England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM WILLESDEN COUNTY COURT
His Honour Judge Cotran

		Royal Courts of Justice Strand, London, WC2A 2LL
		4 August 2005

Sir Martin Nourse :

1. The question on this appeal is whether a landlord of business premises, on the trial of a preliminary issue, successfully established the ground of opposition to the tenant's application for a new tenancy which is specified in s.30(1)(f) of the Landlord and Tenant Act 1954:

"that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding."

More particularly, the question is whether the landlord established the intention necessary to enable him to rely on that provision.

2. The premises are the ground floor shop and premises known as Unit 1 at Colindale Station House, 155-159 Colindale Avenue, London NW9. I will refer to them as "Unit 1". The landlord (by assignment) is the defendant, Semali Investments Limited, a company incorporated under the laws of the British Virgin Islands. The tenant (by assignment) is the claimant, Ismet Dogan. The claimant held Unit 1 under a lease dated 24 March 1992 for a term of twelve years from that date. The lease accordingly expired on 23 March 2004, at which time the yearly rent payable thereunder was £10,250. From the time he acquired the lease in July 2001 the claimant has run a café and restaurant on Unit 1 called the Zara Café.
3. The necessary notices having been served under part 2 of the 1954 Act, the claimant applied to the court for a new tenancy. The preliminary issue came for trial before His Honour Judge Cotran in the Willesden County Court on 11 and 12 November 2004, when judgment was reserved. The judge delivered his judgment on 25 November. By his order made that day he made an order (effectively a declaration) that the defendant had not satisfied its ground of opposition to the grant of a new tenancy under s.30(1)(f) of the 1954 Act. He refused the defendant permission to appeal, but permission was granted by Neuberger LJ, on consideration of the documents, on 19 April 2005.
4. Unit 1 forms part of a building owned by the defendant consisting, on the ground floor, of Unit 1 itself and Units 2 and 3 (a double fronted shop selling model toys) with offices on the upper floors. The front of the building faces on to Colindale Avenue and, at the rear, there is a car park with 20 spaces which is approached at the left-hand end of the building, if you look at it from Colindale Avenue, via an archway stretching the whole width of the building. This has been called the undercroft. Adjacent to the undercroft is an access road from Colindale Avenue serving Colindale Hospital to the rear. This road ("the hospital road") is owned by Barnet, Enfield and Haringey Mental Health NHS Trust ("the Health Trust"). At the front of the right-hand end of the building is a ground floor entrance to the offices on the upper floors.
5. An application to the County Court for a new tenancy was also made by the tenant of Units 2 and 3, but that was compromised on terms that the defendant would get vacant possession of those premises by March 2005.
6. On 24^th April 2003 the defendant applied to the London Borough of Barnet ("the Council") for planning permission for works to the building which would have included, first, demolishing and permanently removing the interior wall dividing Unit 1 from Units 2 and 3 so as to create a single unit, secondly, demolishing and permanently removing the exterior wall to both premises so as to extend them into the car park by building an extension and, thirdly, the construction of a new unit (with A3 use) in the undercroft. It will at once be apparent that these third works would have blocked up the undercroft and thus the access from Colindale Avenue to the rear of the building, so that access could only have been made via the hospital road. The defendant's entitlement to such access depended on an agreement dated 20^th November 2002 between itself and the Health Trust ("the option agreement"), under which, shortly stated, it was entirely up to the Health Trust to decide, by 20^th November 2007, whether access should be granted or not. There was no certainty that the defendant would ever be able to get access to the rear of the building over the hospital road.
7. On 1^st September 2003 the Council refused the defendant's application for planning permission. The defendant appealed under section 78 of the Town and Country Planning Act 1990. On 26^th May 2004 an inspector appointed by the First Secretary of State allowed the appeal and granted planning permission subject to conditions.
8. The Inspector's written decision summarised the proposed development as:

"a ground floor extension to A1 retail unit and enlargement to that unit by incorporating an existing A3 unit. New A3 unit in undercroft area and associated changes to access and parking. New shop front and canopy to front elevation."

Under the heading "Conditions" the Inspector stated:

"In the interests of highway safety it is necessary to ensure that the new access and parking arrangements are in place before the development is brought into use (Condition 8). This final condition obviates the need to establish that the appellant has a right of access along [the hospital road] as without such rights it would not be possible to implement the permission."

Condition 8 was expressed as follows:

"Details of the new access arrangements shall be submitted to and approved in writing by the local planning authority before the development commences. The access arrangements and parking area shall be provided before the development hereby approved is first brought into use and retained thereafter."

9. The claimant's application to the court was made on 26^th April 2004, before the Inspector gave his decision and indeed before the hearing held by him on 18^th May. The trial of the preliminary issue was ordered on 17^th June 2004. On 26^th July 2004 a witness statement of Duncan Shrimpton was put in on behalf of the defendant. Mr Shrimpton said that he was a director of Hallmark Estates Limited ("Hallmark") and that, apart from the defendant's solicitor, he was the person with day to day responsibility for the litigation. He said that Hallmark was a company of property consultants based in London W1, and that he had particular responsibility for the management of the UK portfolio of the investors who owned the defendant.
10. In his judgment the judge read extensively from Mr Shrimpton's statement. He pointed out, correctly (para 10), that it was written after the appeal decision had been made, but that there was "not a word in it about anything relating to the important condition regarding access to the hospital road". The judge said (para 19):

"For Mr Shrimpton putting in a witness statement in July and basically saying, 'Hooray, Hooray, we won the appeal', without even a reference to this, does not seem to me a very full disclosure of the facts."

That was a perfectly fair comment. It seems inconceivable that the defendant's ground of opposition to the claimant's application could have been established at that stage without its having an unassailable right to use the hospital road.

11. On 28^th September 2004 a further statement of Mr Shrimpton was put in, to which the option agreement was exhibited. Mr Shrimpton said that it should be made very clear that if the option was not exercised in time then the works other than the construction of the new A3 Unit in the undercroft would be carried out in any event and as soon as possible once vacant possession of the property had been obtained. He continued:

"The principal commercial objective of this development is to create a single unit by demolishing the wall between Unit 1 and 2/3 and creating….. a single unit from what are currently Units 1, 2 and 3. There will also be a demolition of the walls of both units to create a rear extension.

The intention, as I have stated, is to create a single A1 unit. Because of its location (immediately adjacent to Colindale underground station) the intention is that there be a letting to a supermarket chain once the development works have been carried out. The works which may be made possible by the exercising of the Option (i.e the creation of a further A1 or alternatively an A3 unit) are of far less commercial significance than the main development of an A1 unit. They will be carried out either with those main works, if the Option has been exercised, or at a later stage."

12. That was how the defendant's evidence stood until shortly before the trial. Mr Shrimpton seems to have assumed that a development without the A3 unit in the undercroft would not require a new planning permission. In any event, no further application was made to the local planning authority before the trial.
13. On 10^th November 2004, the day before the trial, the claimant's solicitors were sent a copy of a certificate dated 9^th November 2004 under the seal of the defendant and signed by its assistant secretary, in which it was certified that what followed was a true and correct extract from the minutes of a meeting of the board of directors of the defendant held on 8^th November 2004, and that the resolutions contained therein were in full force and effect and unamended as at 9^th November. The extract recorded that Mr Shrimpton was to give evidence on the defendant's behalf in the proceedings, and that "it was intended that immediately or as soon as possible following the recovery of vacant possession of [Units 1, 2 and 3] there be a redevelopment of that property" in the form envisaged in Mr Shrimpton's two witness statements. It was then recorded that the following resolutions were passed:

"(a) That Duncan Shrimpton continue to be and is authorised to take any step reasonably and properly necessary to represent the Company in the Proceedings and thereafter take such step as is necessary to engage builders, architects and any other person required in order to enable that development to proceed.

(b) That the Company's property at Colindale House as aforesaid be developed as described in the said statements of Duncan Shrimpton."

14. On the first morning of the trial counsel for the defendant, Mr Joss, applied to put in a report of an expert surveyor, Nicholas Henry Joly de Lotbiniere MRIS, MRTPI, which stated that during his career he had specialised in providing planning consultancy advice to a huge variety of commercial and residential developers. The admission of the report was initially opposed by Mr Mayall, counsel for the claimant, but his opposition was later, after consultation with the claimant, withdrawn. The report was admitted and Mr de Lotbiniere gave oral evidence that day. Oral evidence was also given by the claimant and Mr Shrimpton.
15. It was Mr de Lotbiniere who had acted for the defendant in submitting the planning application and conducting the appeal. But he was only instructed to prepare a report for the proceedings on 4^th November. The material parts of Mr de Lotbiniere's report are the following:

"4.4 A further plan….. has been prepared, which is also attached to this report…. and which shows the extension at the rear without the new A3 Unit or building within the current undercroft access to the car park. I believe that it is likely that the planning authority would grant planning consent for the extension as shown with amended access arrangements. The basis of my opinion is set out in the following two paragraphs.

4.5 The extension would remove the same number of car parking spaces as in the appeal scheme…

4.6 The design of the rear of [the] extension would be similar, excluding the area behind the proposed A3 unit and with curved walls at either end of the extension. I do not consider these amendments would be unacceptable in visual terms so far as the local planning authority is concerned.

4.7.1 Further, and again so far as the local authority is concerned, I do not consider there would be any unacceptable traffic impact in terms of manoeuvring into or out of the car park. In my experience, the local planning authority is very likely to take the view that any additional servicing vehicle traffic would be minimal, and would not have an adverse traffic impact…..

5.1 I consider a new application for a rear extension should be straightforward, and capable of being dealt with [in] the statutory 8 week period – possibly under delegated powers."

Under the heading "Conclusions" Mr de Lotbiniere repeated his belief that planning consent for a smaller rear extension and new shop front would be likely to be granted, and should be achievable within eight weeks of the submission of an application.

16. A comparison of the plans demonstrates that the design of the rear of the extension would indeed be similar to the design of the extension to the A1 unit in the application approved by the Inspector, the only significant difference being the curved walls at either end of the extension which would clearly facilitate the passage of vehicles coming in and out of the car park. It should also be stated that Mr Lotbiniere's proposals enabled two of the twelve car park spaces to be relocated in a more convenient position.
17. The judge correctly directed himself by reference to certain passages which he read from Woodfall on Landlord and Tenant at paras 22.106 to 22.109.1. He started by reading the following passage in para 22.106 under the heading "Intention":

"It is not sufficient for the landlord merely to assert that he 'intends' since he may change his mind once he gets possession. An intention connotes that the landlord does more than merely contemplate; it connotes a state of affairs that 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; the landlord does not 'intend' if he has too many hurdles to overcome or too little control of events. The intention must be genuine and not colourable; it must be firm and settled, not likely to be changed. It must have moved out of the zone of contemplation - the sphere of the tentative, the provisional and the exploratory - and have moved into the valley of decision."

18. The judge went on to read later passages dealing with the position where the landlord is a company (under the heading "Proof of desire") and under the heading "Legal ability", in which it is stated that the most important fetter on a person's legal ability to carry out work is the impact of town and country planning. What the judge did not read were the observations following immediately after the first passage under the heading "Intention":

"Thus the landlord's intention is composed of two main ingredients; a fixed and settle desire to do that which he says he intends to do and a reasonable prospect of being able to bring about the desired result."

19. In regard to the first of those ingredients (fixed and settled desire) the defendant relies primarily on the resolutions passed by its board on 8^th November 2004, in particular the resolution that the premises be developed as described in Mr Shrimpton's two witness statements. It is true that by 11^th November, three days later, the defendant was propounding, not the exact development proposed by Mr Shrimpton, but one with the refinements proposed by Mr de Lotbiniere. But those were only refinements, and I think it would be unduly restrictive to interpret the resolutions as being incapable of comprehending them. Moreover, in his oral evidence Mr Shrimpton was confident that the board of the defendant would be just as happy with Mr de Lotbiniere's proposals as they had been with the previous proposals and, however much it may be claimed that he was an unsatisfactory witness, that evidence would accord with the common sense of the matter and could hardly have been rejected by the judge.
20. Having reached the statement in para 22.106 of Woodfall that the intention must be genuine and not colourable, and that it must be firm and settled, not likely to be changed, the judge interrupted his reading to say:

"The commentary here I would make on the facts of this case, it has changed twice; it was settled and firm when it first started, it became unsettled and wishy-washy (if I may use that word) when Shrimpton made his second witness statement and it only matured properly on the day of the hearing by the latest option….. which was presented by Mr de Lotbiniere."

As to that, I would simply say that if the evidence at the trial established the necessary intention, it would not matter that there had been one or more different intentions beforehand.

21. The judge appears to have thought that the real intention of the defendant was to carry out the original proposals and neither of the slimmed down versions. He said (para 47):

"What they want is the project that they always had in mind. They do not want, it sticks out a mile, this one."

I cannot agree. Resolution (b) clearly comprehends the first slimmed down version. In my judgment, on the evidence, the judge could only have properly concluded that the defendant had a fixed and settled desire to implement Mr de Lotbiniere's proposals.

22. As for the second ingredient ( reasonable prospect of being able to bring about the desired result), this is reduced simply to the question whether there was a reasonable prospect of obtaining planning permission for Mr de Lotbiniere's proposals. In his first statement Mr Shrimpton said that the likely cost of the development (in the order of £300,000 including VAT and associated fees) was well within the usual spend of the defendant's investors in relation to their UK property investments, and that there was presently the sum of £300,000 intended to be spent in relation to the development costs held in an account controlled by Hallmark at a London bank. He therefore confirmed that no funding or borrowing would be required in relation to the development costs. Mr Shrimpton further deposed to the identity of the architects who would be retained to provide a schedule of works and to supervise the subsequent works contract once vacant possession had been obtained, and also to the identity of the building contractor who would be used for the project. I did not understand Mr Mayall seriously to suggest that in these respects there was no reasonable prospect of the defendant's being able to carry out the works.
23. In the penultimate paragraph of his judgment (para 50) the judge said:

"Even if planning permission would be applied for tomorrow for [Mr de Lotbiniere's proposals], I hold that it has no reasonable prospect of getting planning permission."

It appears that the principal ground for this view was that the Inspector, differing from the Council, thought that the proposed extension and alterations to the ground floor of the building, i.e. without an undercroft, would improve its appearance and as a result enhance the street scene. Speaking of Mr de Lotbiniere, the judge said (paras 42 and 43):

"I respect his expertise and I respect the fact that he is an expert in the field. I do not accept for one moment his enthusiasm for this scheme in that it is likely to be approved, nor do I accept his timing that it would be all done in an eight week period. The comments of the Inspector on appeal speak for themselves.

As I understand Mr Joss's argument he says Mr de Lotbiniere in an expert in the field, and there is no other evidence before me to the contrary. I must therefore accept it. I do not accept that for a moment."

Mr Mayall submitted that the judge's view, which he was entitled to form on the evidence, was that once a scheme went back to the Council without an undercroft planning permission would be refused.

24. It must be said that if that was the judge's view he did not express it clearly. However, assuming that that was his view, I do not think that the foundation on which it was based was sure enough to entitle him to reject Mr de Lotbiniere's evidence that permission would be likely to be granted. Mr Mayall also submitted that, although Mr de Lotbiniere was accepted to be an expert he could not be considered to be independent. The judge did not say that in his judgment, although Mr Joss, for the claimant, said that it was implicit in some of the things he said during the evidence. Whatever the judge may have said or thought, and despite Mr Mayall's submission, there is no visible basis on which this court could conclude that Mr de Lotbiniere, even though he may not have been independent of the defendant, gave his evidence other than in a frank and impartial manner.
25. In my view Mr Joss was correct in submitting that the judge wrongly preferred his own assessment of the likely outcome of an application for planning permission over that of Mr de Lotbiniere. On that ground I would hold that the judge was wrong in deciding that the defendant had no reasonable prospect of obtaining planning permission for Mr de Lotbiniere's proposals.
26. Accordingly, on the evidence before the judge, I would hold that the only conclusion at which he could properly have arrived was, first, that the defendant did at the time of the trial have a fixed and settled desire to implement Mr de Lotbiniere's proposals and, secondly, that there was a reasonable prospect that it would obtain the necessary planning permission.
27. That was the position before the judge. Now it has changed. On 6^th April 2005 the Council granted planning permission for Mr de Lotbiniere's proposals, subject to conditions which are either in standard form or innocuous in effect.
28. It was established by the decision in Gatwick Parking Services Ltd v Sargent [2000] 2 EGLR 45 that this court is entitled to take account of a planning permission, even though it had not been obtained by the date of the hearing before the judge. In that case the circumstances were much the same as they are here, the only differences (neither of which is significant) being, first, that the landlord's opposition was under para (g) of section 30(1) (landlord's intention to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein) and, secondly, that the application for planning permission was pending at the date of the trial in June 1999. Like Judge Cotran, the county court judge had rejected the evidence of the landlord's expert on the likelihood of obtaining the necessary planning permission and had made a declaration that no ground of opposition was established. In July 1999 the application for planning permission was granted.
29. At page 49 Laws LJ (with whose judgment Aldous and Hale LJJ agreed) said:

"On balance, in my view, the learned judge should have acceded to the appellant's case in June 1999, and was influenced, as it seems to me, by his impressions, wholly adverse as they were, of Mr Kenny as a witness.

I am entirely clear that we are now entitled to take account of the July 1999 planning permission: see Accountancy Personnel Ltd v Salters' Company [1972] EGD 461. Obviously, that was not available to the judge in June 1999."

In that case an application for judicial review of the planning authority's decision to grant permission was pending. But that does not prevent it from being authority for the proposition that a planning permission obtained subsequent to the judge's decision can be taken into account by this court. If so taken, the permission of 26^th April 2005 is strongly confirmatory of the view that the judge's conclusion on the evidence which was before him was wrong and ought to be reversed.

30. The judgment of Laws LJ is also of value for its demonstration of what is the planning hurdle that has to be surmounted by the landlord under section 30(1)(f) or (g). He read a well-known passage from the judgment of Upjohn LJ in Gregson v Cyril Lord Ltd [1963] 1 WLR 41, 47 and a passage from the judgment of Savile LJ in the more recent case of Cadogan v McCarthy & Stone Developments Ltd [1996] EGCS 94. Towards the end of his judgment (page 49J) Laws LJ summarised the position thus:

"I emphasise that the hurdle to be surmounted by the appellant under section 30(1)(g), in the light of the authorities on the subject, is by no means a high one. He does not have to demonstrate a balance of probability that permission will be granted. He has to show that there is a real, not merely a fanciful, chance."

I am quite satisfied that the defendant has passed that test in this case.

31. Mr Joss advanced an alternative ground of appeal. He submitted that Judge Cotran's conduct of the trial had been unfair, in that he displayed an unfair degree of hostility to the defendant's case, intervening in the evidence and undertaking what amounted to hostile cross-examination of Mr de Lotbiniere and Mr Shrimpton, often, by reason of interruption, preventing them from answering questions fully. Mr Joss referred us to passages in the transcripts of evidence and also in the judgment itself which he said supported this alternative ground of appeal.
32. While I see considerable force in Mr Joss's submissions on this point, and would if necessary accept that the judge was indeed unduly hostile to the defendant's case, I do not think it profitable, in the light of my views on the substantive point, to carry out an independent examination of the alternative point, serious though Mr Joss's criticisms of the judge's conduct may be. I prefer to treat the judge's hostility as at least a partial explanation of his having arrived at an unsound conclusion on the substantive point.
33. I would allow the defendant's appeal and discharge the declaration made by the judge. Any further directions which are appropriate will no doubt be agreed between counsel.

Mr Justice Patten:

34. I agree.

Lord Justice Mance:

35. I also agree with Sir Martin Nourse's judgment. I add only this on the second ingredient. "Reasonable prospect" is a low threshold, not to be equated with probability: cf Gatwick Parking Services Ltd. v. Sargent [2000] 25 EG 141. The judge's treatment of this ingredient was, to say the least, sparse. He said that he respected Mr de Lotbiniere's expertise, but that "I not accept for one moment his enthusiasm for this scheme in that it is likely to be approved, nor do I accept his timing that it would all be done within an eight week period" The comments of the inspector speak for themselves". But likelihood, in the sense of probability, is not the test. Nor indeed is timing.
36. The judge only reverted to this ingredient right at the end of his judgment, where he said that "Even if planning permission would be applied for tomorrow for his 2B plan, I hold that it has no reasonable prospect of getting planning permission." This was the right test, but it is unclear whether the judge appreciated that it was a lower test. In argument immediately after the judgment, he said "My whole judgment is based on your argument that I should look to the reasonable possibility or probability ….".
37. However that may be, the comments of the inspector identifying certain advantages which led him to allow the appeal and grant planning permission for the larger scheme including the blocking up of the undercroft could not be regarded as unfavourable to the prospects of obtaining the more restricted planning permission presently in issue. In identifying such benefits, the inspector was disagreeing with the Council's view that the scheme involved positive disadvantages, because of its impact on the building's appearance and on traffic. The inspector thought on the contrary that it would improve the building's appearance and contribute to a reduction in car usage and benefit highway safety. Without the undercroft development, the appearance would have remained unaltered, so that there could be no question of any alteration to the disadvantage of its appearance, and any effect on traffic would have required consideration separate from any given to it by the inspector. The argument we heard about traffic impact failed to persuade me that the impact could possibly have been such as to mean that there was no reasonable prospect of planning permission, and the actual planning permission now granted bears this out.
38. For all these reasons, this appeal will be allowed, on the basis mentioned in paragraph 33 of Sir Martin Nourse's judgment.