Windsor Life Assurance Co Ltd v Lloyds TSB Bank plc

  J U D G M E N T JUDGE COWELL: 1                    This matter raises an extremely important point that arises out of section 29(5) of the Landlord and Tenant Act 1954, that subsection having come into force in June of 2004. I understand, and the reasons for that will become apparent in due course, that the section has occasioned considerable concern amongst District Judges, particularly at this court, and I hope by means of this Judgment to give some guidance to them in addition to deciding the particular point that arises between these two parties. 2                    The two parties I can I think refer to as being relatively rich, and because the amount at stake stems from a rental of £1 million per annum (£2,740 per day) there is much in this case that is worth litigating in terms of money, but there must be many cases where there are only small amounts that could be at stake, small at any rate in terms of the parties in this case but of importance to relatively impoverished landlords and tenants. 3                    The words of subsection (5) of section 29 are these: “The court shall dismiss an application by the landlord under section 24(1) of this Act if the tenant informs the court that he does not want a new tenancy”. 4                    There are a number of unusual features. At first sight one may be a little surprised to learn that a landlord may make an application for the grant of a new tenancy to his own tenant at the expiration of the current tenancy, for that is indeed what the landlord in this case, NM Pensions Limited, sought by its application which it made on 3rd September 2007.  I will refer to that as “the Application”. The landlord had previously, in the way that has been familiar ever since 1954, served a section 25 notice dated 29 August 2007 not opposing the grant of a new tenancy, and the notice gave as the date of termination the 7th March 2008. 5                    Under the Act as originally enacted one would have expected the tenant (in this case Lloyds Bank) to have indicated within two months that it did not want to leave, and then the tenant would have had to make an application within the next four months under the old procedure. Because there was scope for delay by a landlord or a tenant by the new provisions which came into force in June 2004 the ability was given to either party to make the application for a new tenancy. All that is explained, and I need not recite the reasons for the change, in the judgment of Evans-Lombe J. sitting in the Court of Appeal in Lay v. Drexler [2007] 2 E.G.L.R 46 in the passage from paragraph 3 at page 47G through to the end of that page. 6                    The Defendant tenant bank then acknowledged service on 27th September 2007 and in the course of that it made an application for the determination of an interim rent pursuant to section 24A of the 1954 Act, and perhaps I should point out that, whereas that application was made under section 24A, the Application made by the landlord which first brought this matter to court was made under section 24(1) of the Act. 7                    The next thing that happened of any consequence to this case is that about 18 months or so later (as appears from page 94 of the bundle) the bank by its solicitors wrote two letters on 17th April 2009 making it clear that it did not want a new tenancy. The letter at page 94 was written on that day and faxed that day to the landlord’s solicitors, and it reads as follows: “Our client has taken the commercial decision that it no longer wishes to take a new tenancy of the premises. In the circumstances please find attached Notice of Discontinuance by way of service upon you. We have filed the Notice at Court and attach a copy of our letter to the Court for your reference.  In accordance with Part 38.5(1) of the CPR, we calculate that our client’s tenancy shall now determine three months from today’s date, being 17th July 2009. Please confirm that this is your client’s understanding also”. That last point arises from section 64 of the 1954 Act in which the period of three months from the final disposal of the application is provided for, so that if indeed the Defendant tenant is right the lease will come to an end on 17th July 2009.  On the very same day, the 17th April (and this is at page 95), the same solicitors for the tenant bank wrote to the solicitors for the landlord saying, “We enclose the Defendant’s Notice of Discontinuance, discontinuing the claim. These are lease renewal proceedings and the Defendant is entitled to discontinue the proceedings pursuant to s.29(5) Landlord and Tenant Act 1954. We have instructions from our client to issue an interim rent application shortly. We attach our fax to the Claimant’s solicitors serving the Notice upon them today. We thank the Court for its assistance.” In case it matters I can point out that that letter did not ask the court manager to whom it was addressed to do anything in particular. (It was also unnecessary to refer to the issuing of an interim rent application because that had already been issued and so was pending.) At page 96 one finds the Notice of Discontinuance addressed “To the court” and it says, “The (defendant) discontinues all of this (claim) against the (claimant)”, and then it is signed by the Defendant tenant bank’s solicitor. 8                    The landlord did not confirm the understanding that the Defendant tenant had about the date of determination being 17th July 2009. E-mails passed between the solicitors for the parties. The landlord’s solicitor made the bad point which quite rightly was abandoned by Mr. Taggart, counsel for the landlord, to the effect that the court was not notified that the tenant no longer wished to take a new tenancy. Those words did not appear in the letter to the court but since a copy of the letter written to the landlord was also sent to the court, just as a copy of the letter to the court was quite rightly sent to the landlord’s solicitors, the letter to the landlord’s solicitors did say that the tenant bank “no longer wishes to take a new tenancy of the premises”. And so there is no doubt that the tenant gave the notice referred to in section 29(5). 9                    It seems that the solicitors in some way expected an order to come from the court dismissing the application, and if they did expect such a thing they were very optimistic, for what happened was that on 20th April the Defendant’s solicitors got in touch with the court and the court confirmed receipt of the letters which had been faxed to them on the 17th, including the copy letter to the landlord’s solicitors. It does not appear that the member of staff at the court indicated that anything further would be done. 10                I do not think there is any point in my referring to the detail of the e-mails that passed between the parties in this case, but the argument on the part of the landlord’s solicitors was that it was necessary for the tenant’s solicitors to obtain some kind of order dismissing the proceedings.  11                The tenant’s solicitors then made an application on 21st May 2009. It is at page 65 of the bundle and it was an application, and it is put like this: in the box headed “What order are you asking the court to make and why?” there is typed in the box these words: “That the above claim was dismissed on 17 April 2009”, and the application sought a hearing. There was and, again, I need not go into the detail of the matter, a great difficulty in obtaining a hearing date, and indeed counsel for the Defendant bank, Miss Holland, attempted to obtain an order ex-parte but was not heard and a further application was made on 27th May to bring forward the date of the hearing of the application of 21st May and eventually an agreed order was made on 8th June. It is at page 85. It was made without prejudice to the Defendant’s contention that the dismissal had occurred on 17th April 2009, and it was ordered that the claim “be dismissed as of 8th June 2009 (subject to the below provisions);” and it was made clear that it was without prejudice to the application of 21st May that the claim should be deemed to have been dismissed on 17th April 2009, and then arrangements were made for the hearing of that matter in July, but the upshot of that was that this matter was transferred from the court, which was the Mayor’s and City of London County Court, to this court to be heard by a judge of the Chancery List. I have been referred to a number of statements and I do not think I need set out or even recite what Mr. Moorcroft said at page 72 onwards or what Mr. Cripps said at page 87 onwards in their witness statements. 12                If this Judgment contained sub-headings, the sub-heading which I would use next  would headed “The Tenant’s Choice”.  What is to be noticed about subsection 29(5) is that it is entirely a matter for the tenant to inform the court that he does not want a new tenancy. There is nothing whatever that the landlord can do about it. The subsection simply decrees that, if the tenant chooses to inform the court that he does not want a new tenancy, then the court shall dismiss the application under section 24(1), presumably the Application with a capital A in this case made by the landlord. 13                Because it is the tenant’s choice the crucial thing to appreciate is that the dismissal is automatic. No judge can say “I shall refuse to dismiss this application” because the statute is in mandatory words, “the court shall dismiss an application”, so that it is totally different from a vast number of other orders made after decisions made by a judge such as a decision that the landlord has made out one of the grounds of opposition to the grant of a new tenancy, in which case the judge effectively has to dismiss the application for a new tenancy made by the tenant. This is an automatic result of the tenant choosing to inform the court that he does not want a new tenancy.  Under this same heading of “The Tenant’s Choice” it must, in my judgment, follow that the only thing that can be dismissed, when one comes to the detail of it, is that part of the Application over which the tenant has some choice. Accordingly, if costs have been incurred as invariably happens by both sides, the automatic dismissal on receipt of the letter does not determine anything about the costs, because that is not a matter in respect of which the tenant is given a choice. All he can choose to say is “I don’t want a new tenancy”, and the chances are, as is evident from the actual decision in Lay v. Drexler, that the tenant will have to pay the costs of the landlord, because essentially the proceedings, although started by the landlord, have been proceedings under which the tenant has been seeking a new tenancy, and if he never wanted a new tenancy in the first place he could have said so very much earlier, in this case at any time after the tenant became aware of the Application in September 2007.  And so it seems to me that the words of the subsection can have no operation upon the question of the costs of the landlord’s Application.  So that matter is not determined, and similarly if, as in this case, there is an application for an interim rent, more usually made by a landlord than by a tenant, that application, being under section 24A and not under section 24(1), is not affected either. That is also something over which the tenant has no choice. So that is that sub-heading. 14                The next sub-heading I would simply call “Automatic dismissal”. There is, as Miss Holland points out, no requirement in the subsection that anybody should make any application in the proceedings as a result of the notification, and when I say “application” I mean application with a small “a” made in the usual form.  Of course any party may make an application but there is nothing to suggest in the section that any application is necessary for an order. 15                If one were to ask “Well, when is the application dismissed?” it seems to me, because it is automatic, that what the draftsman of the statute must have envisaged is that it is a forthwith dismissal upon the receipt by the court of the information. There is nothing to suggest that it should follow after a particular time from the notification or that it is in some way dependent upon any other condition such as notification being given to the landlord; and that leads on to the next sub-heading “Information to the landlord”. 16                It may well be a defect in the general scheme of things which came into force in June 2004 that the dismissal was not in some way related to a notification given to the other party, such as happens in the case of a notice of discontinuance.  It is unsatisfactory that there may be this automatic choice being taken by the tenant in circumstances in which he does not inform the landlord. Perhaps it is very unlikely, and most tenants who are well advised, as indeed is the case here, would do their utmost to inform the landlord. It seems to me the appropriate remedy on the part of the landlord is that of costs. If he is not informed and he continues to prepare for the trial and instruct expensive experts then the tenant may very well find that the tenant has to pay the costs which are essentially wasted because of that lack of information; nor is there any requirement on the part of the court to inform the landlord.  But it does not seem to me that the absence of information to the landlord can affect the statutory obligation to dismiss the application upon the receipt by the court of the information that the tenant does not want a new tenancy. 17                The next sub-heading is “Notice of Discontinuance”. I preface my remarks about that by reference to the case I have already referred to, Lay v. Drexler.  It did happen there that an order was made on 17th May 2006 dismissing the application, though the notification to the court had been on 6th April 2006.  (The question in this case did not in that case arise.) The order in that case not only dismissed the application but it gave directions for the determination of the question of costs and also for the determination of the interim rent;  later the judge in that case determined the costs and he said there should be no order as to costs. The Court of Appeal when allowing the appeal said, effectively, and I am summarising I hope accurately, that the appropriate order on the facts of that case was an order that the tenant should pay the landlord’s costs because it was “the equivalent of notice to discontinue” (see page 49J-K). Evans-Lombe J. said: “For the reasons that I have set out above, it seems to me that the service on the court by the respondents of notice under section 29(5) was the equivalent of a notice to discontinue proceedings in which they had been seeking an order from the court awarding them a new tenancy upon terms settled by the court. It follows that the judge should have placed the burden of proof on the respondents to establish facts that would justify his departure from the normal order in these circumstances. Since they were not able to do so to his satisfaction, he should have ordered them to pay the appellants’ costs”. 18                It does happen every now and then that the words of a judge are treated, inappropriately, as if they were the words of a statute. The reference to “notice to discontinue” was simply part of the justification by analogy for the Court of Appeal’s decision; effectively the Court was looking at that case as being analogous to one in which a notice of discontinuance is served.  In my judgment the Notice to Discontinue in this case was in law quite inappropriate, though it is very understandable that it should have been given. Technically I suppose one can say that it was the Defendant tenant’s notice to discontinue a claim made by the Claimant, but one gets into awful problems with that kind of argument, because essentially the landlord who was making the application was making the application so that the Defendant could be given a new tenancy.  But that I do not think is the real reason for saying that the notice of discontinuance was inappropriate. The real reason is that the costs consequences of litigation following a notice of discontinuance are automatic (in the absence of a court order otherwise), whereas in this case, although it is highly likely that a tenant who no longer wanted the tenancy would be ordered to pay the landlord’s costs, it is not automatically the case; the question of costs is the aspect of the case not within the tenant’s choice and which, as I have already explained, survives and is outside the provisions of section 29(5). 19                There is a passage in the judgment of Chadwick L.J. in Lay v Drexler which again I say with respect is not to be treated like the words of a statute where he says at page 50H “On 17th May 2006 the court dismissed the appellants’ application, as section 29(5) required”. He did not have this particular issue before him, which in this case is simply this: if the dismissal occurred on 8th June 2009 the Defendant tenant has to pay rent in respect of the three months following that to 8th September. If, on the other hand, the dismissal occurred on 17th April the rent will continue to be payable until 17th July.  Rent in this case runs at about £2,740 a day.  That is why there has been this argument, and the landlord of course contends that the termination was in September and not in July.  20                The facts of the case focus attention along these lines. Is the court to do something on receipt of the notification that the tenant does not want a new tenancy? and if the court does have to do something, what should it do?  21                I would like to say a few words about the problems that would happen in this court which deals with a great number of these cases. Let us assume an impoverished freeholder, say a widow whose only asset is the freehold, and an impoverished tenant, who decides he does not want to carry on business. The tenant writes a letter to the court saying he does not want a new tenancy. The letter first of all goes, and not many people realise that this court is run from two separate buildings, to number 13-14 Park Crescent, and there it is opened by a member of the staff. Staff shortages are increasing because of Government cuts. Most letters are dealt with on a first come, first dealt with basis unless they are obviously urgent, and even then they are not always given priority. The staff are not legally qualified and a letter that refers to section 29(5) of the 1954 Act is probably double Dutch to most of them.  If it says no more than the kind of letter that was written in this case the letter might be referred to a judge or it might simply be put on the court file.  If it is referred to a judge, and for some reason the member of staff thinks it should come to a Circuit judge, then it will be taken to this building (at 26-29 Park Crescent). If it is not marked “Urgent” and the Circuit judge is in the middle of a very lengthy and difficult trial, he will not look at it until the trial is finished;  and I could go on and on mentioning the practical problems that beset us. So does that mean, and this is the real point of merit on the part of the Defendant, that the Defendant, whether it is the wealthy Lloyds Bank or the impoverished shopkeeper, has to pay a daily rental for every day that the court does not get round to doing something about the letter?  22                That does not even answer the question what should the court do about the letter?  It would in my judgment be wholly unjust if the tenant’s liability for rent extended for precisely the period when the court, understaffed, took time to get round to doing something about a letter which might not in fact even ask the court to do anything at all.. 23                I have come to the conclusion that the statute, whatever the C.P.R. may say, for statute will override the C.P.R., makes it quite clear that the court should dismiss the application, and statute presupposes that it will dismiss the application, or that the application ought to be dismissed, upon the information being given by the tenant to the court.  I recognise that under the C.P.R. it is possible to make an order only at the time the order is made. But statute may provide otherwise. And so I have attempted a draft. The facts and dates come from this case but I would suggest that it is entirely appropriate as a template whenever any District Judge has occasion to consider this matter, and the draft of the order should read along these lines: “Upon the tenant having informed the court by a letter received by the court on 17th April 2009 that the tenant does not want a new tenancy and the statute in the form of section 29(5) requiring that the court should forthwith on the date of receipt to dismiss the application of the landlord under section 24(1), it is declared that, by virtue of section 29(5), the Application of the Claimant dated 3rd September 2007, so far as it sought the grant to the Defendant of a new tenancy, was dismissed on 17th April 2009, and it is ordered that” and then the next paragraph would be along these lines “The costs of the Application be [reserved to the next hearing in this Application]” or, if the matter of costs had been argued the appropriate costs order would be made. Similarly, in relation to the interim rent, either directions would be given or the parties would be told to attempt to agree directions and in default to seek a case management conference and so on, because as I have indicated those two matters, the costs of the Application and the question of the interim rent are not matters in respect of which the tenant has any choice. 24                The matter has been very fully and well argued by both counsel in this case, and perhaps I should mention a number of miscellaneous points. It is pointed out by Mr. Taggart that there could be problems about the letter from the tenant not reaching the court but, in my judgment, that is a risk that he takes; and there are questions raised about who is the court? Is it a member of staff who opens the letter and stamps it as having been received on a particular day or is it a District Judge or somebody else? Well, those matters can be dealt with if and when they arise. It seems to me that, as in this case, it is the date when the letter is received by somebody at the court that matters. 25                The case of Aly v.Aly 1984 WL 281660 decided on 8th December 1983 seems to me to be particularly in point. In that case there was a failure on the part of the court to stamp a document on the day of receipt and it was decided that that failure on the part of the court should not prejudice the party who had made the application because that party had done all that he could do.  It was argued that there was no failure on the part of the court in this case but, in my judgment, the same principle does arise because essentially the statute presupposed an ideal situation, that of the court dismissing the application immediately upon receipt of the notice.  In reality that is not going to happen, but statute does require that aspect of the case under section 24(1) to be dismissed, and so in that sense it can be said to be the fault of the court that an order is not there and then drawn up. 26                Because the question of costs is not something over which the tenant has any choice, Mr. Taggart’s arguments by reference to costs, as I think he may have conceded, such as that based upon not knowing when the appropriate time for a costs assessment should begin, do not in my judgment have any application. Those arguments were I think based upon the tenant’s informing the court being a notice of discontinuance, which it is not for the further reason that such a notice has to be given to the other parties to the litigation.  So far as his argument stresses that an order dismissing something can be made only by a judge the answer, it seems to me, is that the statute requires the order automatically to be made on receipt of the information from the tenant, there being no discretion in the matter. All in all I prefer the arguments of Miss Holland, which essentially rest upon the fact that no exercise of the judicial mind is required; the obligation to dismiss is automatic; it is a positive duty imposed on the court; the subsection itself does not require anything further to be done by the parties, for the section was all part of the simplification of the procedure; and if the statute over-simplifies the matter by forgetting that the landlord needs notification, so be it. 27                So I think that is the end of my Judgment and I hope that the  rough draft of the order can be a template to be used by District Judges who, perhaps not in every case because the tenant’s information may not be referred to them, are invited to make an order under section 29(5).  There must be many cases, I should observe, where neither party needs an order at all and both have not the money to argue about the matter, which makes it all the more important that District Judges should have some guidance as to what should go into an order if and when a tenant’s letter comes before them.  I hope the template will cover all situations, whether or not the tenant has notified the landlord and whichever party it may be that seeks to argue the matter.