Landlord and tenant — Landlord and Tenant Act 1954, section 53 — Covenant preventing change of user without landlords’ consent — Whether landlords’ refusal of consent reasonable — Application by tenants for relief under section 53 — Relevance of procedure by which landlords reached decision to refuse consent — Correct approach to consideration of reasonableness — Lease in present case contained a covenant by tenants not without landlords’ previous consent in writing to use the demised premises for any purpose other than as a retail shop and not to use them for residential or office purposes — The existing use was as a restaurant, but trade had dwindled and tenants wished to change use to that of a self-service snack restaurant with about half the area given over to gaming machines or amusement with prizes machines — Landlords in present case were also the planning and the licensing authority — They granted planning permission for the proposed change of use and a gaming licence, but qua landlords refused consent to the change — Tenants applied to county court under section 53 and judge made a declaration in their favour — Landlords appealed — Although the county court judge agreed with fears expressed that the proposed change of user would lead to the attraction of undesirable elements, he found in favour of the tenants — He accepted a submission that because the landlord council had reached their decision in an unreasonable way, on the basis of misconceptions and incorrect information put before them, the decision itself was unreasonable
Court of Appeal that the judge had fallen into error — In determining whether a
refusal of consent is reasonable two questions have to be considered — The
first, which might be called a subjective inquiry (although these terms are not
very helpful), is what was the landlords’ reason for refusal — The onus is on
the tenant to show the reason and that it is unreasonable — If the landlord
gives no express reason the court will more readily infer that the refusal was
unreasonable — Having found what the landlord’s reason was, the next inquiry
(which might, subject to the same comment, be called objective) is whether that
reason in the landlord’s mind was reasonable or unreasonable — The reason must
not be thought up after the decision was made or be a reason arising ex post
facto — The judge was wrong in considering the procedural steps taken by the
landlords in arriving at their decision and inquiring whether they had acted on
information that was accurate and complete — If he had not adopted this wrong
approach he would probably have found that the refusal of consent was
reasonable — Appeal allowed
The following
cases are referred to in this report.
Associated
Provincial Picture Houses Ltd v Wednesbury
Corporation [1948] 1 KB 223; [1947] 2 All ER 680, (1947) 45 LGR 635, CA
Bromley
Park Garden Estates Ltd v Moss [1982] 1 WLR
1019; [1982] 2 All ER 890; (1982) 44 P&CR 266; [1983] EGD 492; 266 EG 1189,
CA
Fredk
Berry Ltd v Royal Bank of Scotland [1949] 1
KB 619
International
Drilling Fluids Ltd v Louisville Investments
(Uxbridge) Ltd [1986] Ch 513; [1986] 2 WLR 581; [1986] 1 All ER 321;
(1985) 51 P&CR 187; [1986] 1 EGLR 39; (1985) 277 EG 62, CA
Lovelock v Margo [1963] 2 QB 786; [1963] 2 WLR 794; [1963] 2 All ER
13, CA
This was an
appeal by the landlords, Plymouth City Council, from the decision of Judge Sir
Jonathan Clarke QC, at Plymouth County Court, in which he granted a declaration
in favour of the tenants, Tollbench Ltd, that the landlords’ refusal of consent
to a proposed change of user was unreasonable. The tenants had applied for
relief under section 53 of the Landlord and Tenant Act 1954 in relation to
premises at 93 Cornwall Street, Plymouth.
Michael Beloff
QC and Clive Newbury (instructed by Sharpe Pritchard & Co, agents for A
Forbes Watson, town clerk, Plymouth City Council) appeared on behalf of the
appellants; Anthony Donne (instructed by Goldbergs, of Plymouth) represented
the respondents.
Giving
judgment, MAY LJ said: This is an appeal from a judgment and declaration of His
Honour Judge Sir Jonathan Clarke in the Plymouth County Court on November 10
1987.
The learned
judge had before him on that occasion an originating application by a tenant,
the respondent in this court, under section 53 of the Landlord and Tenant Act
1954. The relief claimed was not entirely in accordance with the wording of the
statute, but the situation was that the tenant had applied to its landlords,
the city council, who were the appellants before us, for their consent to a
change of user of premises at 93 Cornwall Street, Plymouth, of which the
respondent was the tenant. The appellants had withheld their consent. The
respondent contended that in doing so they were unreasonable and sought a
declaration from the court to that effect.
The relevant
statutory provision is, as I have said, section 53 of the Landlord and Tenant
Act 1954. I need only read subsection (1)(c) and subsections (2) and
(4):
53-(1) Where a landlord withholds his licence or
consent — . . .
(c) to a change in the use of the demised property
or any part thereof, or to the making of a specified use of that property,
and the High
Court has jurisdiction to make a declaration that the licence or consent was
unreasonably withheld, then without prejudice to the jurisdiction of the High
Court the county court shall have the like jurisdiction whatever the value of
the demised property or the rent payable under the tenancy* and notwithstanding
that the tenant does not seek any relief other than the declaration.
*Editor’s
note: The above wording has been to some extent amended: see now County Courts Act
1984, Sched 2, para 23.
(2) Where on the making of an application to the
county court for such a declaration the court is satisfied that the licence or
consent was unreasonably withheld, the court shall make a declaration accordingly.
(4) Nothing in this section shall be construed as
conferring jurisdiction on the county court to grant any relief other than such
a declaration as aforesaid.
The brief
facts of the case are these. As I have said, the respondent was the tenant of
the appellant of premises under a lease containing not unusual tenant’s
covenants, among them being subclause 2(10)(ii) and (12), which read in this
way:
(ii) Not without the previous consent in writing
of the Corporation (which consent shall not unreasonably be withheld) at any
time during the said term to use the premises for any purpose other than for
the purposes of a retail shop and not to use the premises or any part thereof
for residential accommodation or for the purpose of offices except offices
ancillary only to some other non-prohibited purpose.
(12) Not to use the premises or any part thereof
nor knowingly to permit or suffer the same to be used for any illegal or
immoral purpose nor for the carrying on of any noxious offensive noisy or dangerous
trade or process nor knowingly to permit or suffer to be done in or upon the
premises or any part thereof anything which may be or become a nuisance or
annoyance to the Corporation their lessees or tenants or occupiers of any
adjoining or neighbouring property . . .
Until
recently, under an earlier change of user, the premises were used as a
restaurant. It seems that the restaurant trade had been badly affected by a
substantial amount of pedestrianisation in the area. The respondent
consequently conceived the idea to change the user to what was originally
described as a restaurant with amusement facilities. The learned judge in his
judgment described that in this way:
This . . .
involves the provision of an attractive frontage . . . a table and seating area
with a servery from which on a self-service basis will be sold food for
consumption on the premises . . . mainly jacket potatoes . . . pies and
puddings . . . In approximately one half of the premises immediately to the
rear of the seating area will be machines variously described as gaming
machines or amusement with prizes machines. These . . . will not be of the
video game type . . . nor of the jackpot type and will be machines which when
played can deliver a token or tokens to a maximum of £4 which in turn can be
exchanged for an equivalent prize.
However, the
learned judge was understandably sceptical about the proposed change and, after
hearing the evidence, indicated in his judgment that he had no hesitation in
finding that the proposal could not properly be described as a restaurant with
amusement facilities, but more properly as an amusement hall with ancillary
snack refreshments provided.
Be that as it
may, the proposed change of user by the respondent required, in addition to the
landlord’s consent, planning permission from the local planning authority,
which happened to be the appellants wearing another hat, and an appropriate
gaming licence. Again the application had to be made to the appellants, but in
yet another capacity.
Planning
permission was granted on July 17 1987. On July 24 the appellants’ local
economy committee referred the question of granting consent as landlord to the
full council with a recommendation that the council should refuse it. On August
17 1987 the appellants granted the respondent an appropriate gaming licence.
However, despite the success in the planning and gaming fields, on August 26
1987 the respondent was refused landlord’s consent under the terms of the lease
by the council.
That refusal
led to the application by the tenant to the county court, which was the one
upon which the learned judge adjudicated. It is right to comment that the
evidence led on behalf of the appellants as to the reasons for the local
economy committee and the council refusing consent was not substantial.
Nevertheless, on what he had the learned judge held, first:
I am though
in no doubt and so find that there was a consensus majority view held at both
of these meetings which was articulated by the council officers whom I have
heard that, if granted, these premises and the amusement machines in particular
could and probably would attract an undesirable element to the area. This in
turn could and probably would lead to vandalism and disorder generally and
would result in an undermining of the economic fabric of this part of Cornwall
Street.
He then held,
second:
. . . if one
looks at the matter objectively I have no doubt that the fears of the council
officers and the views of the councillors as I infer them to be are soundly
based and justified and that this proposal could and probably would lead to an
attraction to the premises of an undesirable element present in the city. This
in turn could lead to the true middle aged and respectable shopper tending to
shun not only the premises, but the immediate area surrounding them. This could
in turn lead to an undermining of the economic fabric of the immediate area.
Having found in
those terms, one might have been forgiven for thinking that the learned judge
would then swiftly go on to have held the refusal of consent to have been
reasonable.
However, he
turned in the course of his judgment to consider the second way in which the
matter was put before him, and before us, on behalf of the tenant. Briefly, it
was to the effect that the council’s decision had been reached in an
unreasonable way and was therefore necessarily unreasonable itself.
What was
argued was that the local economy committee and/or the council had acted on
various misconceptions, had taken into account objections which were themselves
based on misconceptions, had failed to be told that the planning permission
granted had been conditional and that so also could the grant of a gaming
licence be conditional, with a view in each case to minimise any anticipated
trouble that there might be from the new proposals, and that the council and
the committee had acted on substantially incorrect memoranda from two council
officers. Had the council, it was submitted, not been misled in that way, they
could not have reached the conclusion to refuse consent which they did. It was
argued, therefore, that any decision so reached in that unreasonable way must
itself be unreasonable. The learned judge accepted that both the committee and
the council acted in that sense in an unreasonable way, but did not accept that
‘looked at objectively, this necessarily means that their decision was
unreasonable. It could, coincidentally, be the correct view for them to take
had all the true facts then available to them been actually placed before
them’. He then asked rhetorically ‘Where does this leave the application?’ He considered whether the test which had to
be applied was objective or subjective. He was shown some authorities and
concluded that:
it seems to
me that the proper test to apply is not a wholly objective test, but one in
which it is necessary to have regard to the landlord’s state of mind insofar as
that can be discerned from a council of some 60 members. That is to be done at
the time the decision was made. The council it seems to me can only be permitted
to rely upon what actually influenced their minds at the time the decision was
made.
He then went
on to hold that on that test so stated:
the way in
which the council had approached this decision, the misconceived facts and the
partial picture before them rules out any possibility of the court saying that
their decision, for it is their decision which falls to be scrutinised and
which is to be tested, could possibly be a reasonable one. It is not saved by
saying that they could have acted differently and could by a reasonable process
have reached the same conclusion. They acted, in the sense in which I have
indicated, unreasonably and their decision was in the event an unreasonable one
for them to take.
That finding of
the learned judge effectively concluded the matter as it was before him, but he
went on to consider a third point which has been raised by the tenant, namely
that the landlords’ decision to refuse consent had in truth had nothing to do
with the relationship of landlord and tenant because no evidence had been
adduced before the court that the grant or refusal of consent to a change of
user had any relevance to any of the council’s own proprietary interests. The
learned judge expressed unease about the inadequacy of the evidence that there
was before him, but on such evidence as he had, which comprised that from only
one witness, he felt able to conclude that whatever the precise position may
be, the city council are closely concerned either as landlords or ground
landlords with at least the majority of the city centre and so concerned with a
significant number of properties which would be directly affected by their
decision in respect of 93 Cornwall Street.
Nevertheless,
as I have said, he held that as the appellants had acted unreasonably in the
sense indicated, the refusal of consent was itself unreasonable. He therefore
found for the tenant and made the declaration accordingly.
The city
council now appeal against that order and declaration, asking that it should be
set side. There is a respondent’s notice seeking to uphold it on grounds
additional to those relied on by the learned judge.
The argument
for the appellants before us was, first, that the basic principles to be
applied in these cases were recently restated by the decision of this court in International
Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986]
Ch 513,* particularly the passage in Balcombe LJ’s judgment from pp 519H to
520E. I respectfully
which the learned lord justice there set out.
*Editor’s
note: Also reported at [1986] 1 EGLR 39; (1986) 277 EG 62.
Referring to
section 53(2), the argument for the appellants proceeded that the exercise
contemplated by the subsection involved two stages: first, finding what were
the grounds for withholding consent and, second, determining whether those were
or were not unreasonable within the principles set out in the International
Drilling Fluids case to which I have referred.
Then it was
argued that, if the grounds actually relied on were objectively reasonable, any
error in the process whereby that decision had been reached was nothing to the
point; procedural flaws could only be material, it was contended, if they led
to an objectively unreasonable decision. Accordingly, in the light of the basic
findings of the learned judge, to which I have already referred, it was
submitted that the learned judge ought to have been bound to find that the
refusal of consent was reasonable.
Alternatively
if, contrary to that submission, the learned judge had been entitled to take
into account procedural as distinct from substantial flaws, he could not make a
final declaration, as he did, having a final and permanent effect, but only so
as to give the appellants the opportunity to consider the request for consent
properly. On the findings the result would have been the same and therefore
there should be no declaration in any event. Finally, the procedural
improprieties upon which reliance was placed, it was submitted somewhat
comprehensively, were irrelevant, insignificant and, if any, were matters which
affected the local economy committee and not the council. For present purposes
I think it unnecessary to elaborate further on that particular point.
The respondent
tenant, in seeking to uphold the learned judge’s decision, relies on the
procedural point and submitted that the learned judge was correct in the
approach that he adopted in relation to it. Counsel supported the argument by
reference, first, to a passage from the judgment of Slade LJ in Bromley Park
Garden Estates Ltd v Moss [1982] 1 WLR 1019 at p 1034E, which reads:
The decision
of this court in Lovelock v Margo . . . clearly establishes that
in cases such as the present the court has to have regard to the landlord’s
actual state of mind at the relevant time. The test is not a purely objective
one, though no doubt inferences may be drawn as to his state of mind from his
words and actions and all the other circumstances of the case. It is therefore
necessary to consider what were the factors which actually influenced the
plaintiff landlords in the present case, as at [the relevant date].
And also a short
quotation from the judgment of Lord Denning MR in Lovelock v Margo
[1963] 2 QB 786 at p 789:
I am quite
clearly of opinion that it is not right to say that this is an objective
question, as counsel said. This matter cannot be considered without regard to
the state of mind of the landlord herself as to her reasons for refusing
consent. How otherwise can a lessee hope to see whether he can assign unless he
knows the landlord’s reasons for objection?
As to what was
unreasonable, counsel referred us to the well-known judgment of Lord Greene MR
in Associated Provincial Picture Houses Ltd v Wednesbury Corporation
[1948] 1 KB 223. I say straightaway that in that case what was under
consideration was reasonableness in a public law statutory duty context and, with
respect to counsel’s argument, cogent though it was, I do not think we are
assisted by what Lord Greene said in the Wednesbury case.
In the
alternative, if he were wrong on his main submission, counsel for the
respondent tenant submitted that there was in truth no sufficient evidence
before the learned judge below to entitle him to find that any grant or refusal
of consent to change of user would have affected any proprietary interest of
the appellants as landlords and that accordingly the learned judge was right
again.
As is so often
the case, I do not find an approach which divides consideration of a case into
a subjective inquiry on the one hand and an objective inquiry on the other very
helpful.
To determine
whether a landlord’s refusal of consent is reasonable, accepting the submission
on behalf of the appellants, requires a consideration of two questions. First,
what reason did the landlord actually have for refusing consent, that is to say
upon what reason did he act in refusing that consent? That is a subjective inquiry, if one needs so
to describe it, in the sense that one has to discover what was in the mind of
the landlord at the time when he was refusing his consent. The onus is on the
tenant to show that the reason the landlord had was unreasonable and the onus
therefore is on the tenant to show the reason and that that reason was
unreasonable. One may have, in whole or in part, to infer in certain cases what
was in the landlord’s mind at the relevant time. In particular, I comment that
if the landlord gives no express reasons for withholding his consent, then the
court will more readily imply that that withholding was unreasonable, as Lord
Goddard CJ pointed out in Fredk Berry Ltd v Royal Bank of Scotland
[1949] 1 KB 619, at p 623. Having then found what reason the landlord did have
in mind at the relevant time, one turns to what can perhaps properly be
described as an objective inquiry, whether that reason in the landlord’s mind
was reasonable or unreasonable. The legal guidelines under which one should
make that inquiry were laid down, as I have said, in the International
Drilling Fluids case referred to earlier in this judgment.
I do not think
that on its proper construction section 53 of the Landlord and Tenant Act 1954,
and in particular the subsections which I have quoted, were intended to cover,
or permit the court to consider, the procedure by which the landlord made up
his mind whether or not to refuse consent. The procedure may be material on the
issue of the genuineness of the stated reason, that is to say on the bona fides
of the landlord in any given case, or indeed on what the actual reason was. But
qua procedure it is, in my judgment, not intended to be covered by the
statutory provisions.
I do not
understand Slade LJ in the Bromley case or Lord Denning MR in Lovelock
v Margo to be saying any more than that one must consider the
reasonableness or otherwise of the landlord’s refusal at the date he so refused
and the reason he then had for refusing consent. If he gave none, as I have said,
it may be more readily possible to imply that he was unreasonable. But the
essence and true effect of the judgments of Slade LJ and Lord Denning is, I
think, that a landlord is not entitled to rely on a reason, for instance,
thought up after he has made his decision to refuse consent or a reason, for
instance, arising ex post facto.
In my opinion,
therefore, in this case the learned judge erred in considering what he thought
was the procedural unreasonableness of the landlords in the sense to which he referred.
Had he not done so, and subject to the evidential point to which I have
referred, I have no doubt that the learned judge would have found that the
refusal of consent in this case had been reasonable.
On the
evidential point, as I have already indicated, I do not think there was over
much evidence before the judge. Indeed I am surprised, for instance, by the
absence from the court of any one of the 60 councillors who took the relevant
decision when this matter came before the Plymouth County Court and that the
appellants were not better supported by the evidence of witnesses. As I have
also indicated, the learned judge was clearly troubled by the evidential point,
but in the end decided that there had been enough for him to make the
appropriate decision. Despite the paucity of the evidence, I am in no way
persuaded that the learned judge was wrong in the conclusion to which he came
on this particular issue.
For these
reasons, therefore, I would allow this appeal and I would set aside the
declaration made by the learned judge below.
Agreeing,
WAITE J said: I will only add a few supporting words in tribute to the helpful
arguments that have been addressed to us and in tribute also to the careful
attention given to the case by the learned judge, including the one issue on
which we have found it necessary to differ from him.
Once it had
become established to the judge’s satisfaction, first, what the grounds were of
the head lessors’ objection to the proposed change of user and, second, that
those grounds were reasonable, it became unnecessary and indeed irrelevant to
inquire whether or not the head lessors, in making the decision to grant or
refuse consent, had acted upon information that was accurate and complete in
every particular. The judge’s secondary finding — that there were shortcomings
in the head lessors’ processes of consideration, which might have put them at
theoretical risk of reaching an erroneous decision on incomplete or inaccurate
information — ceased therefore to have any relevance to, and should not have
been allowed to affect, the judge’s primary finding that the grounds of refusal
were reasonable.
I, too, would
allow the appeal.
The appeal
was allowed with costs.