Landlord and tenant — Signs advertising tenants’ licensed betting office — Dispute as to tenants’ right to maintain signs on landlords’ property — The signs in question, which were illuminated and were regarded as essential to the success of the tenants’ business, were placed on the wall of the building just above the entrance at street level — Tenants’ betting office was on the first floor and was approached from the street by an external staircase not included in the demise — The signs had been affixed with the consent of, or without objection from, the previous landlords — After the reversion changed hands, however, difficulties arose — New landlords contended that tenants had a revocable licence only to maintain the signs and requested their removal — Tenants sought a declaration as to their rights in regard to the signs and Goulding J decided in their favour — He did so, not on the ground that the rights were included in a demise of the first-floor offices and their ‘appurtenances’, nor that they passed under section 62 of the Law of Property Act 1925, but by implication from a negative covenant forbidding the exhibition of signs in, on or to the premises without the landlords’ consent — Held by the Court of Appeal that Goulding J had come to the correct conclusion but that the particular ground on which he based it could not be supported — The view that the grant of an easement could be spelt out of a prohibition against placing signs without the landlords’ consent, even where consent had been given before the grant of the lease, was too novel and unorthodox to be accepted — The easement in the present case arose from the demise of ‘appurtenances’, which included the signs in question — Kerr LJ, while agreeing with this ratio, would if necessary have decided the case in favour of the tenants on the ground that communications between the parties’ solicitors before the lease was executed constituted a ‘convention’ which estopped the landlords from disputing the tenants’ claim — Appeal by landlords dismissed
The following
cases are referred to in this report.
Cuthbert v Robinson (1882) 51 LJ (NS) 238
Francis v Hayward (1882) 22 Ch D 177
Moody v Steggles (1879) 12 Ch D 251
Wheeldon v Burrows (1879) 12 Ch D 31
This was an appeal
by the landlords, Cabras Ltd, from a decision of Goulding J granting a
declaration in favour of the rights of the tenants, William Hill (Southern)
Ltd, to maintain certain illuminated signs on a part of the landlords’ wall at
27 Park Lane, Mayfair, on the first floor of which the tenants carried on their
business as a licensed betting office and turf accountants.
Gerald Godfrey
QC and S Bickford-Smith (instructed by Wallis & Co, of Bromley) appeared on
behalf of the appellants; Charles Sparrow QC and K F Farrow (instructed by
Titmuss Sainer & Webb) represented the respondents. (The reversion had been
transferred to new freeholders since Goulding J’s judgment and they had been
added as appellants for the purposes of the appeal). Goulding J’s judgment is
reported at [1985] 2 EGLR 62; (1985) 275 EG 149.
Giving the
first judgment at the invitation of Kerr LJ, NOURSE LJ said: On June 20 1978
the appellants’ predecessors in title granted to the respondents a 20-year
lease of a licensed betting office on the first floor of 27 Park Lane, Mayfair,
London W1, together with a right to use the staircase leading from the entrance
at street level. The respondents were already in possession under an earlier
lease of the property and they had previously, either with the consent of, or
without objection from, their then landlords, affixed two
above the entrance at street level.
In 1979, this
time with the express consent of their then landlords, the respondents removed
the lower of the two signs and replaced it with an illuminated quadrant canopy
bearing the name ‘William Hill’ on each of its three exterior faces.
Between 1978
and 1983 they continued to maintain and illumine the two signs. By the terms of
the lease the respondents are prohibited from using the premises otherwise than
as offices in connection with their business as turf accountants and a licensed
betting office. Goulding J found that at all material times the success of the
business which the respondents carry on from the premises has depended upon
their ability conspicuously to advertise the existence of the office to
passers-by and that, both by reason of the physical situation of the premises
and by virtue of section 10(5) of the Betting, Gaming and Lotteries Act 1963,
such advertisement can only be by a sign or signs at street level.
To anyone
uninitiated in the mysteries of English property law that bare statement of the
essential facts of this case might suggest that the respondents were entitled
as of right to keep their two existing signs in position during the remainder
of the 20-year term. However, in 1983 the ownership of the building of which
the premises form part and of the reversion to the premises was acquired by the
appellants, who have ever since contended that there is no such entitlement.
They say that the respondents have no more than a licence to maintain the
signs, which is revocable by the appellants at any time on reasonable notice.
They say that they want the signs removed, because they would greatly interfere
with, if not actually inhibit, their proposed redevelopment or redesign of the
front of the building, although it must be said that if the appellants’
contention is correct it is not one which they have to justify.
Goulding J
was, I think, disposed to reject the appellants’ contention if he properly
could, but in so doing he accepted only one of the respondents’ five arguments
to the contrary.
The appellants
now appeal to this court against his decision. We have heard this morning that
they have now assigned the reversion in the premises — and, I take it, in the
whole building — to another company. However, that company, which is now a
party to the proceedings, through Mr Godfrey, who appears for the appellants,
adopts the same stance as they do.
The material
terms of the lease are as follows. It starts with nearly two pages of
particulars, which are, by clause 1(a), expressed to form part of the lease.
Paras 5 and 12 of the particulars define ‘demised premises’ and ‘user’
respectively as follows:
ALL THAT
suite of offices situated on the first floor of 27 PARK LANE MAYFAIR W1 in the
CITY OF WESTMINSTER WITH TOILET ACCOMMODATION AT THE REAR THEREOF up to but
excluding the joists of the floor above down to and including the floors
thereof (together with joists)(as the same is defined on the plan and thereon
edged red together with the Landlords fixtures and fittings therein.
Then ‘user’ is
defined as:
Use as
offices in connection with the Lessee’s business as Turf Accountants and
Licensed Betting office and for purposes ancillary thereto or associated with
such activity or for such other purposes as may first be approved in writing by
the Lessor such approval not to be unreasonably withheld.
By clause 1A,
‘the Premises’ is defined to mean:
The ‘Demised
Premises’ described in the Particulars and each and every part thereof together
with the appurtenances thereto and any building now or hereafter on any part
thereof including all additions alterations and improvements thereto and all
Landlords fixtures and fittings and plant machinery and equipment now or
hereafter in or about the same.
The first part
of clause 2 is as follows:
The Lessor
HEREBY DEMISES unto the Lessee the premises together with the rights expressed
in the First Schedule hereto but EXCEPTING AND RESERVING unto the Lessor the
rights and easements specified in the Second Schedule hereto.
The rights
expressed in the First Schedule are, first, the right to use the staircase from
Park Lane and, second, the right to the free passage and running of water,
soil, gas and electricity serving the demised premises.
Clause 3 is in
the following terms:
The demise
hereby made shall not be deemed to include or confer and shall not operate to
convey or demise unto the Lessee any right of light or air liberties privileges
easements or advantages (except such as are specifically granted by this Lease)
in through over and upon any land or premises adjoining or near to the demised
premises.
There are, as
is usual in a lease of this kind, a large number of tenant’s covenants, no (xv)
which is in the following terms:
That no
figure letter pole flag signboard advertisement inscription bill placard or
sign whatsoever shall be attached to or exhibited in on or to the Premises or
the windows thereof so as to be seen from the exterior without the previous
consent of the Lessor which shall not be unreasonably withheld in respect of a
sign stating the Lessee’s name and business or profession (such sign if the
Lessor so requires to be removed and any damage caused thereby made good by the
Lessee at the end or sooner determination of the said term) and in the case of
the premises demised this covenant shall not apply to any reasonable and usual
display of trade or business notice inside the shop window.
Although Mr
Sparrow, for the respondents, also advanced arguments based on tenant’s
covenants nos (xiii) and (xiv), on the view which I take of the case it is
unnecessary for me to refer to them.
The decisive
passage in Goulding J’s judgment starts at p 7 E of the transcript* where,
having stated that Mr Sparrow had put forward five alternative grounds for the
respondents’ alleged right to maintain the signs during the whole term of the
lease he said this:
The most
obvious, and in my opinion the most satisfactory, approach to the matter is
this. At the time of the lease the exhibition on the lessor’s retained property
of sign no 1 and the finger sign was an advantage actually enjoyed with the
betting office. Therefore, if no intention was expressed to the contrary in the
lease, it was granted thereby as an easement to be enjoyed with the betting
office, whether or not it had been the subject of any such right under the
previous regime. That conclusion follows from the demise of the office
‘together with the appurtenances thereto’ or alternatively from the
incorporation of the general words set out in section 62 of the Law of Property
Act 1925: see Watts v Kelson (1870) LR 6 Ch App 166; Bayley
v Great Western Railway Co (1881) 26 Ch D 434; Henry Ltd v M’Glade
[1926] N1 144. However, the lease expresses an intention to limit the wide
effect of such words, and even of the demise itself considered apart from
general words. That is the purpose of clause 3 . . .
*Editor’s
note: See [1985] 2 EGLR 62 at p 64.
The judge then
read clause 3, and continued at p8C:
Rights over
adjoining premises are therefore limited to those ‘specifically granted’ by the
lease. One looks first for such rights in the first schedule, but the rights
there specified do not help the plaintiff in the present controversy. I turn
next to tenant’s covenant no xv.
Then he read
that covenant continued at p8F:
That
covenant, in my judgment, specifically grants a right to exhibit a sign stating
the lessee’s name and business or profession and fit for approval by a
reasonable lessor. If, on its true construction, it can extend to signs not on
the demised premises but on the ground-floor property of the lessor, there is
accordingly nothing in clause 3 to cut it down. But does the covenant go so
far? In construing it, I find two points
of particular relevance, one in the grammar of the subclause, the other in the
surrounding circumstances. In its language the scope of the covenant embraces
not only signs attached to the premises, signs exhibited in the premises
and signs exhibited on the premises, but also signs exhibited to
the premises. Second, it was the fact, and was within the knowledge of both
parties, that the success of the business for which the premises were let
depended upon a sign at ground-floor level. The right granted to exhibit a
proper sign therefore extends in my view to a sign on the lessor’s retained
property indicating the way to the betting shop, such as the signs known to
both parties as erected before, and subsisting at, the time of the lease.
The learned
judge then said that there remained two points regarding consent under covenant
(xv), both of which he resolved in favour of the respondents. It was on that
ground that he gave judgment for the respondents. He made a declaration
appropriate to reflect the construction of the lease which they had urged upon
him and he gave them liberty to apply for an injunction to restrain the
appellants from interfering with the signs.
In the passage
which I have quoted from his judgment Goulding J started by considering two
possible ways in which there might have been the grant of an easement to
maintain the signs. I should state here that it is not in dispute that such an
easement is capable of existence. If authority is needed for that, it will be
found in Moody v Steggles (1879) 12 Ch D 251.
The first way
in which the judge thought that an easement might have been granted was by
virtue of the demise of the suite of offices ‘together with the appurtenances
thereto’; second, by virtue of section 62 of the Law of Property Act 1925. He
then went on expressly to reject the second possibility and impliedly to reject
the first as well. He rejected the second possibility by reason of the terms of
clause 3 of the lease. In my view he was correct in so doing. The language of
that clause clearly demonstrates that it was intended to exclude the effect of
section 62, a state of affairs for which express
that the judge must also have relied on clause 3, to reject the first
possibility, although that is a point on which, as will appear, I respectfully
disagree with him.
Having
rejected both those possibilities, the judge then went on to find a specific
grant of the right to exhibit a sign in tenant’s covenant no (xv). There are,
as it seems to me, two difficulties about that. First, the judge’s construction
of the covenant, with the weight which it places on the word ‘to’, is in my
view a very strained one and I do not find myself able to accept it. Second and
conclusively, the proposition that a tenant’s covenant which prohibits him from
placing signs on the landlord’s other land without consent can operate as a
grant of an easement over that land, even in a case where consent has been
given before the grant of the lease, is novel and unorthodox and I have no
hesitation in rejecting it. It seems to me that that proposition, if it were to
be accepted, might be of far-reaching effect in the law of landlord and tenant
and it would certainly cause consternation among conveyancers. It is right to
say that Mr Sparrow did not rely on that point before the learned judge, and
that he has not relied on it in this court either.
His case was
based on the construction of covenant no (xv) which was favoured by the learned
judge, and also on an anterior consent granted for the erection of the signs
and for the maintenance of them during the term of the lease. Since I am unable
to agree with the learned judge on the question of construction, it becomes
unnecessary for me to consider the question of consent.
I return then
to the demise of the suite of offices ‘together with the appurtenances thereto’.
What effect did those last words have?
It is to be
noted that clause 2 of the lease demised ‘the premises’, being something which
had previously been given a very studied definition, ie the ‘demised premises’
(the suite of offices situated on the first floor) together with the landlord’s
fixtures and fittings therein and ‘together with the appurtenances thereto’. In
the circumstances I do not think that those last words can be treated as being
mere surplusage. I would accept that in certain contexts they can be so
treated, but it would not seem to me that that would be a permissible course in
the context of the present lease.
Moreover,
since clause 2 contains an express demise of the rights expressed in the First
Schedule, it would appear that the ‘appurtenances’ were intended to include
either some other rights appertaining to the demised premises or some other
parcel or parcels of land. The word ‘appurtenances’ in its strict sense means
the former and not the latter. Bearing in mind the permitted user of the
premises and the judge’s finding as to the practical and commercial
considerations for keeping the two signs in their present positions if that
user is to be continued, I do not find it very difficult to suppose that the
appurtenances include the right to maintain the two signs.
Then this
question arises. Is that view of the position invalidated by clause 3 of the
lease, on which Mr Godfrey so strongly relies?
I do not think that it is. For one thing, that clause refers to a number
of different rights, or quasi rights, but not to appurtenances as such. For
another, and perhaps more significantly, it makes an express exception for
rights and quasi rights which are ‘specifically’ granted by the lease. They
would obviously include the two rights expressed in the First Schedule, but
they must also, I think, include the appurtenances demised by clause 2. There
was some debate as to whether it could be said that the appurtenances were
specifically granted, on the ground that the word is an entirely general one.
However, I do not think that there is much in that point. The appurtenances
were clearly granted expressly, and I think that that is enough, particularly
when the general principle to which I now come is borne in mind.
Mr Sparrow
relied on the well-known judgment of Thesiger LJ in Wheeldon v Burrows
(1879) 12 Ch D 31, at p 49, where, having said that there were two general
rules covering cases of this kind, he continued as follows:
The first of
these rules is, that on the grant by the owner of a tenement of part of that
tenement as it is then used and enjoyed, there will pass to the grantee all
those continuous and apparent easements (by which, of course, I mean quasi easements),
or, in other words, all those easements which are necessary to the reasonable
enjoyment of the property granted, and which have been and are at the time of
the grant used by the owners of the entirety for the benefit of the part
granted.
That is the
rule which would, in the absence of clause 3, apply to this case. The learned
lord justice then went on to state the second rule, namely that rights intended
to be reserved over the tenement granted must be expressly reserved, and he
dealt with certain exceptions to the second rule, in particular the case of
ways of necessity. Then comes the sentence on which Mr Sparrow particularly
relies:
Both of the
general rules which I have mentioned are founded upon a maxim which is as well
established by authority as it is consonant to reason and commonsense, viz that
a grantor shall not derogate from his grant.
Mr Sparrow
submits that that shows that the court will as a general rule construe
provisions such as clause 3 of the lease in the present case so as not to
derogate from the grant made by the lease, that is to say, in this case, the
grant made for the purpose of using the premises as a licensed betting office
and for that purpose only. In other words, Mr Sparrow submits that the court
will not construe a general provision in a lease, particularly an exception and
most of all an exception couched in very general terms such as those in clause
3, so as to take away with the other hand that which has already been granted
by the one hand in the dispositive provisions of the lease. Although Wheeldon
v Burrows was a case on implied rights, I accept Mr Sparrow’s
proposition in regard to the construction of express rights, it being, as
Thesiger LJ said, consonant to reason and commonsense and also, I would add, to
the commercial realities of a case such as this. I think that there is enough
latitude in the language of clause 3 to enable the proposition to be applied in
the present case. I would therefore accede to this argument of Mr Sparrow, and
hold that the right to maintain the signs was granted to the respondents by the
demise of the appurtenances to the demised premises. If that view prevailed it
would be enough to dispose of this appeal in favour of the respondents.
However, I wish to mention more briefly two further arguments which have been
advanced by Mr Sparrow.
The first of
these arguments seeks to treat the signs as corporeal hereditaments and to
interpret ‘appurtenances’ accordingly. Whatever its strict meaning may be,
there is undoubtedly authority for the view that the word ‘appurtenances’ can
mean corporeal hereditaments. An example to which Mr Sparrow referred us is Cuthbert
v Robinson (1882) 51 LJ (NS) 238. The foundation of his argument in this
respect is the decision of this court in Francis v Hayward (1882)
22 Ch D 177. Undoubtedly the facts of that case do bear some similarity to those
of the present. There it was held, both by Kay J and by this court, that a
fascia formed of cement or stucco plastered on the brickwork of other premises
belonging to the landlord was part of the premises demised to the tenant.
However,
Goulding J, in rejecting Mr Sparrow’s argument, said this at p 11B of the
transcript:
The industry
of counsel has not discovered any judicial reference to the case of Francis
v Hayward during the century that has now passed since it was decided. I
for my part regard the decision not as laying down any principle but as
applying to the very special facts of this case. Certainly I find it quite
unreal to regard the easily detachable signs now under consideration as part of
the premises demised and I do not think that Francis v Hayward
could legitimately be used to circumvent the operation of clause 3 of the
lease.
Although I was
at one time greatly attracted by Mr Sparrow’s argument, I have in the end come
to the conclusion that the learned judge’s decision on this point was correct.
The question depends to a great extent on whether the signs should be regarded
as being tenant’s fixtures on the ground that they were intended to be fixed to
the premises during the period of the lease, so as to become part of the
realty, or whether, as Mr Godfrey contends, they were intended to be enjoyed as
chattels, in which event there would not have been the necessary purpose of
annexation in order to make them fixtures. The point is an interesting one. I
dare say that it would repay a closer study of some of the authorities on
fixtures in a case in which a decision on it was necessary. That is not this
case.
The second of
Mr Sparrow’s further arguments was that by virtue of two communications which
took place between the parties’ solicitors before the lease was executed, to
which the judge referred as ‘the preliminary exchange’, the former landlords’
solicitors had made a statement which constituted a convention, or an
underlying assumption, as to the applicability and effect of tenant’s covenant
no (xv) to the signs which are in issue in these proceedings. Mr Sparrow
contended that after the respondents had apparently incurred expenditure on the
property on the faith of their continued right to maintain the signs with the
consent of their former landlords they and the appellants were estopped from
claiming that the respondents were not entitled to do so. That contention is
undoubtedly improved by the fact that on September 14 1979 the former
landlords’ solicitors wrote to the respondents’ solicitors giving an express
consent to the substitution of the canopy to which I have already referred.
That is
to decide. I therefore express no view on it, beyond saying that I see great
force in the argument which Mr Sparrow has advanced.
For the
reasons which I have given, although on a different ground from that favoured
by the learned judge, I have come to the conclusion that his decision was
correct. I would therefore dismiss this appeal.
Agreeing,
STOCKER LJ said: I think it is possible that the decision can be supported on
some of the other grounds which have been argued before us, and in particular
that consents given within the terms of tenant’s covenant (xv) are irrevocable during
the continuance of the lease. But for my part I am content to rest my judgment
on the grounds which have been stated by my lord.
I also would
dismiss the appeal.
Also agreeing,
KERR LJ said: I share the view expressed by Nourse LJ that the judge was not
correct in the conclusion, which he evidently formed unaided by argument, that
a specific grant can be extracted from the negative covenant in clause (xv),
albeit subject to the qualification of consent not being unreasonably withheld.
But I am not
convinced that the judge’s construction of that covenant is also necessarily
incorrect, ie the meaning which he gave to the word ‘to’ in the phrase ‘. . .
in on or to the premises’. It seems to me that the word ‘to’ means ‘relating
to’ the premises. Having regard to the pre-existing facts found by the judge
concerning the location of these signs, the word ‘to’ may be sufficient for the
purposes of covenant (xv), even though the signs were situated on the
landlords’ property.
But assuming
that this goes too far, I am certainly of the view that the appeal should be
dismissed for the reasons stated by Nourse LJ and also on the last ground to
which he briefly referred. The exchange between the solicitors before the lease
was executed, which the judge quotes at p 3 of his judgment, was as follows.
The lessee’s solicitors inquired:
Please
confirm that the Lessee’s present signs are approved.
The reply was
clearly intended to refer to covenant (xv):
There should
not be any problem about this, and in any event the particular covenant dealing
with this is open to the extent that the landlords’ consent is not to be
unreasonably withheld.
It seems to me
that once that reply had been given and the lessees thereupon remained content
to rely and act upon it, as they clearly did, it is not open to the landlords
subsequently to contend that because of some alleged restrictive meaning of the
word ‘to’, covenant (xv) cannot be applied to these signs on the ground that
they were situated on the landlords’ retained property. Both parties were in my
view in agreement to proceed on the basis that the then existing signs, and the
tenants’ right to maintain them in their present location, fall within the
scope of covenant (xv). In these circumstances I do not think that the
landlords can go back on their solicitors’ assurance.
If that is
correct, as I think it must be as a matter of commercial sense and justice,
then it becomes relevant to refer briefly to what the judge concluded on the
issue of consent, beginning at p 9C of the judgment. He said:
There remain
two points regarding consent. Did Python Properties Ltd, on the grant of the
lease, consent to the existing signs for the purposes of covenant no xv, and,
if so, was such consent revocable?
I incline to
the view that, as the existing signs were known and obvious to both parties and
some sign on the ground floor was patently necessary, the grant of the lease
without any
he is reported
as saying ‘observation’, but I think it must be ‘reservation’
on the
subject by the lessor would have authorised the continuance of the signs as
approved signs within covenant no xv. That it in fact did so after the point
had been brought into the open by the preliminary exchange, I feel no doubt.
The plaintiff’s inquiry was made and the vague but reassuring reply thereto was
given, expressly in relation to the covenant, and the matter was not raised
again on behalf of Python Properties Ltd before the plaintiff accepted the
lease. Thus if my construction of the covenant is correct, sign no 1 and the
finger sign were authorised under its terms.
Pausing at that
point, when the judge referred to his construction of the covenant, it seems to
me that in the present connection he was only referring to the meaning of the
words ‘to the premises’ and not to his view that covenant (xv) also contained
an implied specific grant.
He then went
on as follows:
No authority
precisely covering the second point has been cited. In my judgment a landlord’s
consent under such a clause as that now in question, once acted upon by a
tenant, cannot be withdrawn during the term unless given with an express
reservation for that purpose; and here the tenant at once acted on the consent
by continuing to maintain and illuminate the signs as it had been doing under
the previous lease.
If it had been
necessary to decide this appeal on this basis, I would have done so and
dismissed it on that ground. However, my primary reason is the same as that
stated by Nourse LJ concerning the demise of ‘appurtenances’, which in my view
remains unaffected by the generality of clause 3.
I should add
that the reversion has been sold once again, the present freeholders having
evidently acquired their title since the judgment and before this appeal, as
was discovered only today. In that regard it has been agreed that they should
be added as appellants for the purposes of this appeal and that they will be
bound by its result.
The appeal was
dismissed with costs. Leave to appeal to the House of Lords was refused.
