Landlord and tenant — Part II of Landlord and Tenant Act 1954 — Exclusion agreement — Leases of business premises — Purported agreement to exclude application of sections 24 to 28 of 1954 Act — Landlord serving requisite notice of exclusion — Tenant serving declaration of agreement to exclusion — Section 38A(3) of 1954 Act — Schedule 2 to Regulatory Reform (Business Tenancies)(England and Wales) Order 2003 — Tenant’s declaration in form of para 8 of Schedule 2 but para 7 appropriate to case — Contractual lease term expiring — Whether landlord entitled to possession — Whether tenancy continuing under section 24 of 1954 Act — Whether Part II of 1954 Act effectively excluded — Whether para 8 notice “in substantially the same form” as para 7
The respondent granted the appellant leases of two shops on the concourse of Marylebone station for terms expiring in July 2006. Both leases contained provisions excluding the application of sections 24 to 28 of the Landlord and Tenant Act 1954. The respondent had earlier served notice on the appellant, as required by section 38A(3), explaining that the appellant was relinquishing rights under the Act and emphasising the importance of obtaining professional advice. The notice was in the form prescribed by Schedule 1 to the Regulatory Reform (Business Tenancies)(England and Wales) Order 2003. In response, the appellant made a declaration, as required by section 38A(3)(b) of the 1954 Act and Schedule 2 to the 2003 Order, indicating her agreement to the exclusion of the statutory provisions from the tenancy. The declaration was in the form set out in para 8 of Schedule 2 for a “statutory declaration” of the kind required where the landlord had served its notice less than 14 days before the tenant entered into the tenancy. In fact, since the respondents’ notice had been served months earlier, a declaration in the form stipulated by para 7 was the appropriate course. The two forms of declaration were similar, but the para 8 version was in a more solemn form. The making of the para 8 declaration was recorded in the lease.
Following the expiry of the contractual lease term, the respondent brought proceedings for possession. The appellant contended that the tenancy continued in force under section 24; she submitted that the agreement to exclude sections 24 to 28 was void owing to her use of the wrong form of declaration and the failure to record the making of a para 7 declaration in the lease as required by para 5 of Schedule 2 to the 2003 Order. In the county court, HH Judge Peter Cowell rejected that submission and made orders for possession. The appellant appealed.
Held: The appeal was dismissed. A statutory declaration should not be deemed ineffective on the grounds that it differs from the prescribed form merely because it is in a more solemn form and because, although stating that the landlord has served the requisite notice, it does not state that such notice was served more than 14 days before the lease was entered into. Nor will the record of that declaration in a lease be ineffective merely because it mentions the wrong paragraph of Schedule 2 to the 2003 Order. The statutory requirements are not so unequivocally expressed that strict compliance only will suffice; the declaration will be valid if it is in the form or “substantially in the form” of para 7. The test is one of substance; the purpose of the declaration is to convey information, in that the declarant must confirm certain facts and show that he or she has received and understood certain facts and their legal consequences. Looked at in its statutory and commercial context, the para 8 statutory declaration is in substantially the same form as para 7. Its use does not result in any of the essential purposes of the prescribed form being thwarted or blunted.
Per curiam: The converse would not be true if a para 7 declaration were used where a para 8 declaration was required; it would not provide the tenant with the protection afforded by the more formal declaration under para 8.
The following case is referred to in this report.
Davis v Burton (1883) LR 11 QBD 537, CA
This was an appeal by the appellant, Bella Patel, from a decision of HH Judge Peter Cowell, sitting in Central London County Court, allowing a claim by the respondent, The Chiltern Railway Co Ltd, for possession of business premises.
Salim Merali, solicitor-advocate (instructed by S Merali & Co) appeared for the appellant; Alexander Winter (instructed by Hollingworth Bissell) represented the respondent.
Giving the first judgment, Lord Neuberger of Abbotsbury said:
[1] This is an appeal against orders for possession made on 24 May 2007 in respect of two shops, by HH Judge Peter Cowell in Central London County Court. Those orders were made in the light of his conclusion that the leases of those shops granted to the appellant, Mrs Bella Patel, by the respondent, The Chiltern Railway Co Ltd, were excluded from the protection of Part II of the Landlord and Tenant Act 1954 (the Act).
[2] The legal background is as follows. The Act applies to tenants that occupy business premises: see section 23. By section 24, such a tenant has the right to apply to the court for a new tenancy, which can be refused only on specified grounds, some of which carry with them a right to compensation from the landlord. Section 24 also provides that a business tenancy will continue past its contractual term date unless and until determined by a notice that complies with the requirements of sections 25, 26 or 27. Section 38 generally renders void any agreement (which I shall call an “exclusion agreement”) that precludes a tenant of business premises from exercising its rights under the Act.
[3] However, since 1969 the Act has included provisions whereby parties that are to be the landlord and the tenant under a tenancy of business premises can enter into a valid exclusion agreement. Certain |page:34| formalities have always been required before such an agreement can be effective. Until 2003, the prior sanction of the court on the application of both parties was required. However, a different regime now applies. Section 38A(3) provides that an exclusion agreement:
shall be void unless
(a) the landlord has served on the tenant a notice in the form, or substantially in the form, set out in Schedule 1 to the Regulatory Reform (Business Tenancies)(England and Wales) Order 2003; and
(b) the requirements specified in Schedule 2 to that Order are met.
[4] The form of notice in Schedule 1 to the Regulatory Reform (Business Tenancies)(England and Wales) Order 2003 explains that the tenant is relinquishing the rights given by the Act and emphasises the importance of obtaining professional advice. The notice also states that if it is received more than 14 days before the tenant is committed to the lease, he or she must sign a declaration and (in bold type) that if the notice is received later than that, the tenant must sign a “statutory” declaration, and for that purpose a visit to a solicitor (or someone empowered to administer oaths) will be required.
[5] The principally relevant part of the order for present purposes is Schedule 2, and all references to paragraphs in this judgment are to paragraphs in that schedule. Paragraph 2 says that the notice referred to in section 38A(3) must, subject to para 4, be served “not less than fourteen days before the tenant enters into the tenancy”. Paragraph 3, which applies “if the requirement in paragraph 2 is met”, stipulates that the tenant must, before entering into the tenancy, “make a declaration in the form, or substantially in the form, set out in paragraph 7”. Paragraph 4 applies “if the requirement in paragraph 2 is not met”: in other words, if a notice is not served on the tenant at least 14 days before the tenancy is granted. It states that before the tenancy is granted, the landlord must serve a notice on the tenant and the tenant must:
make a statutory declaration in the form, or substantially in the form, set out in paragraph 8.
Paragraph 5 provides:
A reference to the notice, and, where paragraph 3 applies, the declaration, or, where paragraph 4 applies, the statutory declaration, must be contained in or endorsed on the instrument creating the tenancy.
[6] In the form of declaration set out in para 7, the tenant and the tenant’s address must first be stated. The tenant must then “declare”, first, that it proposes to take a tenancy of the premises as identified from the landlord, which must be named, for a term whose commencement date must be stated; second, that it proposes to agree that the provisions of sections 24 to 28 of the Act are to be excluded from the tenancy; third, that the landlord has, “not less than fourteen days before” the tenant is committed to the tenancy, served a notice; and fourth, that the tenant has read the notice and accepts the consequences of the proposed agreement. The form ends: “DECLARED this… day of…”.
[7] The form of statutory declaration set out in para 8 is very similar, but it has the following differences. First, the tenant must not merely declare but must “solemnly and sincerely declare”. Second, the service of a notice by the landlord is not stated to have been effective at any particular time. Third, before the words “DECLARED… day of…” are the words “AND I make this solemn declaration conscientiously believing the same to be true and by virtue of the Statutory Declarations Act 1835”. And fourth, after the words “DECLARED…day of…” are the words “before me,” (signature of person before whom declaration is made)” and then:
A commissioner for oaths or A solicitor empowered to administer oaths or (as appropriate)
[8] The relevant facts of the present case are as follows. On 15 March 2005, Chiltern granted Mrs Patel leases of two shops on the concourse of Marylebone station in London. Each lease was for a term contractually expiring on 17 July 2006, and each was subject to an exclusion agreement. On 3 August 2004, long before the 14-day period referred to in para 2, Chiltern served a notice on Mrs Patel in respect of each lease. Those notices clearly comply with the requirements of section 1 to the order.
[9] On 10 March 2005, five days before the execution of the leases, Mrs Patel made a statutory declaration in respect of each lease in the form stipulated in para 8. When the leases were granted, each of them contained in clause 8 purportedly pursuant to the provisions of para 5 a statement that the landlord, Chiltern, had served a notice under section 38A(3) on 3 August 2004, and a statement that the tenant, Mrs Patel, had made a statutory declaration in accordance with para 8 on 10 May 2005. When the leases expired contractually in July 2006, Chiltern claimed possession of the two shops. Mrs Patel resisted the claims on the basis of two arguments. The first argument relied upon an alleged estoppel; the second was that the requirements of section 38A(3)(b) had not been satisfied and so the tenancies were continuing under section 24. Both arguments were rejected by Judge Cowell. My lady, Arden LJ, refused permission to appeal on the first argument because she considered that the judge had been plainly entitled to reject the contention that an estoppel had been established on the facts that he had found. However, she granted permission to appeal on the second argument, which raises a short point of law to which I now turn to consider.
[10] Mrs Patel’s argument is, of course, the same in respect of each lease and, for the sake of clarity, I will deal with it by reference to one of them. She relies upon the fact that the notice in the present case was served in accordance with the requirements of para 2, that is more than 14 days before the lease was entered into, that it follows that para 3 applied, that she should therefore have made a declaration in accordance with para 7, and that, under para 5, that declaration should have been recorded in the lease. As it is, however, she contends that no such declaration was entered into and no such declaration was recorded as having been entered into in the lease. Instead, she says, first, contrary to para 3, she did not make a declaration pursuant to para 7 but a statutory declaration purportedly pursuant to para 8; and, second, contrary to para 5, there was no record in the lease of a declaration under para 7 having been made. Accordingly, her argument is that neither the requirements of para 3 nor those of para 5 have been met and, consequently, section 38A(3)(b) has not been satisfied, with the result that the exclusion agreement is “void” under section 38A(3), so that the tenancy has not expired because no notice pursuant to section 25, 26 or 27 has been served.
[11] In agreement with Judge Cowell, and despite Mr Salim Merali’s commendably concise and clear submissions to the contrary, I consider that this argument is not only unattractive in common-sense terms, but that it is bad in law. It would, to use the judge’s words, be “bordering on the absurd” if a statutory declaration was held to be ineffective on the grounds that it differed from the prescribed form because: (i) it was both expressly and in law in a more solemn form than that form; and (ii) although it stated that notice was served before the lease was entered into, it did not state that it was served more than 14 days before the lease was entered into. It would be equally unreal if, assuming that the statutory declaration was effective, what was contained in clause 8.2 of the lease was ineffective because it applied to a statutory declaration rather than a declaration and because it irrelevantly mentioned the wrong paragraph of Schedule 2 to the 2003 Order.
[12] Of course, the statutory requirements in respect of a notice or a declaration could be so clearly and unequivocally expressed that strict compliance would be required and that any deviation, however insignificant, from those requirements would render a purported notice or declaration invalid. Sometimes, indeed, although it conflicts with common and commercial common sense, this may be the result because it is correct as a matter of law. However, this is not such a case.
[13] It is clear that on the facts of this case that para 3, and not para 4, applied. However, the requirement of para 3 is not that a declaration must be “in the form set out in paragraph 7,” but that it must be “in the form or substantially in the form set out in paragraph 7”. Accordingly, the first issue is whether the statutory declaration in para 8, as used in this case, is substantially in the form of the declaration in para 7. The answer to that question must, in my view, |page:35| ultimately turn on whether the para 8 form performs all the essential functions of the para 7 form. After all, the purpose of the declaration under para 7, like that of a contractual or statutory notice, is to convey information. In this case, the declarant must confirm certain facts and show that he or she has received and understands certain facts and their legal consequences. One must therefore look at the form prescribed by para 7 in its statutory and commercial context and see whether the departures, either individually or taken together, from that form, in the statutory declaration used in this case, result in any of the essential purposes of the prescribed form being thwarted or even significantly blunted. To say that this test is one of substance rather than form may well be correct, but he should not mask the point that the style, even the layout in the prescribed form, may at least in some respects be of the essence.
[14] It is unnecessary to develop or explore the application of the test further on the facts of this case. However, it is worth mentioning Davis v Burton (1883) LR 11 QBD 537, a decision of this court to which attention has been drawn by Arden LJ and which appears to endorse the test suggested. In that case, the issue was whether a bill of sale complied with section 9 of the Bills of Sale Act (1878) Amendment Act 1882, which provided that a bill of sale would be void if it did not comply with section 9, which stated that a bill of sale should be “in accordance with the form in the schedule”. At p540, having said that this “must mean that every bill of sale should be substantially like the form in the schedule”. The then Lord Brett MR, observed that “nothing substantial must be subtracted from it and nothing actually inconsistent must be added to it”.
[15] I turn then to apply this approach to the facts of this case. Despite the submissions to the contrary on behalf of Mrs Patel, I find it quite impossible to accept that the differences between the two documents justify the conclusion that a para 8 statutory declaration is not “substantially in the form” of the para 7 declaration. As my lord Mummery LJ said in argument, those four words underline the intention of the legislature that mere technical defects, with no substantive effect, should not render invalid a document that performs the task that legislature requires.
[16] The fact that a document is a statutory declaration obviously does not prevent it from being a declaration. The fact that, under para 8, the declarant “solemnly and sincerely declares” rather than merely “declares” the fact that the declaration is said to be made pursuant to the 1835 Act, and the fact that the form is witnessed by a solicitor or a commissioner for oaths, cannot in any way prevent a para 8 declaration from being substantially in the form of a declaration under para 7. The para 8 form carries the same message of the para 7 form, but in more emphatic and solemn form. What the judge referred to, arguably a little extravagantly, as a general principle of our law that the greater includes the less does seem to me to be in point.
[17] As to the fact that the para 8 declaration refers to the notice having been served rather than to its having been served “not less than fourteen days before” the date of the lease, that does not seem to me to be close to representing a significant departure from the para 7 declaration. It is an accurate statement. At worst, it may be said to suggest that the tenant had been a little less protected or informed than was in fact the case. However, in no way can any purpose in the statutory scheme embodied in section 38A(3) and the order be said to be weakened, let alone thwarted, by that departure from the form of the para 7 declaration. After all, the very fact that an exclusion agreement can satisfy section 38A(3)(b), even where the landlord serves notice less than 14 days before the tenant became committed to the lease, demonstrates that the fact that whether or not the notice is served before those 14 days is not an essential factor in itself. Accordingly, it appears to me that the para 8 statutory declaration is in the same form as the para 7 declaration, save in the arid sense, that the wrong form of declaration was used, but that is precisely catered for by the words “or substantially in the form” in para 3.
[18] Permission to appeal was given in this case because the point is of some significance in respect of the statutory scheme, and indeed of potentially wider significance in so far as it applies to statutory forms generally. It may therefore be sensible to add that I find it very hard to see how it could be said, in a para 4 case, that a simple para 7 declaration would be “substantially in the form” of a para 8 declaration. In other words, the converse of the conclusion that I have reached in this case does not appear to me to apply. At least part of the thinking behind the two different declarations, as demonstrated by the contents of the notice in Schedule 1 to the 2003 Order, was that the prospective tenant should either be given at least 14 days between receipt of the notice and being committed to the lease (paras 3 and 7) or, where less time is given, the tenant should have access to a solicitor or commissioner for oaths and should have the consequences of the exclusion agreement emphasised before being committed to the lease: paras 4 and 8. Clearly, the latter purpose is, at least on the face of the declaration, thwarted if a para 7 declaration, rather than a para 8 declaration, is used in a para 4 case.
[19] This leads to another argument raised on behalf of Mrs Patel, namely that where legislature provides for two different forms appropriate for two different circumstances, one of the forms cannot logically be in substantially the same form as the other. I do not see why that is right. I can see that it would be surprising if the conclusion was that either form could be used in either circumstance, but that is not my view. As I have said, a para 8 form will do in a para 3 case, whereas a para 7 form will not do in a para 4 case.
[20] Indeed, as Mr Alexander Winter, for Chiltern, said, the structure of Schedule 2 supports the notion that a para 8 statutory declaration will suffice in a para 3 case. Paragraph 2 indicates that the notice should be served more than 14 days before the tenant is committed to the lease, although the schedule as a whole clearly permits it to be served later. Accordingly, one would expect the provisions of para 8 to give greater protection in a para 4 case than the protection given by para 7 in a para 3 case. It would therefore be surprising if para 8 protection was not good enough in a para 3 case, and (I add) it would be equally surprising if para 7 protection sufficed in a para 4 case.
[21] Mr Winter also made the valid practical point that when the notice is served, in many cases the parties may not know whether the tenant will in fact be committed to the lease in the following 14 days, either because the precise date of service of the notice on the tenant may not be known to the landlord or, even where it is known, neither party may know precisely when they would be committed to the lease. It could therefore represent something of an unfair trap, particularly for a landlord, if the parties were required to use a para 7 form, and could not use a para 8 form, in a case to which para 3 applied. It would lead to practical difficulties, such as either preventing the parties from entering into the lease when they wanted to, having to delay for 14 days, or the tenant being put to the rather absurd expense of having to execute a para 7 declaration and a para 8 statutory declaration, to wait and see whether more than 14 days elapsed between the service of the notice and the tenant being committed to the lease.
[22] That leaves the second point, namely that even if the para 8 statutory declaration satisfied the requirements of para 3, it is said by Mr Merali that clause 8.2 of the lease did not satisfy the requirements of para 5. Again, that argument appears to me to fail once one identifies the alleged failure and considers it in the light of the statutory wording and purpose. A statutory declaration is a declaration, and since the contents of clause 8.2 were otherwise accurate, this argument stands or falls on whether the reference to para 8 in clause 8.2 of the lease means para 5(d) is not complied with because this was a para 7 case, not a para 8 case. Although para 5 undoubtedly requires a reference in the lease to the declaration that was made, it does not state in that reference that the parties must identify the specific paragraph under which the declaration was made. I do not consider that the reference to para 8 in clause 8.2 of the lease which was otherwise accurate and which otherwise complied with para 5 means that para 5 was not satisfied. Apart from the arid point that it refers to the wrong paragraph of Schedule 2 to the 2003 Order, the only criticism that can be made of the reference to para 8 is that it implies that Mrs Patel was given notice less than 14 days before she became committed to the lease, whereas she was given more than 14 days. Nobody would be confused by this in this case because clause 8.1 was given the date when she was served with the notice. |page:36|
[23] However, in any event, that point goes nowhere because, whatever is the case, the legal consequences are identical. If a successor to either party or another interested third party, read clause 8.2 of the lease, it would reach precisely the same conclusion as to the legal position, namely that there was a valid exclusion agreement whether the clause contained a reference to para 7 or to para 8, or to neither paragraph. The simple and, to my mind, conclusive point is that the essential information required by para 5 namely that a notice and a declaration, as required by section 38A(3)(b), had been respectably served and made was contained in the lease.
[24] A shorter way of reaching the same conclusion on the second issue is that if (as I consider to be the case, for reasons already given) a para 8 statutory declaration would satisfy the requirements of para 3, clause 8.2 records that an effective declaration for the purposes of para 5 was made in any event.
[25] Accordingly, for these reasons, which are essentially the same as those given by the judge, I, for my part, would dismiss this appeal.
Giving the second judgment, Arden LJ said:
[26] I agree for all the reasons that Lord Neuberger has given. In particular, I agree with him that a simple declaration under para 7 in Schedule 2 to the 2003 Order would not suffice in a case to which para 4 of that schedule applies. I would add that the appellant was unable to point to any policy interest that could possibly be served by accepting the appellant’s submission in this case. Mrs Patel received what parliament in the 2003 Order clearly regarded as superior protection for a prospective business tenant.
Mummery LJ said:
[27] I agree. The appeal is dismissed.
Appeal dismissed.
