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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Patel & Anor v Keles & Anor [2009] EWCA Civ 1187 (12 November 2009) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2009/1187.html Cite as: [2009] NPC 128, [2009] EWCA Civ 1187, [2010] 2 WLR 1159, [2010] Ch 332 |
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ON APPEAL FROM
HH JUDGE COWELL
CENTRAL LONDON CIVIL JUSTICE CENTRE
Strand, London, WC2A 2LL |
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B e f o r e :
Vice President of the Court of Appeal Civil Division
LADY JUSTICE ARDEN
and
LORD JUSTICE THOMAS
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PATEL & ANR |
Respondents |
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- and - |
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KELES & ANR |
Appellants |
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Miss Tamsin Cox (instructed by Messrs Wright Son & Pepper) for the Appellants
Hearing date : 28 October 2009
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Crown Copyright ©
Lady Justice Arden :
The Principal Issue
"30. Opposition by landlord to application for a new tenancy
(1) The grounds on which a landlord may oppose an application under [section 24(1) of this Act, or make an application under section 29(2) of this Act,] are such of the following grounds as may be stated in the landlord's notice under section twenty-five of this Act or, as the case may be, under subsection (6) of section twenty-six thereof, that is to say:—
….
(g) subject as hereinafter provided, that on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein, or as his residence.
….
(2) The landlord shall not be entitled to oppose an application [under section 24(1) of this Act, or make an application under section 29(2) of this Act,] on the ground specified in paragraph (g) of the last foregoing subsection if the interest of the landlord, or an interest which has merged in that interest and but for the merger would be the interest of the landlord, was purchased or created after the beginning of the period of five years which ends with the termination of the current tenancy, and at all times since the purchase or creation thereof the holding has been comprised in a tenancy or successive tenancies of the description specified in subsection (1) of section 23 of this Act."
Background
"2. This is an application made by the claimants, who are the tenants of the defendants, who have been running a business in a small shop which sells newspapers, confectionary, tobacco and the like, known as the "City Confection", and the claimants have been doing that since about 1991 or 1992. The most recent lease being a five year term which expired on 25 March 2007 but which has been continued by Part II of the Landlord and Tenant Act 1954. The landlords oppose the granting of a new lease by virtue of paragraph (g) of section 30(1) of the 1954 Act. …
3. …Most lawyers and judges are very familiar with Tudor Street because at the end of Tudor Street there is one of the main entrances through to the Inner and Middle Temples, and the premises in this case are in Tudor Street.
4. The reversion is clearly held by the two defendants in this case. They acquired the property at some stage in about 1997. It consists of a number of different businesses. There is this business, known as "City Confection", which is on the ground floor and in some part of the basement. It used to be what is called a "kiosk", but about eight or ten years ago the claimants in this case did some work, some reconstruction, as a result of which customers can actually come into the premises and choose things to buy, whereas when it was a kiosk the customers would be outside."
"5. On another part of this property, 24 Tudor Street, there was a property run in a similar way which became some years ago a barber's shop. The first defendant was some kind of partner of the barber, but when he left there was no way in which the defendant could carry on that particular business and so he let it on a 20 year lease in 2007, that being the year in which the first defendant attained the age of 60.
6. The third business carried on at 24 Tudor Street was a coffee shop which had a slightly more complicated business than the "City Confection" because coffees were served, and I think at some stage food of some kind was served so it needed slightly more skilled staff. But, similarly, in 2007 that property was let for 20 years."
THE JUDGMENT OF HHJ COWELL QC
"… I am prepared to offer to the court an undertaking that the defendants will indeed take possession of the premises and run their business from it. This undertaking cannot of course, be open ended, as it will be dependent, amongst other things, upon my health, economic conditions and ultimately my wish to retire from business in four years time. However, I can confirm and undertake that my present intention is to occupy the premises for my own business for the foreseeable future, however, I must of course reserve my right to sell the business at some stage in the future if personal and economic conditions dictate. I am aware of the importance of an undertaking given to the court .."
"not to use the premises for two years for any purpose other than as a newsagents' business carried on by [Mr and Mrs Keles]".
"34. The undertaking which is offered and was mentioned for the first time today stems from a recommendation in the leading work on this subject, Reynolds and Clark, and that is how it comes to be made rather late in the day. It is in a negative form, not to use the premises for two years from 1 June 2009 or such later date being the date on which the period of one month shall have expired following recovery of possession of the premises by the defendants other than as a news agency business carried on by the defendants. It is said that that is a very strong indication of a positive intention and is enforceable by the court, though nobody at this court would in practice do so without prompting from the claimants. Then it is said that it could even be enforced by specific performance or more accurately a prohibitory injunction by the claimants, though they would gain absolutely no practical advantage of returning to the premises from such an expensive litigation exercise. It is said that it is put forward in response to the points made by Mr Demachkie in his skeleton argument about the unsatisfactory nature of undertakings.
36. [sic] I have to say that I am very disturbed about what I can only say is the temporary nature of the undertaking for a two year period. It does indicate to me that the intention is a temporary one, to run for two years and no more. It reflects in turn on the real nature of the intention for effectively there is an end date. It is not the foreseeable future, it has an end date to it; an end date which is clearly in contemplation. It does not stem from a positive need for the premises, or a positive requirement, which one might ordinarily expect there to be in the case, for example, of a landlord who was out of work but who owned premises which he could use for his own livelihood, perhaps his only premises. It is the limited nature of that undertaking which I find really very unsatisfactory.
37. There is no real need that this landlord has for business premises as his only way of making ends meet, or the only way of achieving some kind of income. One can readily see that it is highly likely that at the expiry of the two year period there will be either a sale or the grant of a lease of some kind."
"40. So one has in the background of this case the fact that all the other businesses, even if they were more difficult to run than this one, have been sold (and clearly there was a problem about carrying on the barber's shop in the absence of a barber); that the two sales of the properties in 24 Tudor Street in 2007 occurred when the first defendant was 60 years old or so. To some extent staffing problems contributed to the reasons for sale and it is undoubted that the first defendant himself does not intend to work in the property but to put managers and staff there, his sons being of no substantial practical help. He is at any rate a reasonably wealthy man living on the rents at the moment of six properties.
41. As against that background it seems to me that the limited undertaking throws real doubt upon his substantial intention, which ought to be a substantial and genuine intention of running a business for the foreseeable future at the premises. It is very likely not to survive the two years offered in the undertaking. It is even less likely to survive the defendant attaining the age of 65. By the undertaking business could cease altogether even within the two year period, the premises being left empty. It seems to me that the sort of intention in this case is not the kind that the Act is concerned with, which is a genuine intention to run a business for the foreseeable future, there ordinarily being no short-term limit or other of this event obstacle likely to end it in the short term. This undertaking really gives the lie to such an intention."
FOR HOW LONG MUST THE LANDLORD INTEND TO OCCUPY THE PREMISES?
"An "intention" to my mind connotes a state of affairs which the party "intending" - I will call him X - does more than merely contemplate: it connotes a state of affairs which, on the contrary, he decides, so far as in him lies, to bring about, and which, in point of possibility, he has a reasonable prospect of being able to bring about, by his own act of volition…Not merely is the term "intention" unsatisfied if the person professing it has too many hurdles to overcome, or too little control of events: it is equally inappropriate if at the material date that person is in effect not deciding to proceed but feeling his way and reserving his decision until he shall be in possession of financial data sufficient to enable him to determine whether the project will be commercially worth while."
"The answer to [the point that the landlord did not intend to occupy the premises itself] is, I think, that the landlords did in fact intend to occupy the premises themselves even if only for the short time that should ensue before the transfer. Section 30 (1) (g) of the Act of 1954 does not say for how long the landlord must intend to occupy himself, and the courts must fill the gap. It seems to me that in some cases even a short time may suffice. Take the case where the landlord intends to occupy the premises and to carry on business himself there for six months, and then transfer the business to his son as a family arrangement. I should have thought that the father would have sufficient intention to satisfy section 30 (1) (g). But suppose the intention was after six months to transfer to a purchaser for cash, I should not expect that intention to suffice. Just as a purchaser within the previous five years cannot defeat the tenant (see section 30 (2)), so also a purchaser shortly afterwards should not be able to defeat him. The matters that influence me are these. It is open to the landlord to complete the transfer before the day of hearing, in which case it is the successor's intention which counts - see section 30 (1) (g) - save only that if that successor falls foul of section 30 (2) his intention does not count. Hence I would say that if the landlord intends to occupy the premises and carry on business himself there for a time, and then to transfer to a successor, his intention is sufficient to satisfy section 30 (1) (g), unless the intended transfer is one which, if it had been made before the hearing, would have fallen within section 30 (2) so as to render section 30 (1) (g) unavailable.
Applying those principles to this case it seems to me that the intent of the landlords is sufficient to satisfy section 30 (1) (g). They intend to occupy the premises and to carry on their activities therein (by providing the detailed administration for the Universities Central Council on Admissions) and then to transfer their activities to their successors, the chartered company, without any payment in money or anything in the nature of sale or purchase.
The landlords have established, therefore, the statutory ground of opposition. The tenants are not entitled to a new lease."
"This case falls within the literal meaning of section 30 (1) (g) as the landlords do intend to occupy the premises for the purposes of a business to be carried on by them therein, though only for a short time until transfer of the occupation and the business to the chartered corporation. The transfer will not be by way of sale. and there will be only a formal change of identity. In form the landlords are a limited company which is being wound up, and a new chartered corporation has been created. In substance, however, there is continuity. The phrase alter ego undoubtedly lacks precision for most purposes, but for the present purpose it is a fair description of the landlords in their new guise of the chartered corporation as successors of the landlords in their old guise of the limited company.
There must, however, be some qualification of the literal meaning of section 30 (1) (g) of the Act of 1954. A landlord should not be allowed to succeed under section 30 (1) (g) in a case where his intention is only to start a business at the premises and carry it on for a few weeks and then sell his interest in the premises and the business. If the sale took place before the hearing the purchaser would be precluded by section 30 (2) from relying on section 30 (1) (g). It should not be possible to evade section 30 (2) by postponing the intended sale until after the hearing. There is, therefore, an implied limitation on the operation of section 30 (1) (g); it is not applicable if the landlord's intention is to occupy for only a short time and then make a sale. The implied limitation should not be any greater than is necessary to secure consistency between section 30 (1) (g) and section 30 (2). Probably section 30 (1) (g) can be allowed to apply according to its terms without implied limitation in any case where no sale is intended. Certainly it should be allowed to apply according to its terms in a case such as the present where there is no intended transaction even resembling a sale and there is to be complete continuity of operation, and the only transfer is to be a formal transfer to an alter ego of the transferor."
"The argument runs that, at best, the period during which the landlords will carry on business there before the transfer is so short that the landlords' real purpose in occupying the premises is to effect the transfer. It is pointed out that in the ordinary case a landlord could not defeat the tenant's right to a new lease if he intended to occupy the premises and carry on business there for only a few days or weeks before selling them. In such circumstances his real purpose would be to sell the premises, not to carry on business there. No doubt that is so.
If, however, a landlord not being a company, intended to occupy the premises and carry on business there as long as he lived or was physically capable of doing so, his rights under the Act of 1954 could not, in my judgment, be defeated by showing that his expectation of life or of retaining his strength happened to be very short. The tenant could not successfully argue that the landlord's real intention was merely to transfer the premises to his heirs. If the landlord died before the termination of the tenancy, or indeed at any time before the hearing, his heirs would stand in his shoes and succeed to his rights. They could not be defeated because they had inherited only recently; Landlord and Tenant Act, 1954, ss. 30 (2) and 41 (2). So, too, if a landlord transferred otherwise than for money or money's worth at any time, his transferee would succeed to his rights against the tenant; H. L. Bolton Engineering Co. Ltd. v. T. J. Graham & Co. Ltd.
Here the circumstances are somewhat analogous. The landlord association will be dissolved, for all practical purposes, as soon as the transfer to the new chartered association is complete. It intends to carry on its activities, inter alia, in the three rooms on the top floor of No. 29, Tavistock Square, virtually for the rest of its life, short as that may be. Moreover (and this is of crucial importance), it is quite plain that the transfer to the new chartered association will be by way of gift, and not for any financial consideration. In these circumstances there seems to me to be no reason on principle or authority why the probable brevity of the landlords' occupation of the three top rooms should confer any benefit upon the tenants, and in my view it does not do so. If the transfer to the chartered association had been completed before the county court hearing, the tenants would clearly have had no right to a new lease. I am glad to think that the law does not make the rights of the parties depend upon the fortuitous circumstance as to whether the transfer is executed sooner rather than later."(page 154-5)
CRITICISMS OF THE JUDGE'S JUDGMENT AND MY CONCLUSIONS ON THIS APPEAL
Lord Justice Thomas:
Lord Justice Waller: