Landlord and tenant — Application by underlessees for a new tenancy under Landlord and Tenant Act 1954, Part II — Application opposed by landlords (underlessors) under section 30(1)(g) of Act — Whether landlords qualified to oppose under para (g) as being entitled to occupy holding for the purpose of a business (estate agency) to be carried on by them — Consent to carrying on estate agency (contrary to user covenant in lease) given by superior landlords in licence for underletting — Whether such consent available to head lessees on expiry of underlease — Underlessees become head lessees’ landlords by acquisition of a reversionary lease — Whether underlessees estopped from contesting head lessees’ right to contest application for new tenancy under para (g) — Appeal from county court judge’s decision on preliminary issue in favour of underlessors
problem in this case arose from the fact that an underlease of the subject
premises expired a few years before the date of expiry of the superior lease —
The superior lease, granted by Dulwich College for 21 years, comprised
ground-floor business accommodation with a flat above — The lease contained a
covenant prohibiting the use of the ground floor otherwise than for the
business of a florist — After some years, however, the college consented to an
underletting which provided for the ground floor to be used for the business of
estate agency; the consent was embodied in a formal licence — The underlease
was due to terminate a little less than three years before the superior lease —
Some months before the expiry date of the underlease the college granted the
underlessees a reversionary lease of 21 years, the effect of which was that the
underlessees became also the landlords of the superior lessees
whether, on the expiry of the underlease, the head lessees were prohibited by
the terms of the original user covenant, relaxed in the licence for the
underlease, from carrying on an estate agency business; if so, they would not
be lawfully qualified to oppose the grant of a new tenancy to the underlessees
under para (g) of section 30(1) of the 1954 Act — It was submitted on behalf of
the appellant underlessees that the licence did not give any authority for the
use of the ground floor of the subject premises as an estate agents’ office
during the period of almost three years between the expiry of the underlease
and the expiry of the head lease — The reply of the respondent head lessees was
twofold — First, correspondence showed that there was a binding agreement
whereby the college, in consideration of a payment of £4,000, waived the use
covenant so as to permit user as an estate agency during the residue of the
head lease — The court, although inclined to agree, preferred to rest their
decision in favour of the respondents on the second ground, namely, estoppel —
The correspondence already mentioned together with later correspondence showed
the clear and unequivocal representation required to found an estoppel — For
example, a letter from the college contained the sentence ‘I confirm that the
change of use refers to the full term of the head lease, ie until September 29
1990’ — The appellants, as successors to the college, were bound by that
representation — Appeal dismissed
The following
case is referred to in this report.
Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce
Marketing Co Ltd [1972] AC 741; [1972] 2 WLR 1090; [1972] 2 All ER 271;
[1972] 1 Lloyd’s Rep 439, HL
This was an
appeal by Wates Estate Agency Services Ltd from the decision of Judge Harris
QC, at Westminster County Court, on a preliminary issue relating to their
application for a new tenancy of premises at 27 Dulwich Village, London SE21.
The respondents to that application and to the present appeal were Bartleys
Ltd, another firm of estate agents.
David
Neuberger QC and Simon Berry (instructed by Lovell White Durrant) appeared on
behalf of the appellants; Jonathan Gaunt (instructed by Rubinstein Callingham
with Polden Bishop & Gale) represented the respondents.
Giving
judgment, NICHOLLS LJ said: This is a dispute between two companies of estate
agents. The issue is which of them shall carry on business from premises at 27
Dulwich Village, London SE21. The property comprises ground-floor business
premises with a flat above. At present, Wates Estate Agency Services Ltd (which
I shall call ‘Wates’) is trading from no 27. On March 18 1987 Wates applied for
a new tenancy under Part II of the Landlord and Tenant Act 1954. The lessor,
Bartleys Ltd (to which I shall refer as ‘Bartleys’), resisted the application
on grounds (c) and (g) in section 30(1). Only ground (g)
is now material. Ground (g) is that on the termination of the current
tenancy the landlord intends to occupy the holding for the purposes of a
business to be carried on by him therein. The registrar directed a preliminary
issue on this point. That issue was decided adversely to Wates by Judge Percy
Harris QC, sitting in the Westminster County Court on March 20 1989. Before the
court today is an appeal by Wates from that decision.
I must first
mention the relevant conveyancing history of no 27. On March 30 1971 the
Estates Governors of Alleyn’s College of God’s Gift at Dulwich (to which I
shall refer as ‘the college’) granted to two brothers, Howard and Walter
Bartley, a 21-year lease from Michaelmas 1969 of no 27 and the adjoining
property no 29. This lease was due to expire on September 29 1990. So far as
material, the user covenant contained a prohibition against the ground floor of
no 27 being used otherwise than for the business of a florist and, in the case
of the ground floor of no 29, against user otherwise than as a fruiterer. The
lease contained the usual covenant against assignment without the lessor’s
consent.
In 1975 the
two Bartley brothers assigned the lease to the company Bartleys, whose name was
then Bartleys Fruiterers Ltd. Bartleys was then a family company of the two
brothers. The college gave its consent to that assignment. The college also
agreed to a minor modification of the user covenant, to the effect that
thenceforth the user restriction was that the ground floor of the two
properties should
A year or two
later Bartleys ceased to trade at nos 27 and 29. With the consent of the
college Bartleys underlet no 29 to a Mr Arnold Levinrad for the residue of the
term of the 1971 lease, less three days. That was in or about October 1977. As
to no 27, on December 8 1977 this was sublet by Bartleys to Wates for a period
of 10 years from November 21 1977. The college’s consent to this underletting
was expressed in a formal licence, dated January 16 1978. Clause 5 of that
licence provided as follows.
The Tenants
— ie Bartleys —
hereby covenant with the Landlords
— ie the college —
but without prejudice to the generality
of the foregoing that the said Underlease shall contain a covenant by the said
Wates Estate Agency Services Limited that the ground floor of the premises
shall not be used otherwise than as a shop for the trade or business of an
Estate Agents Valuer Surveyor or Property Developer and the upper floor as a
single private dwelling-house.
Finally, on
June 26 1987 the college granted to Wates a reversionary lease of nos 27 and 29
for a period of 21 years from March 25 1987. The effect of this was that Wates,
which was Bartleys’ undertenant of no 27, became also Bartleys’ landlord.
The background
to this reversionary lease was a change of ownership of Bartleys. In 1984 a
firm of estate agents in Belgravia, Harvey & Wheeler, were anxious to
expand into Dulwich. Wates was not willing to sell its interest in no 27 to
Harvey & Wheeler. What then happened was that Harvey & Wheeler
approached the shareholders of Bartleys and in April 1986 bought their shares
for £55,000. The new owners of Bartleys then changed the name of the company to
its present form by dropping the word ‘Fruiterers’. They also enlarged the
objects of the company to include carrying on the business of estate agents. By
acquiring the shares in Bartleys in this way rather than taking an assignment
of the residue of the lease of 1971 from Bartleys, Harvey & Wheeler put
themselves in a position that, when the underlease to Wates expired, Bartleys
could rely on ground (g) in answer to any application by Wates for a new
business tenancy without any problem arising from the five-year restriction set
out in section 30(2) of the 1954 Act. By this means Bartleys sought to obtain
possession of no 27 when the 10-year underlease to Wates expired in November
1987. If successful, Bartleys would then carry on its estate agency business
there in place of Wates.
I come next to
the issues on this appeal. It is not disputed that Bartleys has a firm and
settled intention to use no 27 for an estate agency business. Likewise, it is
accepted that there is no problem about planning permission or the financial
viability of the proposed business. The point at issue is whether on the
termination of the 1977 underlease Bartleys is prohibited from carrying on an
estate agency business having regard to the terms of the 1971 lease. The
reversion to that lease is now owned by Wates. Wates is therefore in a position
now to enforce the tenant’s covenants contained in the 1971 lease. Indeed, it
was in order to achieve precisely this ability that in June 1987 Wates obtained
the grant to it of the reversionary lease by the college. It has been said,
therefore, that if Harvey & Wheeler’s acquisition of Bartleys is to be
likened, in terms of playing cards, to their playing an ace, Wates’ subsequent
acquisition of the reversionary lease may be regarded as trumping that ace.
I have already
cited clause 5 of the formal licence of January 16 1978. That 1978 licence
authorised the grant of an underlease which permitted the use of the ground
floor of no 27 for the business of an estate agent. That licence did not in
terms otherwise relax the user covenant in the 1971 lease. The 1977 underlease
was due to expire in November 1987, and the 1971 lease would continue beyond
that until September 1990. The 1978 licence, therefore, did not in terms
expressly authorise the use of no 27 as an estate agents’ office during that
period of almost three years.
It is on this
foundation that Wates bases its answer to Bartleys’ reliance on ground (g).
Wates’ case is that on the expiration of the underlease Bartleys is not in a
position lawfully to conduct an estate agents’ business at no 27. If it sought
to do so, Bartleys would be in breach of the user covenant in the 1971 lease.
There can be no question of Bartleys side-stepping this difficulty by now
obtaining consent for change of use from its landlord because, as I have
explained, by virtue of the reversionary lease Wates is Bartleys’ landlord.
There is no means by which Bartleys can compel Wates to give its consent, if it
is needed, to a change of use.
To this
Bartleys’ riposte is two-fold. First, Bartleys contends that although the terms
of the formal 1978 licence were limited as I have described, the correspondence
contains a binding agreement between Bartleys and the college, which was then
the lessor. The agreement was that, in consideration of the payment of £4,000,
the college would waive the user covenant so as to permit no 27 to be used as
an estate agency during the residue of the 1971 lease. As successor in title to
the college, Wates is bound by that agreement. Second and additionally,
Bartleys relies on assurances given by the college in certain letters. Bartleys
contends that as successors to the college Wates is estopped from asserting
that estate agency user would be in breach of the user covenant in the 1971
lease. I consider those two points in that order.
The execution
of the 1978 licence was preceded by correspondence in the usual way. I need
mention only a few of the letters. In December 1977, £4,000 was paid by
Bartleys and the terms of the draft licence were agreed between the solicitors
acting for Bartleys and the college. On January 5 1978, before the formal
licence had been sealed and executed, Mrs Jappie, an officer of Bartleys, wrote
to Bartleys’ solicitors, Evill & Coleman, sending the original and
counterpart licence sealed by Bartleys. She raised with the solicitors the very
point which is now at issue regarding user after the expiration of Wates’
10-year underlease and before the expiration of the 1971 lease. On January 9
1978, Evill & Coleman sent these documents to Druces & Attlee, the
college’s solicitors. In the covering letter they asked for the original
licence to be returned when it was duly executed and they added the following
comment prompted by Mrs Jappie’s query:
would you please confirm, on behalf of
your clients, that if at the expiry of the present Underlease, Wates Estate
Agency Services Limited (or another Estate Agency) wished to renew the lease,
there will be no question of your clients demanding any further premium.
On January 16 Druces & Attlee
returned the original licence duly executed by the college and said:
Our clients confirm that the premium
already paid was a once only payment and no further premium will be demanded on
expiry of the underlease.
Some lingering doubt seems to have
remained in somebody’s mind. Five weeks later, on February 24, Evill & Coleman
wrote again to Druces & Attlee in these terms:
We refer to your letter of January 16 and
are sorry to bother you again in this matter. However, our clients would like
formal confirmation that there is no question of our clients ever having to pay
any further premium at any time in the future in connection with the use of the
premises as an estate agency.
To that letter Druces & Attlee did
not respond.
In respect of
those letters, Mr Neuberger on behalf of Wates has submitted that until the
licence was agreed and the sum of £4,000 was paid matters were all subject to
contract. Those negotiations, he submitted, led to the formal licence and the
parties were bound by the terms of that formal licence and nothing else. In the
correspondence, he submitted, the concept of change of use and the underletting
went hand in hand. The correspondence to which I have referred cannot be read
as an unequivocal representation that there was a general relaxation of the
user covenant in the 1971 lease. He further submitted that at this date no one
had in mind that Bartleys, a greengrocery company, might ever itself use no 27
for estate agency purposes.
As I see it,
even if the correspondence had stopped at this point, I might have been
inclined to the view that this correspondence alone disposed of Wates’
contentions. Reading the two letters of January 9 and 16 together, it seems to
me that it might be right to read those letters as containing with reasonable
clarity the implication that the premium that had been paid as a once-only
payment was intended to frank the change of use for the whole period of the
lease. The letter of January 16 is explicit that no further premium will be
demanded on the expiry of the underlease.
However, I
need not express any concluded view and I do not do so on this point having
regard to the view that I have formed on Bartleys’ other point concerning
estoppel. To that I now turn.
The estoppel
point is founded in part on the correspondence I have mentioned and in part on
subsequent correspondence. When Harvey & Wheeler were negotiating to
acquire the shares in Bartleys, they were concerned to see that the user
position of no 27 would not be in doubt following the termination of the Wates’
underlease. On March 20 1986 Evill & Coleman wrote to the college in these
terms:
We act for Bartleys Fruiterers Ltd, the
Lessees of the above. You will recall
underletting of the above to Wates Ltd for use as an Estate Agency. You will
also recall that our Clients paid a premium of £4,000.00.
We enclose a copy of the letter we sent
to Messrs Druces & Attlee, your Solicitors, on January 9 1978 and a copy of
their reply of January 16 1978 confirming that the premium was a once only
payment and no further premium would be demanded on expiry of the Underlease.
You granted our Clients a Licence to
underlet the premises for a term of ten years from November 21 1977 and you
also granted our Clients a Licence to change the use. Could you please confirm that
the Licence to change the use refers to the full term of the Head Lease ie
until September 29 1990 and not just for the term of the Underlease. We look
forward to hearing from you.
The answer from the college was in a
letter dated May 9 which read:
Further to your letter of March 20 and
further telephone conversations, I confirm that the change of use refers to the
full term of the Head Lease ie until September 29 1990.
Mr Neuberger,
in the course of his very clear submissions, drew our attention to the House of
Lords’ decision of Woodhouse AC Israel Cocoa Ltd SA v Nigerian
Produce Marketing Co Ltd [1972] AC 741 as authority for the proposition
that to found an estoppel the representation must be clear and unequivocal. He
reminded us of the passage in the speech of Lord Cross at p 768 where reference
was made to the test to be applied being formulated as whether the representee
was justified in having no doubt that the words meant what he took them to
mean.
Turning to the
letters, Mr Neuberger submitted that those of January 16 1978 and May 9 1986
did no more than represent that an underlessee might use no 27 for the purposes
of the business of an estate agency whether he held under the specific
underlease permitted by the 1978 licence or under a renewal thereof. ‘Renew’,
he submitted, envisaged the undertenant in existence at the expiry of the 1977
underlease obtaining a new lease. He submitted that Bartleys was not justified
in having no doubt that the words meant what it took them to mean, given that,
first, the correspondence had been prompted by Bartleys’ own desire to clarify
the position in regard to the renewals of the underlease and, second, the
earlier part of the correspondence which prompted the letters relied on was
directed at the position concerning renewals, and in 1986 Bartleys did not tell
the college that it was then concerned not with renewals but with the position
under the 1971 lease itself.
I am unable to
accept these submissions on the construction of the correspondence which
culminated with the letter of May 9 1986. For my part I think that the
correspondence does contain a clear and unequivocal representation by the
college to the effect that, so far as the 1971 lease is concerned, the college
has no objection to no 27 being used for estate agency. The letter of May 9
1986 expressly refers to change of use for ‘the full term of the Head lease, ie
until September 29 1990’. I can see no sufficient justification for not taking
those words at their face value.
Mr Neuberger
submitted that the letters in 1986 took the matter no further than the
correspondence in 1978, because, in the letter of March 20 1986, what Bartleys
was seeking was confirmation, and what it was seeking to have confirmed was the
effect of the ‘Licence’ — referred to with a capital ‘L’. I think that the
answer to this contention is this. In my view, the word ‘confirm’ is not to be
restricted in its effect, as contended by Mr Neuberger, where the language is
clear. I do not think that using the word ‘confirm’, and then obtaining a
confirmation sought from the college, takes the matter any further having
regard to the fact that the confirmation sought expressly and unequivocally
related to the full term of the 1971 lease.
Mr Neuberger
accepted that, if contrary to Wates’ submission, a representation was made in
the correspondence, Bartleys acted on that representation to its detriment.
He further
accepted that, although the representation was made by the college, Wates is
bound by that representation as successor to the college. In those
circumstances, having regard to the view I have formed on the construction of
the letters, it must follow that for my part I would dismiss this appeal.
BINGHAM and
FARQUHARSON LJJ agreed and did not add anything.
The appeal was dismissed with costs.
