenancy under Part II of the 1954 Act of
their holding, the second floor of Mortimer House. They made United Artists
sole defendants to the originating summons. Obviously they intended that the
originating summons should be directed to the competent landlord as required by
the rules, but they believed that United Artists were the competent landlord,
as represented in the section 25 notice of July 28, because they did not know
about the notices served by United Artists on Benesco on July 30. The
originating summons had, under section 29(3) of the Act, to be issued not less
than two nor more than four months after the giving of the landlords’ section
25 notice. Accordingly the summons was in time as against United Artists. But
Benesco did not hear of the summons until some date in 1988, well out of time.
On November 25
1987 United Artists issued their own application to the High Court in the
Chancery Division for a new tenancy under Part II of the 1954 Act of the whole
of Mortimer House. Benesco was made sole defendant to that application. Benesco
had not given any notice to United Artists under section 26(6) of the 1954 Act
that Benesco would oppose any application to the court for a grant of a new
tenancy on any of the statutory grounds for opposition. Benesco’s position can
only have been that by one route or the other, by the exercise of the clause 6
option or by the application to the court, United Artists were entitled to a
new lease of the whole of Mortimer House.
In the upshot,
on October 7 1988, Benesco granted a new lease of the whole of Mortimer House
to a company called MGM/UA Home Video (UK) Ltd (‘MGM’) for a term of 25 years
from June 24 1988. MGM, the other respondent to this appeal, is a fellow
subsidiary in the same group of companies as United Artists, and United Artists
were a party to MGM’s lease as surety. It is conceded that the lease was
granted to MGM at the request of United Artists and by virtue of the
negotiating position created by United Artists’ exercise of the clause 6 option
and United Artists’ application to the court. The documents disclosed show that
the same solicitors, Wright Webb Syrett, acted — not surprisingly — for both
United Artists and MGM in the negotiations which led to the grant of the MGM
lease.
In the
meantime, after the four-month time-limit under section 29(3) had expired,
Wright Webb Syrett took the point on behalf of United Artists that the
plaintiffs’ application to the court under the 1954 Act was misconceived
because, it was said, at the date of the issue of the originating summons Benesco
and not United Artists was the competent landlord and so Benesco should have
been joined as sole defendant. The plaintiffs consequently applied to
substitute Benesco for United Artists as defendant if it should be held that
United Artists had not been the competent landlord at the time of the issue of
the plaintiffs’ originating summons. When, however, the MGM lease had been
granted, that application was changed, by common consent, into an application
to substitute MGM, rather than Benesco, for United Artists in any event, since
it is apparent, after the grant of the MGM lease, that only MGM can now grant
the plaintiffs the new tenancy they seek.
Mr Galloway,
the partner in Wright Webb Syrett, who was acting in these matters, has sworn
an affidavit in which he has stated that he was aware that, on the service of
the section 26 notice of July 30 1987 on Benesco, United Artists would no
longer be a competent landlord within the meaning of the Act in relation to the
plaintiffs’ tenancy and Benesco would become the competent landlord, and he has
further stated that he was of the opinion that he was under no duty to advise
the plaintiffs or their solicitors that the section 26 notice had been served.
His integrity is not in question, but his appreciation of the law, and of his
duties, is.
As I have
indicated, it is contended for the plaintiffs that as a result of the exercise
by United Artists of their option under clause 6 of their original lease United
Artists remained the competent landlord and were still the competent landlord
when the plaintiffs issued their originating summons. The argument is put in
three ways:
(i) As a result of the exercise of the option and
the doctrine in Walsh v Lonsdale (1882) LR 21 Ch D 9, the
‘interest’ of United Artists at the date of the issue of the originating
summons consisted of the combination of the fag-end of the original term to
June 24 1988 plus an equitable term of 14 years from that date as a result of
the exercise of the option. Reference is made to the definition of ‘tenancy’ in
the interpretation section, section 69 of the 1954 Act, where it is said that a
tenancy means a tenancy created whether by a lease or underlease or by
agreement for a lease or underlease or by a tenancy agreement. It is said that
if a person is entitled in equity to have a lease granted, his rights ought to
be dealt with in the same way as if a lease had been granted to him and do not
depend upon its actually having been granted: see the citation in Cornish
v Brook Green Laundry Ltd [1959] 1 QB 394 at p 406 from the judgment of
Cotton LJ in Lowther v Heaver (1889) 41 Ch D 248 at p 264.
(ii) In the alternative, if the 14-year term as a
result of the exercise of the option is disregarded, United Artists had in any
event their rights under clause 6(3) of their original lease, namely the right
to remain in occupation under a new tenancy at a new rent after June 24 1988
until at least the expiration of six months from the date on which United
Artists received notification of the amount of the rent to be reserved under
the new lease pursuant to the exercise of the option if such six months had not
expired before June 24 1988. It is submitted that that new tenancy of
indeterminate length should be added to United Artists’ fag-end of the original
term to June 24 1988, that the result is a tenancy which would not necessarily
come to an end within 14 months of the issue of the plaintiffs’ originating
summons by effluxion of time and that no notice had been given to bring it to
an end within such 14 months, and
(iii) In the further alternative, the plaintiffs
refer to section 28 of the 1954 Act and say, following the wording of that
section, that by the clause 6 option agreement and the exercise of that option
United Artists and Benesco have agreed to the grant to United Artists of a
future tenancy of the holding on terms and from a date specified in the
agreement and so the current tenancy was not a tenancy to which Part II of the
1954 Act applied and the purported section 26 notice was a nullity. This further
alternative does not, however, in my judgment, help the plaintiffs. It may be
correct, but by itself would merely leave United Artists with the fag-end to
June 24 1988 of their original term; it does not assist the plaintiffs to add
on to that fag-end either the 14-year term or any other tenancy as a result of
the exercise of the option, which is what the plaintiffs need to do.
The
respondents, United Artists and MGM, dispute the points urged for the
plaintiffs, but they say in particular:
(a) For the purposes of section 44 of the 1954
Act the ‘interest of the landlord in the property comprised in the relevant
tenancy’ means only the immediate reversion of United Artists, under its
original lease extending only to June 24 1988, and that reversionary tenancies
whether at law or in equity, whether under executed leases or under agreements
for leases, cannot be added on. They are merely mesne tenancies and to be
disregarded, and
(b) The agreement for a new lease constituted by
the exercise of the clause 6 option is not an agreement of which specific
performance could be obtained because the rent has not been ascertained and
United Artists has a right under clause 6(3) of the original lease to cancel
the exercise of the option, by serving within 14 days after notification of the
amount of rent a notice that United Artists no longer wish to exercise the
option. Therefore it is said, by reference to the enunciation of the principle
of Walsh v Lonsdale by Cotton LJ in the passage in his judgment
in Lowther v Heaver which I have mentioned, that that principle
does not apply, and so there is no equitable 14-year equivalent to a legal
14-year term in reversion on the fag-end to June 24 1988.
So far as the
respondents’ point (b) is concerned, this court held in Cornish v Brook
Green Laundry Ltd that the Walsh v Lonsdale principle cannot
be invoked in cases where an agreement for a lease is subject to a condition
precedent which remains unperformed by the proposed tenant and has not been
waived by the landlord — see per Romer LJ at p 407. Mr Neuberger for the
plaintiffs submits that United Artists’ right to withdraw from the exercise of
the option was more in the nature of a defeasance than a condition precedent;
United Artists were, by the exercise of the option, entitled to the 14-year
term if they did not abandon it or elect to withdraw from the exercise of the
option. At the crucial date, the date of the issue of the plaintiffs’
originating summons, United Artists could not have obtained specific
performance of the agreement for the grant of the 14-year lease from June 28
1988 as a result of their exercise of the clause 6 option (as opposed to
obtaining injunctive relief restraining their landlords from acting in breach
of that agreement) without
their lessor that they no longer wished to exercise their option. But the right
to withdraw from the exercise of the option was a right exclusively for the
benefit of United Artists which they could have abandoned at any time, whether
or not they actually had at the crucial date any thought of abandoning it.
Apart from that unilateral right of withdrawal, the agreement arising from the
exercise of the option was susceptible of specific performance; even though the
rent under the new 14-year lease had not been ascertained, complete machinery
for its ascertainment had been agreed. In my judgment, the right of withdrawal
does not alter the position, since it was a provision exclusively for the
benefit of United Artists which they could abandon at any time; the general
position as to the power of a party to relinquish a provision exclusively in
his favour is covered by Hawksley v Outram [1892] 3 Ch 359, where
specific performance of an agreement was consequently granted. Accordingly, for
my part I would not accept the respondents’ point (b) as an obstacle to the
plaintiffs.
We were
referred by Mr Neuberger to a statement by Lord Hodson, one of the majority, in
Bowes-Lyon v Green [1963] AC 420 at p 447 where, in considering
whether the interest of a party satisfied the definition of ‘landlord’ — ie
competent landlord — in section 44 of the 1954 Act, he disregarded the fact
that the party in question could by his own act, eg by giving a notice, bring
his interest to an end. But Lord Hodson’s comment, though superficially
applicable to the present case, is in my judgment, on analysis, directed to a
different point.
As for the
plaintiffs’ alternative submission referred to as (ii) above and founded on
United Artists’ residual rights under clause 6(3) of United Artists’ original
lease, this I do not accept. The residual rights apply only where United
Artists have given a notice that they no longer wish to exercise the option.
Such a notice would, in my judgment, be a ‘notice to quit’ within the wide
definition of that term in section 69 of the 1954 Act. Prima facie,
therefore, section 24(2) of the 1954 Act would prevent section 24(1) applying
to extend United Artists’ tenancy under clause 6(3) beyond the expiration of six
months from the date on which the landlord received the notification that
United Artists no longer wished to exercise the option. But in the absence of
such extension under section 24, it could not be said of United Artists’
interest at the date of issue of the plaintiffs’ originating summons (and if
the 14-year term under the option is disregarded as alternative (ii) assumes)
that, in the words of section 44, ‘it will not come to an end within 14 months
by effluxion of time’.
It remains,
therefore, to consider the respondents’ submission (a), that for the purposes
of section 44 the interest of the landlord was merely United Artists’ immediate
interest to June 24 1988 under its original lease, and reversionary terms legal
or equitable are to be disregarded. This seems to me wholly unreal. It is
conceded by Mr Lightman for the respondents that the argument would apply even
if Benesco had, before the plaintiffs issued their originating summons, granted
to United Artists by a lease under seal a reversionary term in the whole of
Mortimer House, say 25 years from June 24 1988. It is submitted that even in
such a case, Benesco and not United Artists would have been the competent
landlord and so the only proper defendant to the plaintiffs’ originating
summons, even though Benesco would, on the assumed facts, have had no interest
whatsoever in the grant or refusal of the plaintiffs’ application to the court
for a new tenancy.
Such a bizarre
result is said to be required by the wording used in section 44(1), which I have
already quoted, and in particular the reference there to ‘that interest in the
property . . . which . . . is either the freehold or a tenancy which will not
come to an end’ etc. It is said also to be supported by the provisions as to
reversionary tenancies in section 65(4) of the 1954 Act. In my judgment, the
result is not required by the wording of section 44 and is not supported by
section 65(4), in that section 65(4) is concerned with different problems which
may arise in the working out of an order for the grant of a new tenancy when an
order for the grant of such a tenancy has been made by the court and is not
concerned to govern the construction of section 44.
In Artemiou
v Procopiou [1966] 1 QB 878 the majority of this court, Danckwerts and
Salmon LJJ, for sound reasons of common sense, held that for the purposes of
section 30(2) of the 1954 Act the ‘interest of the landlord’ at a particular
time meant his interest whether under one lease or under a series of leases:
see per Danckwerts LJ at p 888B-F and per Salmon LJ at p 891B-F.
For like
reasons, in my judgment, the plaintiffs can pray in aid, as part of the
interest in the property to which United Artists were entitled at the crucial
date, the 14-year reversionary term under their exercise of the clause 6
option. They can add that term to the fag-end to June 24 1988. Consequently, at
the date of the issue of the originating summons United Artists were the
competent landlord and were properly named as the defendant.
In case I am
wrong on the foregoing — issue (i) — I turn to issue (ii), the issue of
estoppel.
There is no
question of any estoppel as against Benesco — merely as against United Artists
and MGM. Moreover, the question of estoppel arises only if, contrary to my view
on issue (i) above, Benesco became the competent landlord in place of United
Artists when United Artists served their section 26 notice of July 30 claiming
a new lease from Benesco under Part II of the 1954 Act. Consequently, the
question can conveniently be tested by ignoring the clause 6 option and its
exercise and assuming that the only notice served by United Artists on Benesco
on July 30 had been the section 26 notice.
On that
assumption the position is, in my judgment, as follows:
(i) When United Artists served the section 25
notice on July 28 1987 on the plaintiffs in the prescribed form and containing
the statement that United Artists would not oppose an application to the court
for a new tenancy, they represented to the plaintiffs that they were the
competent landlord for the purposes of the 1954 Act.
(ii) When United Artists served the section 26
notice of July 30 1987 on Benesco claiming a new lease, United Artists ceased
to be, and Benesco became, the competent landlord in relation to the
plaintiffs’ tenancy. The earlier representation to the plaintiffs that United
Artists were the competent landlord therefore became a misrepresentation which
it was United Artists’ duty to correct: compare With v O’Flanagan
[1936] Ch 575.
(iii) When United Artists received the notice of
August 6 1987 from the plaintiffs stating that the plaintiffs were not willing
to give up possession of their holding, United Artists realised, through their
solicitors, that the plaintiffs were labouring under the mistaken belief that
United Artists were still the competent landlord, but they still failed to
correct the misrepresentation: see the evidence of Mr Galloway referred to
above.
(iv) When the plaintiffs’ originating summons was
served on United Artists, United Artists again failed to correct the
misrepresentation by informing the plaintiffs that Benesco had become the
competent landlord. If the misrepresentation had been corrected even at that
comparatively late stage there would have been time for the plaintiffs to have
issued a summons against Benesco or added Benesco as a defendant before the
time-limit under section 29(3) of the 1954 Act expired.
(v) Against that background, if Benesco had then
granted the 25-year reversionary lease from June 24 1988, or any new lease
pursuant to the United Artists’ section 26 notice of July 30 1987, to United
Artists themselves rather than to MGM, United Artists would clearly have been
estopped from asserting as against the plaintiffs that the plaintiffs’
application to the court for a new tenancy under Part II of the 1954 Act was
not properly constituted because Benesco had been the competent landlord when
the originating summons was issued and had not been made a defendant.
(vi) MGM can be in no better position than United
Artists, since MGM came in at the request of United Artists and as a result of
United Artists’ negotiating position, and MGM are a fellow subsidiary in the
same group and were represented by the same solicitors, Wright Webb Syrett, who
had known all the facts at each stage.
It was, in the
circumstances, the duty of United Artists to correct what had become a
misrepresentation. It is therefore no answer for United Artists to say that the
plaintiffs could, or might, have found out the truth by making further
inquiries of United Artists, eg by serving notices at appropriate times under
section 40 of the 1954 Act. It is never a defence to a person who has made a
misrepresentation to say that the person to whom the misrepresentation was made
could have found out the truth if he had made appropriate inquiries.
Accordingly,
the plaintiffs succeed, in my judgment, on issue (i) or alternatively on issue
(ii). I would therefore allow this appeal, set aside the order of the judge and
substitute MGM for United Artists as defendant in these proceedings, so that
effective relief can be granted to the plaintiffs.
It is
therefore unnecessary for me to express any view on issue (iii), which arises
only if United Artists were not the competent landlord when the plaintiffs
issued their originating summons and there is no estoppel. I would comment only
that the decision of this court in Evans Construction Co Ltd v Charrington
& Co Ltd [1983] QB 810 is normally regarded as the leading authority on
the substitution of the correct party after the expiration of the time-limit
under section 29(3), where a person who was in truth not the competent landlord
had been joined initially as sole defendant to a tenant’s application for a new
tenancy under Part II of the 1954 Act; but in the present case both sides
submitted — for widely differing reasons and among many other far-ranging
submissions — that Evans v Charrington had been decided per
incuriam and ought to be disregarded.
RUSSELL and BUTLER-SLOSS LJJ agreed and did not add anything.
The appeal
was allowed. The judge’s order was set aside, save in so far as it ordered the
plaintiffs to pay the costs of Benesco. United Artists were ordered to pay the
plaintiffs’ costs of the appeal and of the two summonses in the court below,
and also the costs which the plaintiffs were ordered to pay Benesco in the
court below. Leave to appeal to the House of Lords was refused.
