England and Wales Court of Appeal (Civil Division) Decisions

Court of Appeal

		12 February 1979

1. Giving the first judgment at the invitation of Megaw LJ, ROSKILL LJ said: This is an appeal by the landlords against an order of His Honour Judge Wakley, sitting at Brentford County Court, on January 26 1978 in proceedings between the tenants, West Layton Ltd, and the landlords, who, at the hearing before the learned judge, were Louis Joseph and Robin Dannhorn. The tenants sought, and indeed obtained, from the learned county court judge, a declaration that the landlords had unreasonably withheld their consent, under a lease dated June 27 1971, to the granting of a subtenancy by the tenants to would-be subtenants, Mr and Mrs Jack Woodward.
2. Before I go further it is necessary, so that it is on record, to mention one procedural matter, to which, most properly, counsel for the appellant, Mr Michael Brooke, drew our attention before he opened the substance of the appeal. Mr Dannhorn, the second of the two gentlemen named as landlords, in point of fact had no relevant interest in the premises in question, which are a butcher's shop at 278 Bath Road, Hounslow. The relevant party was Mr Louis Joseph, who held the premises, we were told, as trustees for himself and for another. Unhappily, last September, after the learned judge's decision, Mr Joseph died; and to date probate of the will, in which he named a Mrs Ford as his executrix, has not been obtained. After discussion, the appellant's solicitors, most helpfully, gave an undertaking that they would be responsible for any order for costs which this court might make in favour of the respondents; and they also undertook that as soon as probate has been obtained (we have since been told that it is likely to be obtained in the next five or six weeks, if all goes well) the title of this appeal will be amended by substituting as appellant Mrs Ford, the executrix of Mr Joseph deceased. Meanwhile, it was agreed that, whatever the result of this appeal, no formal order would be drawn up until the title has been so amended. So much for the formalities. I shall deal with the matter as if the executrix of Mr Joseph had been substituted for the late Mr Joseph.
3. Now, as I say, the landlord appeals. This case has been ably argued by counsel on both sides. The gravamen of the argument for the appellant is that the learned county court judge reached a wrong conclusion and that he ought, instead of declaring that the landlord had unreasonably withheld his consent, to have upheld the landlord's refusal to grant the consent in question.
4. A few dates are relevant. As I said a moment ago, the term was granted on June 27 1971. On March 4 1974 the benefit of that term was assigned to the respondent tenants, West Layton Ltd, who, we are told, have a number of butchers' shops throughout London. On November 5 1976 the reversion of the lease passed to the late Mr Joseph as trustee. But between the date of the assignment of the term to the respondent tenants and the acquisition of the reversion by the late Mr Joseph, the Rent Act 1974 had become law, on August 14 1974.
5. The lease contained two covenants which are relevant for present purposes. Mr Fernyhough, for the respondents, invited us to look particularly at clause 2 (9) before we turned to clause 2 (18). Clause 2 (9) provides that the lessee covenants:

not without the previous consent in writing of the lessor (a) to carry on or suffer to be carried on in or upon the shop portion of the demised premises or any part thereof any trade or business whatsoever other than that of a Butchers and at all times of the year during the usual business hours of the locality to keep the shop portion of the demised premises open as a shop for carrying on the said business and (b) to use the residential portion of the demised premises otherwise than for private residential purposes only.

Clause 2 (19) (a) (i) and (ii) read thus (and this is all-important):

Not to assign transfer charge underlet or part with the possession of any part of the demised premises except a letting on a service tenancy or occupancy of the living accommodation above the shop to any employee of the lessee or on a fully furnished tenancy for which furnished tenancy the landlord's consent in writing shall first be had and obtained and such consent for such a letting shall not be unreasonably withheld and (ii) not to assign transfer underlet or part with the possession of the whole of the demised premises without the previous consent in writing of the lessor such consent not to be unreasonably withheld in the case of a respectable and responsible person.

6. Let it be said at once that no one has one single word to say against Mr and Mrs Jack Woodward. Their respectability is beyond question. Their suitability to be subtenants of the residential part of these premises in Bath Road, Hounslow, has not been disputed.
7. There is attached to our papers a sketch plan of the ground floor of this shop. We have not got a plan of the first floor, where the residential accommodation is contained; but if one looks at the ground-floor plan it is reasonably plain that this is a very simple type of small shop with accommodation at the rear in the nature of a kitchen, a store, a lavatory and so on; then upstairs is a small amount of residential accommodation. It is clear that the intention was that this shop would be used for, and only for, a butcher's shop, and that the tenant should have the right to use the upstairs accommodation without let or hindrance from the landlord, the occupant being any employee whom they might let in on a service tenancy or licence for the purpose of the business of butchery that was being carried on underneath, but that if the tenant wanted to use the upstairs accommodation for any other residential purpose dissociated from the business of butchery, two conditions had to be satisfied. One was that the landlord's written consent had to be obtained and such consent was not to be unreasonably withheld, and the other that such tenancy had to be a furnished tenancy.
8. This lease, as is obvious from the chronology which I have already given, was entered into before the Rent Act 1974 protected furnished tenancies. It is clear, therefore, that the draftsman of this lease thought that, if there were a letting of the type contemplated by clause 2 (18) (a), when the term of the lease ran out by effluxion of time there would be no difficulty in the landlord regaining possession. It is clear that the position has changed since 1974; and it is feared that if Mr and Mrs Woodward go into possession now and obtain statutory protection under the Rent Act 1974 there will be difficulty in regaining possession when this lease expires in five or six years' time. That is really what this dispute is all about.
9. The learned judge, in a careful judgment, of which we have a note, said that he found this a difficult case to resolve: he expressed the hope that the matter might be taken--as in the event it has been--to the Court of Appeal. I hope I do the learned judge's careful judgment no injustice if I say that his reason for reaching the conclusion that he did, namely that the landlord had unreasonably withheld his consent, was based upon the fact that he thought that he was following what had been called in argument 'the Rent Act cases' and not what had been called in argument 'the Leasehold Reform Act cases.' He also appears to have taken the view that because there was a substantial period of this lease left unexpired--more than 7 1/2 years, he said in the passage in question--it was almost automatically unreasonable for this landlord to withhold his consent in the circumstances in which he did.
10. It seems to me that one has to approach this problem not so much by reference to the authorities--of which there are a great number--as a matter of the construction of the covenant which I have already read. The facts are not in dispute. Against those background facts, which I hope I have outlined sufficiently, can it fairly be said that the tenants have shown that this landlord has unreasonably refused his consent?
11. I do not find it necessary to refer to more than a few of the cases. The cases suggest that there has grown up a practice of asking the question: Is the proposed assignment a 'normal' assignment or an 'abnormal' assignment? If it be the former, then the consent is said to be unreasonably withheld. If, on the other hand, it be the latter, then the consent is said to be not unreasonably withheld. I respectfully question whether, although that phraseology appears to have been used more than once in the cases, it is very helpful phraseology. One first finds reference to it in the decision of this court in Swanson v Forton [1949] Ch 143 in the judgment of Lord Greene MR at p 152, where this court followed the immediately antecedent case of Lee v K CarterLtd [1949] 1 KB 85. Lord Greene, after referring to the judgments in Lee v K Carter Ltd, said:

Nothing that I have said must be taken as applying to a case of what in the argument was sometimes referred to as 'normal' assignment. If that phraseology be adopted, the whole basis of fact in the present case is that the assignment proposed was an 'abnormal' one in that it was an assignment of the tail end of the term by the lessee not for the purpose of conferring the right to occupy for the few remaining days of the term, but in order to enable the assignee to occupy thereafter under the Rent Restriction Acts. In my opinion, therefore, the appellant's withholding of consent was not unreasonable.

12. One may deduce from the Master of the Rolls' phraseology in that passage that he was not enamoured of the use of the two adjectives in antithesis to each other--'normal' and 'abnormal.' I find that view reinforced by two recent judgments in this court--true, both in Leasehold Reform Act and not in Rent Act cases. In the first, Norfolk Capital Group Ltd v Kitway Ltd [1977] QB 506, my Lord, Megaw LJ, giving the first judgment, dealt with the unsuccessful argument of counsel for the tenant in this way, at p 512:

The principle which it is claimed is to be derived from an analysis of those decisions and the developments resulting from one decision to another, is this: that where the effect of the desired assignment of the lease is likely to be that the proposed assignee will thereafter gain the protection of the Rent Acts, whereas the assignor either could not or would have been unlikely to have had those benefits in the absence of an assignment, the landlord is not entitled to refuse such an assignment if that assignment is to be regarded as a 'normal' assignment: he would be acting unreasonably if he so refuses: he will not be acting unreasonably, however, if such an assignment is an 'abnormal' assignment.

My Lord went on:

The definition of 'abnormal' which Mr Barnes

--he was counsel for the unsuccessful appellant--

submits is to be derived from the cases to which I have referred is, for this purpose, that such an assignment is abnormal where the sole intention (I think on the part of the intended assignor and the intended assignee) is to give to the intended assignee statutory protection under the Rent Acts which would not be available to the assignor. It is a question of the intention. If, however, the effect of the proposed assignment would be to give such a protection, it is nevertheless unreasonable, as a matter of principle, for the landlord to refuse consent, provided only that that effect was not within the intention of the parties to the assignment.

I do not propose, with all respect to Mr Barnes' argument, to go into the authorities on which it is said to be based. It does, in my judgment, involve very many difficulties, both of law and, if the principle as stated be right, of practical application. But I am content, for the purposes of this appeal, because I think it is unnecessary to do otherwise, to assume that the principle to be derived from those cases in respect of what I may call the Rent Act position is as it has been put by Mr Barnes. That indeed, as I understand it, was the way in which it was dealt with by Judge Leslie in the court below. But, like Judge Leslie, it is my opinion that the argument put forward on behalf of the tenants fails at the second stage, even making that assumption in respect of the first stage of the argument.

There is no authority to the effect that, and I can see no valid reason why, that principle of 'normal' and 'abnormal' assignments, said to exist in relation to the Rent Acts, should be carried into the different sphere with which we are concerned in this case, namely, the case where there is a potentially serious disadvantage to the landlord in the proposed assignment by virtue of the provisions of the Leasehold Reform Act 1967. The principle--if principle it be--is one which, for my part, I think ought not to be extended beyond the sphere to which it has been applied, if it has indeed been so applied.

13. I find in that passage in my Lord's judgment in that case the same dislike, if I may use that word, for the adjectives 'normal' and 'abnormal' which I think I detect in the judgment of Lord Greene MR some 30 years earlier.
14. The matter does not rest there, for within a few days of that judgment, which was given on June 30 1976, a further judgment was given, by the Master of the Rolls, Orr LJ and Waller LJ on July 8 1976, in Bickel v Duke of Westminster [1977] QB 517. The Master of the Rolls repeated in very similar language what I have already said, though he did not in terms refer to the decision in Norfolk Capital Group v Kitway. At the bottom of p 523 he said:

The other proposition is that, where a house is subject to the Rent Acts, the landlord cannot reasonably refuse his consent to a normal assignment during the contractual term, even though it means that the assignee will be able to stay on afterwards as a statutory tenant. Such is the result of Thomas Bookman Ltd v Nathan [1955] 1 WLR 815.

15. I pause there to point out that the first judgment in that case had been given by the Master of the Rolls (then Denning LJ).

But he can reasonably refuse it in the case of an abnormal assignment of the 'fag end' of the contractual term, made for the purpose of giving the assignee the benefit of the Acts. Such is said to be the result of Lee v K Carter Ltd [1949] 1 KB 85; Swanson v Forton [1949] Ch 143; Dollar v Winston [1950] Ch 236. Those decisions are said to be binding on this court. If they are good law, they bear a close analogy to the present case. This is an absolutely normal assignment of the lease for the last seven years of the term. It is not the 'fag end' of the lease. There is nothing abnormal about it. The Grosvenor Estate cannot, therefore, reasonably refuse their consent, even though it means that the lady will be able afterwards to enfranchise the premises under the Leasehold Reform Act 1967.

If those cases can properly be regarded as laying down propositions of law, I would agree that we ought to hold the landlords' refusal to be unreasonable. But I do not think they do lay down any propositions of law, and for this reason. The words of the contract are perfectly clear English words: 'such licence shall not be unreasonably withheld.' When those words come to be applied in any particular case, I do not think the court can, or should, determine by strict rules the grounds on which a landlord may, or may not, reasonably refuse his consent. He is not limited by the contract to any particular grounds. Nor should the courts limit him. Not even under the guise of construing the words. The landlord has to exercise his judgment in all sorts of circumstances. It is impossible for him, or for the courts, to envisage them all. When this lease was granted in 1947 no one could have foreseen that 20 years later Parliament would give a tenant a right to buy up the freehold. Seeing that the circumstances are infinitely various, it is impossible to formulate strict rules as to how a landlord should exercise his power of refusal. The utmost that the courts can do is to give guidance to those who have to consider the problem. As one decision follows another, people will get to know the likely result, in any given set of circumstances. But no one decision will be a binding precedent as a strict rule of law The reasons given by the judges are to be treated as propositions of good sense--in relation to the particular case--rather than propositions of law applicable to all cases.

16. I respectfully agree with and adopt that passage in the judgment of the Master of the Rolls, which seems to me to confirm the doubts expressed by my Lord in the Norfolk Capital Group case to which I have already referred.
17. I also agree with an observation made by Lawton LJ during the argument of this appeal: that it is impossible to see why there should be some special rule applicable to Rent Act cases on one side of the line and some different rule applicable to the Leasehold Reform Act cases on the other side of the line. I think that the right approach, as the Master of the Rolls suggested in the Bickel case, is to look first of all at the covenant and construe that covenant in order to see what its purpose was when the parties entered into it; what each party, one the holder of the reversion, the other the assignee of the benefit of the relevant term, must be taken to have understood when they acquired the relevant interest on either side. It is plain, when one looks at this covenant, that its purpose was that the lessee should have the benefit of the living accommodation for the use of any of his staff linked with the carrying-on of the business of butchery; but that if he wished to go beyond that user and to use that accommodation for some purpose disconnected with butchery, he must grant no more than a furnished tenancy for which he must obtain the landlord's written consent, which was not to be unreasonably withheld.
18. The landlord has not got to consider anybody else's interests except his own. He is the person who has in all the circumstances to decide whether or not he will grant consent. As the Master of the Rolls said, circumstances may vary endlessly. In the present case one of the matters which has caused a change of circumstance is the passing of the Rent Act 1974: just as, in the cases of leases entered into before 1967, the passing of the Leasehold Reform Act 1967 altered the background.
19. It seems to me that the effect of the request which this landlord has had made to him by the tenant is to invite him to agree to alter the nature of the property which was being let from commercial property, namely a butcher's shop with residential accommodation above, to property which would be let on a multiple tenancy--by which I mean to more tenants or lessees than one, because there will be not only the tenancy of the shop but also the separate subtenancy upstairs of the residential accommodation, which would be a tenancy attracting Rent Act protection. That is indeed conceded.
20. There is this further point. It does seem, if one looks at the downstairs plan, that the entrance to the accommodation upstairs is only either through the front of the shop or through the back of the shop. Either the subtenants, to proceed upstairs, can come in through the door marked 'A,' walk through the shop, go through the door marked 'B' and then up the stairs, or they have to come round from behind, go through the door marked 'E,' go through the kitchen, which is part of the shop, through the door 'D,' through part of the door marked 'C,' and then up the stairs. So that the overall position will be radically altered, because the subtenants will then have a right, if they are granted this subtenancy, to go through the shop. I would have thought that a further consideration would be that if that right were possessed by someone who had no connection with the shop, that must adversely affect the letting value of the shop. Be that as it may, with great respect to the learned county court judge, I feel myself compelled to reach a different conclusion from that which he reached. But even if, contrary to my view, it is still right to ask oneself the question whether this proposed subletting is 'normal' or 'abnormal,' I would answer the question by saying that it is 'abnormal,' in this sense, that it is proposed that there should be a different user of a part of the premises, namely independent residential user, different from and dissociated from the business the letting for which this lease was primarily intended, namely, the carrying on of a butcher's business at these premises in Bath Road, Hounslow.
21. For those reasons, which I have given at a little length out of respect for Mr Fernyhough's argument, for which I am indebted, and because we are differing from the learned judge, I would allow the appeal and set aside the declaration which he granted.
22. Agreeing, LAWTON LJ said: I approach this case with only a dim recollection of the many cases in the last three decades which deal with the meaning of common words in leases, namely, 'consent for a letting shall not be unreasonably withheld.' But for that dim recollection, I should without any hesitation have regarded the question whether a consent to a letting had been unreasonably withheld as one of fact. That, so it seems to me, was the approach of the Master of the Rolls in Bickel v Duke of Westminster, in the passage to which Roskill LJ referred in his judgment. Whether anything is 'unreasonable' depends upon all the circumstances of the case; and, in relation to lettings, unreasonableness must be considered against the background of the statutory provisions which are applicable. Those statutory provisions may be the Rent Acts; they may be the Leasehold Reform Act 1967; and they may be the Landlord and Tenant Act 1954. When the trial judge is deciding whether anything is 'unreasonable,' he must take the existence of the statutory provisions into account. The statutory provisions, however, are just one factor. There may be others. When during the period of the contractual tenancy a landlord is asked to consent to one tenant being replaced by another well able to pay the rent and likely to observe the covenants in the lease, in almost all cases it would be unreasonable for him to refuse his consent. It may be that that sort of case is what in the past has been referred to on occasions as a 'normal letting.' But cases tend to differ on their facts. This case differs from the kind of case to which I have just referred by the fact that when the landlord, Mr Joseph, took an assignment of the reversion, the residential accommodation on the first floor had been unoccupied for a year. The effect of that emptiness above the shop was that he could look forward with a reasonable degree of confidence to being able to maintain complete control of the premises at the end of the lease or such extension of it as might be granted pursuant to the Landlord and Tenant Act 1954. The consequence of being forced by the court to give his consent would have been that he could no longer look forward at the end of the contractual tenancy or such extension of it as might be granted to being able to maintain control of the premises and have them available for reletting, for sale, or redevelopment as business premises. This, it seems to me, was an important factor, which the learned judge was entitled to take into account and should have taken into account.
23. Mr Fernyhough reminded us, and rightly so, that this court is dealing with a question of fact, and we ought not to interfere unless the learned judge took into account factors which he ought not to have done. In my judgment the learned judge did take a factor into account which he ought not to have done, namely, he thought that there were some special rules relating to cases which came within the Rent Acts and to cases which amounted to 'normal' lettings. In my judgment there are no such rules. For those reasons it seems to me that this court can properly interfere with the learned judge's findings; and I would do so. Like Roskill LJ, I would allow this appeal.
24. MEGAW LJ also agreed.

The appeal was allowed with costs. The appellant's solicitors undertook, immediately upon grant of probate to Mrs Ford as executrix of Mr Louis Joseph deceased, to amend the title by substituting her name as appellant. The order of the court was not to be drawn up until the title was amended. Liberty to apply on terms of the order.

The electronic text of this judgment was provided by Estates Gazette, whose assistance is gratefully acknowledged.