Landlord and Tenant Act 1954, Part II — Landlords’ opposition to a new tenancy of premises on which the tenants had been running a successful bowling club — Landlords opposed the grant of a new tenancy on the grounds set out in section 30(1)(g) of the 1954 Act, namely that they intended to occupy the holding for the purposes of a business to be carried on by them therein — The business in question was that of running a bowling club, which included the provision of associated facilities, such as a bar — In the county court the plaintiff tenants’ claim to a new tenancy was dismissed — The tenants appealed
was whether the landlords, the borough council, had established that the
premises were intended to be occupied by them for the purposes of a business to
be carried on by them in the premises — It was well established that it is
sufficient if the landlord intends to occupy and carry on the business through
an agent or manager — The question here was whether the arrangements made by
the landlords for the business to be carried on were such as to justify the
statement that it was being carried on ‘by them’ within the meaning of para (g)
in section 30(1)
council had at first decided to take possession of the premises and run the
bowling club themselves, but decided that they did not have the necessary
experience or flair to do so successfully — They therefore advertised for and
selected an experienced management company — It was their precise relationship
with this company which was called into question — On the face of it the
company was to act as the council’s agent — There was a long and elaborate
management agreement, salient features of which were that all advertising
material was to show that the bowling club was a leisure facility provided by
the council and the council’s logo
in regard to membership fees, green fees and locker fees — Under the heading
‘Agency’ it was stated that ‘in providing the service the company, its servants
and employees shall be the agents of the council but not otherwise’ — The
council retained policy decisions while looking to the company’s expertise in
the day-to-day management
rejected submissions that the council, if carrying on the business, was acting
ultra vires, having regard to section 19(1) of the Local Government
(Miscellaneous Provisions) Act 1976; that the club was not run on the council’s
behalf but was a members’ club; and that the premises were intended to be
occupied by the members of the club for the purposes of the club’s business or
for the purposes of the management company’s business — The court’s decision
was that the premises were intended to be occupied by the council for the
purposes of the council’s business or for the purposes of a business to be
carried on by the council through the company as the council’s agent — The tenants’
appeal was accordingly dismissed
No cases are
referred to in this report.
This was an
appeal by the tenants, Teesside Indoor Bowls Ltd, from the decision of Judge
Hewitt, at Stockton-on-Tees County Court, in favour of the landlords,
Stockton-on-Tees Borough Council, holding that they had established the grounds
of their opposition to the grant of a new tenancy under section 30(1)(g)
of the Landlord and Tenant Act 1954.
Richard
Merritt (instructed by Sheffield Smith & French, of Middlesbrough) appeared
on behalf of the appellants; Christopher Parker (instructed by the town clerk
of Stockton-on-Tees Borough Council, Mr F F Theobalds) represented the
respondent council.
Giving
judgment, LLOYD LJ said: The question in this case is whether the
plaintiffs, Teesside Indoor Bowls Ltd, are entitled to the grant of a new
tenancy of certain premises at Thornaby Pavilion, Wrightson House, Cleveland,
under Part II of the Landlord and Tenant Act 1954. Thornaby Pavilion is a
leisure complex built nearly 25 years ago by the Stockton on Tees Borough
Council or their predecessors in title. Included within the leisure centre is
an indoor bowling green.
On March 21
1968 the plaintiffs and the council entered into an agreement whereby the
plaintiffs agreed to construct and complete the bowling green, at their own
expense, within the complex and to provide various club facilities, such as a
bar. In return for that, they were to be granted a 21-year lease. The lease is
dated October 12 1968. On March 23 1989 the council gave notice under section
25 of the Act terminating the tenancy on October 12 1989 and indicating that
they would oppose any application for the grant of a new tenancy on the grounds
set out in section 30(1)(g) of the Act. On April 3 the plaintiffs served
a counternotice.
The case came
on before Judge Hewitt in the Stockton on Tees County Court on November 13
1989. He held that the council had established an intention to occupy the
premises at the termination of the tenancy for the purpose of a business to be
carried on by them. Accordingly, he dismissed the plaintiffs’ claim. The
plaintiffs now appeal to this court. Fortunately there is no dispute as to the
relevant legal principles. The sole question is the application of
well-established law to the facts of the present case.
The background
is clearly set out in the judge’s judgment and there is no need for me to
repeat it. The plaintiffs, to judge from a document which was included among
our papers, had made a great success of running the so-called bowling club. By 1989
there were 1,500 playing members and 400 social members. On average about 250
members would play bowls every day, including Sunday, during the eight-month
season.
At their
meeting on March 15 1989 the leisure services committee of the council decided not
to renew the plaintiffs’ tenancy but to take possession of the premises and run
the bowling club themselves. Subsequently they decided to employ an outside
company to manage the bowling club on their behalf. The reason for that was
given by a Mr D A Earnshaw [FRICS], the council’s valuer and estate agent.
According to his evidence, the council took the view that they did not have the
necessary expertise and flair to run the bowling club. So they advertised for
an experienced management company for that purpose. There were three replies to
the advertisement, including the plaintiffs as existing tenants and a company
called Pavilion Bowls Management Ltd (to whom I shall refer as ‘the company’ in
order to distinguish it from the plaintiffs).
Negotiations
between the council and the company continued during the summer of 1989 and
culminated in an agreement dated November 6 1989. It is a very elaborate and
lengthy document, some 58 pages long. The judge held that on its true
construction the agreement is what it purports to be, namely a management
agreement. I agree with the judge and find the contrary to be almost
unarguable.
I will refer
to a few of the relevant provisions. Clause 1 is the definitions clause. It
defines ‘Bowls Club’ as ‘the club to be operated by the Council at the Pavilion
for the playing of indoor bowls and associated social activities’. ‘Service’ is
defined as ‘the whole of the work to be executed, including any goods or
materials to be supplied by the Company in accordance with the Contract . . .’.
Clause 2 sets out the company’s obligations. Clause 2.1 provides:
The Council
will engage the Company to and the Company agrees to manage the Bowls Club in
accordance with the terms of this agreement in a proper skilful and workmanlike
manner to the entire satisfaction of the authorised Officer.
Clause 2.3
provides:
If the
Company fails to provide the Service or any part thereof with due diligence or
in a proper skilful and workmanlike manner . . . the Council may itself provide
or may employ and pay other persons to provide the Service . . .
Clause 3 deals
with the operation of the bowls club. Clause 3.1 provides for management:
The Company
shall manage the Bowls Club and shall appoint a nominee in whose name any
licences necessary for the provision of the Service will be held.
Clause 3.2
deals with the membership scheme and provides:
The Council shall
run a membership scheme for the Bowls Club in conjunction with the membership
scheme for the rest of the Pavilion to include [various categories of members].
Then clause
3.2.3 provides:
The Company
shall prepare a set of rules applicable to Members of the Bowls Club to be
agreed by the Council.
I can go
forward to clause 3.9.1 under the heading ‘Pricing Policy’:
The level of
membership fees for the Pavilion, green fees and locker fees will be set by the
Council in consultation with the Company, the decision of the Council being
final.
Clause 3.13.2:
All
advertising material and information shall prominently state that the Bowls
Club is a Leisure facility of the Council and the Council’s Logo shall be
displayed in the same manner.
Finally,
clause 15.1 under the heading ‘Agency’:
In providing
the Service the Company its servants and employees shall be the agents of the
Council but not otherwise . . . .
Nobody
suggests that any of these provisions — and there are many others which point
in the same direction — are a sham. They give the council almost complete
control over the operation of the company in running the club, as indeed the
judge found. Clause 6 of the agreement governs the disposal of surplus income
from running the club. Mr Merritt does not suggest that those provisions are in
any way inconsistent with agency. It follows that as between the council and
the company the council always intended to occupy, and have in fact occupied,
the premises for the purposes of a business carried on by them through the
company as the council’s agents.
Mr Merritt
argued that if the council are indeed carrying on the business in question,
then they are acting ultra vires. Under section 19(1) of the Local
Government (Miscellaneous Provisions) Act 1976, the council have power to
provide indoor facilities including a bowling centre and, further, have power
to provide premises for the use of clubs having social or recreational objects.
But Mr Merritt submits that the council have no power under section 19(1) or
elsewhere to carry on the business of running a club.
In support of
that argument, Mr Merritt refers us to certain provisions in the agreement
relating to the collection of income and the payment of expenses. The
provisions are to be found in clause 5. That clause provides for the company to
keep a bank account known as the Bowls Club Management Account (BCMA), for
payment in of
company’s auditors to audit the accounts.
All this, says
Mr Merritt, is in marked contrast with the agreement for the running of the ice
rink at Billingham, where the bank account was to be held not by the company
but by the council. Mr Merritt went so far as to submit that the arrangement
whereby the bank account is to be held in the company’s name is contrary to
section 148(4) of the Local Government Act 1972 whereby all receipts of local
authorities have to be carried into an appropriate fund.
I cannot
accept any of those submissions. It seems to me quite clear that if the council
had power, as they clearly had, to provide a bowling centre, they had power to
make regulations for its use. The convenient way of doing so was by means of a
club which the council could either run themselves or through a managing agent.
Nor can I see anything contrary to section 148(4) in the company holding a bank
account in its own name for the purposes of the day-to-day running of the club
pending the distribution of surplus income in accordance with clause 6. So far,
I would have been content to say that I agree entirely with the conclusion at
which the judge arrived and adopt his reasons. But before us Mr Merritt has
developed a second argument which was only lightly touched on in the court
below and has become the main thrust of his argument before us. He submits that
the judge never properly analysed the nature of the bowling club and that in
truth the bowling club is not a proprietary club at all. It is not a club run
by the company on the council’s behalf but is a members’ club which the members
run for themselves through an executive committee.
The judge had
some difficulty in following that argument, and so do I. It is quite clear,
when you look at the detailed terms of the agreement, that the club is not a
members’ club in any sense of those words. The council retained control
throughout. It is the council who set the level of the membership fees. It is
the council who have to approve the membership rules as drawn up by the
company. When Gibson LJ asked in the course of the argument whether the council
could thwart the company’s intention as to the nature of the club, Mr Merritt
was compelled to reply in the affirmative. I see none of the indicia of a
members’ club here and no sign that the company was acting as agent of the club
as Mr Merritt submitted. This is the exact antithesis of the agreement as I
construe it.
The true
position is as stated by Mr Brook, the council’s solicitor, in a few answers
which he gave when he was recalled. He said:
Club . . .
will elect its own President and officers — Council concerned that members
should be involved. The Management of the playing of the bowls and associated
facilities was to be done by the Pavilion Bowls Ltd on behalf of the Council.
Council
retains policy decisions like pricing of membership fees, green fees, locker
fees and bar. Rules of Club are to be drawn up by the Managing Company —
because Council look to their expertise.
I would
accordingly reject Mr Merritt’s submission that the premises were intended to
be occupied by the members of the club for the purposes of the club’s business
or for the purposes of the company’s business. The true position was the other
way round. The premises were intended to be occupied by the council for the
purposes of the council’s business or for the purposes of a business to be
carried on by the council through the company as the council’s agent. That is
what the agreement on its true construction provides and there is really
nothing else that can be said.
I would
dismiss the appeal.
RALPH
GIBSON LJ and SIR DENYS BUCKLEY agreed and
did not add anything.
The appeal
was dismissed with costs.
