Landlord and Tenant Act 1954, Part II, section 30(1)(f) — Appeal by tenants from decision of county court judge refusing their application for a new tenancy, the landlords having opposed the application on the ground set out in section 30(1)(f) — The landlords wished to redevelop the site which was the subject of the tenancy for the purpose of a supermarket and had obtained the necessary planning permission — The issue was as to whether the landlords had established the necessary intention required by para (f) — The landlords, who were freeholders, had at first proposed to sell the site outright to well-known supermarket operators, but it became clear that the appellant tenants were not willing to quit — It was therefore decided to enter into a building agreement with the operators, the agreement providing for a 99-year lease to be granted on completion of the buildings — Pending completion a licence fee was payable and the lease would be subject to a premium and a ground rent — From a valuation point of view the total of the sums payable would probably be equivalent to the value of the freehold, which had been agreed at £650,000
law since Gilmour Caterers Ltd v St Bartholomew’s Hospital Governors that the intention required by
section 30(1)(f) could be satisfied by the landlords’ grant of a building
lease, but the appellants raised two points of objection — The first was that
the present transaction looked at as a whole was tantamount to an outright
disposal — The Court of Appeal rejected this suggestion, holding that in
principle the case was indistinguishable from Gilmour — The other objection was
that the landlords’ intention at the date of service of the notice opposing the
grant of a new tenancy was different from that which was held to be established
at the date of the hearing (the earlier idea having been an outright sale) —
That objection also failed; the critical date was the date of the hearing —
Held that there was abundant material on which the judge was entitled to hold
that the ground of objection under section 30(1)(f) was established — Appeal
dismissed
The following
cases are referred to in this report.
Betty’s
Cafes Ltd v Phillips Furnishing Stores Ltd
[1959] AC 20; [1958] 2 WLR 513; [1958] 1 All ER 607; [1958] EGD 92; (1958) 171
EG 319, HL
Gilmour
Caterers Ltd v St Bartholomew’s Hospital
Governors [1956] 1 QB 387; [1956] 2 WLR 419; [1956] 1 All ER 314, CA
This was an
appeal by the tenants, Spook Erection Ltd, who carried on business as market
owners, operators and erectors, from the decision of Judge Lee at Evesham
County Court, rejecting the appellants’ application for a new tenancy of
premises at Moreton-in-Marsh, Gloucestershire, of which the landlords were
British Railways Board.
John West
(instructed by Whiteman, Bretherton & Co, of Gloucester) appeared on behalf
of the appellants; P M Kremen (instructed by Simon K Osborne, solicitors’
department, British Railways Board, Melbury House, London NW1) represented the
respondents.
Giving the
first judgment at the invitation of Bingham LJ, MANN LJ said: There is before
the court an appeal from His Honour Judge Lee sitting at Evesham County Court
in respect of a decision given on October 30 1987. By that decision the learned
judge refused an application dated August 12 1986 by the present appellants for
a new tenancy of premises at Moreton-in-Marsh. The application for the new
tenancy was mounted by reference to the business tenancy provisions of Part II
of the Landlord and Tenant Act 1954. The particular business carried on by the
appellants is described as being that of market owners, operators and erectors.
The freeholder
of the premises is the British Railways Board. The board desires to see the
site which is the subject of the tenancy redeveloped. The board obtained planning
permission for a supermarket and listed building consent for the demolition of
the listed buildings upon the site. The board opposed the application for a new
tenancy on September 18 1986. The grounds of opposition were as follows:
that on the
termination of the current tenancy the Respondents intend to demolish or
reconstruct the premises comprised in the holding or a substantial part of
those premises or to carry out substantial work of construction on the holding
or part thereof and that they could not reasonably do so without obtaining
possession of the holding.
That ground of
opposition is a reflection of the ground of opposition contained in section
30(1)(f) of the Act of 1954.
The facts fall
within short compass. In pursuit of its desire to secure the redevelopment of
the site, which was presumably surplus to its operational requirements, the
board had in mind a sale of its freehold to Budgens. That company is a
well-known firm of supermarket operators. However, it became plain that the
appellants would not leave the site. Accordingly, in order to sustain a ground
of opposition under section 30(1)(f), the board entered into a building
agreement with Budgens. It was a building agreement which contained a term to
the effect that a 99-year lease would be granted on completion of the
buildings. Pending completion of the buildings there was a licence fee payable.
There was a premium payable on the lease and there was a ground rent. As a
valuation exercise the sums payable under the heads I have described would
probably equate with the value of the freehold, which had been agreed at
£650,000.
It is plain
law that the necessary intent for the purposes of section 30(1)(f) must
be an intent extant at the time of the hearing of the application. The intent
is not necessarily an intent to reconstruct or rebuild with one’s own hands. It
is sufficient that, for example, the intention should be to effect the
rebuilding or the reconstruction by the mechanism of a building lease. That has
been clear for upwards of 32 years. It was established in Gilmour Caterers
Ltd v St Bartholomew’s Hospital Governors [1956] 1 QB 387 where at p
391 Denning LJ (as he then was) said:
The landlord
intends to demolish or reconstruct the premises even though he does it through
the hands of a building lessee. In a way, the grant of a building lease is a
means of paying for the work. Just as when you employ a building contractor you
pay him in money, so you pay the building lessee by granting him a period of
years of occupation. It seems to me that, whether the work is done directly by
a building contractor or less directly through a building lessee, the landlord
intends to demolish or reconstruct the premises. He intends to have it
demolished and reconstructed, and that is sufficient.
Morris LJ (as
he then was) said at p 392:
Mr
Heathcote-Williams concedes that, if the landlords in the present case had
employed building contractors to demolish and reconstruct and had then granted
a lease, the provisions of the Act would have been satisfied.
In my judgment
the effect and result is exactly the same under the arrangement which the
landlords have in fact made . . . . The scheme, therefore, is that, when the
building is completed, there will be a lease, though that lease is to be dated
from September 29, 1955, and there is a provision for a rent in money to take
the place of a peppercorn rent, which is to apply for the earlier period.
It seems to me
that on the facts here the landlords are intending to demolish and reconstruct
the premises.
The decision
in Gilmour has never been criticised. It must have been followed
numerous times in the county courts. The textbooks do not venture adverse
comment. Mr West, who presented the case for the appellants with moderation and
with an appreciation of the difficulties in his path, said that the Gilmour
case was distinguishable because here there was a transaction which was
tantamount to an outright disposal. He did not and, I think, would not have
suggested that the transaction was a sham. The reality of the transaction and
its appearance corresponded. The reason for entering into the transaction is,
in my view, immaterial. Reality and appearance corresponding, I can see no
reason for distinguishing the decision in Gilmour.
The other
ground upon which Mr West sought to impugn the learned judge’s decision was
that at the time of the service of the notice on September 18 1986 the board’s
intention was different from that which had been sustained at the hearing
before the judge. Mr West drew our attention to a passage in the speech of Lord
Denning in Betty’s Cafes Ltd v Phillips Furnishing Stores Ltd
[1959] AC 20 at p 52. At that page Lord Denning said:
If the notice
had been a dishonest notice in which the landlords had fraudulently
misrepresented their intention — or, I would add, if there had been a material
misrepresentation in it — I should have thought it would be a bad notice.
There is here
no suggestion of fraud or material misrepresentation. Undoubtedly, the
mechanism of redevelopment was the subject of change in the mind of the board.
The hearing date is, however, the critical date and, in my judgment, there was
abundant material on which as at that date His Honour Judge Lee could hold that
the ground of objection under section 30(1)(f) was established. Accordingly,
I would, for my part, dismiss this appeal.
BINGHAM LJ
agreed and did not add anything.
The appeal
was dismissed with costs to be taxed if not agreed. Leave to appeal to the
House of Lords was refused.