England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM STOKE ON TRENT COUNTY COURT
(HIS HONOUR JUDGE MAIN QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		19 March 2014

1. LORD JUSTICE LEWISON: Mr Cox and Miss Billingsley are the tenants of 7A Whitburn Street, Bridgnorth in Shropshire. They occupy those premises for the purposes of their business, which is the retail sale of upmarket women's clothing. They first occupied the property under a lease granted in 1981 which has been subsequently renewed.
2. When the current lease came up for renewal under the Landlord and Tenant Act 1954 the landlord opposed the grant of a new lease on two grounds. The first was the redevelopment ground under section 30 (1) (f) of the Landlord and Tenant Act 1954. His Honour Judge Main QC found that that ground had not been established.
3. The second ground was the ground specified in section 30 (1) (c) of the Act, namely that:

"the tenant ought not to be granted a new tenancy in view of other substantial breaches by him of his obligations under the tenancy or for any other reason connected with the use or management of the holding."

4. The judge held that this ground had been established; and by his order of 21 December 2012 ordered that the tenancy be terminated on 1 May 2013.
5. With the permission of Floyd LJ, Mr Cox and Miss Billingsley appeal. Their appeal is limited to one narrow ground, namely that the matters on which the judge relied in coming to his conclusion are not reasons connected with the use or management of the holding.
6. It is sensible to begin with the holding. This is a defined term in the Landlord and Tenant Act 1954. The definition is in section 23 (3) of the Act. That reads:

"In the following provisions of this Part of this Act the expression 'the holding' in relation to a tenancy to which this Part of this Act applies means the property comprised in the tenancy, there being exclude any part thereof which is occupied neither by the tenant nor by a person employed by the tenant and so employed for the purposes of a business by reason of which the tenancy is one to which this Part of this Act applies."

7. Accordingly, in order to find out what the holding is one must first start with the property comprised in the tenancy. Having identified the property comprised in the tenancy, one must then subtract from it any property which is occupied neither by the tenant nor by an employee of his. The property comprised in the tenancy includes not only the corporeal hereditaments devised by the tenancy -- ie the parcels-- but also incorporeal hereditaments, such as rights of way; see Pointon York Group Ltd v Poulton [2006] EWCA Civ 1001; [2006] 3 EGLR 37 at 23. Normally incorporeal hereditaments are incapable of being occupied by anyone, so they do not fall to be subtracted from the property comprised in the tenancy in order to identify the holding.
8. In the present case the lease granted to Mr Cox and Miss Billingsley included not only the shop but also two rights of way and the right to park in six private car parking spaces. The route of the right of way was varied by a deed of variation made in 2008 but nothing material turns on that.
9. In my judgment, therefore, the holding as defined by section 23 (3) consists of the shop, the rights of way and the right to park.
10. At the heart of the judge's reasoning for refusing the grant of a new tenancy is the fact that for 16 years or more the parties have been in frequent litigation over alleged obstructions to the right of way. The proceedings have all been initiated by the tenants.
11. The judge set out the landlord's case about the litigation and its effect in paragraph 19 of his judgment. He said:

"The claimants maintain that they have been subjected to a remorseless campaign of the defendants' issuing legal proceedings against them, regardless of the legal advice they are likely to have received, chopping and changing their solicitors when one or other dislikes the legal advice received, seemingly oblivious to the substantial costs of their actions (both to themselves and the claimants). No fewer than nine different solicitors have been involved (four additional firms refused to accept the retainer) over some 16 years or so, since proceedings were first commenced in 1996, with the involvement of at least as many barristers, not to mention those barristers that refused to get involved with the first defendant. They have been subjected to no fewer than ten separate sets of proceedings, over very spurious or exaggerated legal infringements of the defendants' rights as tenants or as persons whose rights of way by the side of number 8 Whitburn Street and over the car park to the rear of the premises, have allegedly been infringed. The cost to the claimants as landlords had been absolutely colossal - their own legal costs' bills for just one set of consolidated proceedings in October 2007 being around £300,000. Such proceedings have included wholly baseless allegations of fraud, commenced by the first defendant in person (when he had solicitors acting for him), which were struck out by the court, only to be repeated; the issue of fresh proceedings (the two actions later consolidated) in 2008, which seek to revisit old issues which have been resolved in previous agreements resulting in the entering into of a Tomlin order and a later deed of variation; the issuing of numerous without notice applications, without a request for judicial hearing. All this, contend the claimants, resulting in the imposition of a limited civil restraint order (LCRO) imposed by District Judge Brown on 18 May 2011 against both defendants. If ever there was behaviour that engaged the provisions of section 30(1)(c), say the defendants, this is it. In the case of these defendants, the past is in every sense a good and reliable guide to likely future conduct."

12. In paragraph 23 of the judgment he set out the chronology of the litigation, which I need not repeat. Having done so he then reached a conclusion in paragraphs 34 and 35 as follows:

"34. I approach this issue by recognising first that both parties accept that the relationship between them has irretrievably broken down. Moreover, I am entirely satisfied that the approach of the first defendant to his own perceived sense of wrong and interference with his legitimate interests, as he sees it, will not change. Solicitors will continue to have to be involved at every step, in any dealings between the parties. - the ongoing litigation will be rekindled by the first defendants given half a chance (and the leave of District Judge Brown) and what has happened over the last 16 years, is only likely to continue. I very much doubt that the first defendant would disagree with a word of what I have just stated. His response, genuinely held, I do not doubt, is that he is entitled to protect what he sees as his legitimate interests as he has embarked on this course of litigation, regardless of the costs - and it has cost him an enormous sum (approaching £500,000 just for the consolidated hearings by his own account) in an entirely reasonable fashion.

35. Having set out the broad chronology of these various actions - the orders made in his various proceedings, I can only observe that the first defendant's approach to litigation has grotesquely exceeded any reasonable balance or judgment on his part. He remains transfixed by allegations of wrong doing and fraud on the part of the claimants and the directors of that company (among others), yet time and again, his assertions have been struck out as being baseless and an abuse of process. He does not await the outcome of a judicial investigation into an already alleged wrong - well advanced, proceeding to trial - he just issues fresh applications, (without notice) makes yet further allegations (reiterating old allegations, many of which have been resolved in the consolidated proceedings resulting in the drawing up of the Tomlin order). His remedy in the event that he proves any breach of that compromise agreement is to seek to enforce it. Yet the first defendant embarks on a separate course of litigation which goes so much further, in a way that in my judgment is both unreasonable and unnecessary. The first defendant incurs himself repeatedly in wasted costs orders, as he chops and changes his solicitors and barristers and in so doing can only be regarded as a legal menace so far as the claimants, as his landlords, are concerned. Very few companies in the position of the claimants would have been able easily to accommodate all the costs and expense brought about by the actions of the defendants. Accordingly, I am entirely sympathetic to their wish to see an end to their relationship with him as their tenant."

13. The judge then considered whether those reasons legally justified the refusal of the grant of a new tenancy and having considered the cases he held that they did. His final conclusion in paragraph 43 was:

"It would to my mind be an affront to require a landlord to grant protection to such a tenant who lost no opportunity allege and repeat and persist in repeating that directors were frauds, dragging the company through the mire in wasted legal expenses when the assertions had been found to be totally without merit."

14. The sole ground of appeal on which permission to appeal has been granted is whether the judge was right in his legal conclusion that the sorry history of litigation which has destroyed the relationship of landlord and tenant and has cost the landlord a sum of money that the judge described as colossal was capable of being "a reason connected with the use or management of the holding" such as to ground the refusal of a new tenancy.
15. The main submission in the skeleton argument of Mr Edmund Farrell, appearing on behalf of Mr Cox and Miss Billingsley, is that the latter half of section 30 (1) (c) is baffling, opaque and without any clear meaning. It has been so little relied on in 60 years since the Act was passed that it should now be regarded as superfluous to the Act.
16. Despite Mr Farrell's spirited written submissions there is no principle of law which entitles a court simply to ignore a legislative provision contained in an Act of Parliament. The court's role is to interpret legislation, not to repeal it. Mr Farrell recognised this in his oral submission this morning and submits that the concluding half of section 30 (1) (c) should be narrowly interpreted so as to reduce uncertainty for business tenants up and down the country.
17. In fact there as body of case law which does interpret section 30 (1) (c). In the context of this case there are two questions contained in this part of the section. One: are the matters relied upon reasons connected with the tenant's use or management of the holding? Two: if so, are they such that the tenant ought not to be granted a new tenancy of the holding? It is the first question only on which Floyd LJ granted permission to appeal.
18. The first point to make is that this limb of section 30 (1) (c) is in two disjunctive parts:

"Other substantial breaches by him of his obligations under the tenancy or for any other reason connected with the use or management of the holding."

19. The word "or" separating these parts of the sub-section makes it clear that it is not necessary to find a breach of obligation in order for the reason to come within the sub-section. That is confirmed by the decision of this court in Beard v Williams [1986] 1 EGLR 148 at 149 L to M. In Turner and Bell v Searles (Stanford Le Hope) Ltd [1977] 33 P & CR 208 this court held that the reasons need not be directly concerned with the relationship of the parties qua landlord and tenant; and also held that the words were broad and enabled the court to look at everything it regarded as relevant in connection with the tenant's use and management of the holding.
20. Roskill LJ said at page 212:

"The latter words in paragraph (c) are quite wide. I do not think that they require the court to look only at alleged breaches of any tenancy agreement or lease that may have taken place in the past. I think that they entitle the court to look at everything which the court thinks is relevant in connection with the tenant's use or management of the holding past, present or future which may enable the court fairly to exercise its discretion under that section."

21. Cairns LJ also agreed that:

"The words in the latter part of section 30 (1) (c) of the Landlord and Tenant Act 1954 cannot be confined to matters connected with the relations between landlord and tenant."

22. Roskill LJ's observations were expressly approved by this court in Fowles v Heathrow Airport Ltd [2008] EWCA Civ 1270. As Roskill LJ said, the words in the latter part of paragraph (c) are wide words, and deliberately so. The control mechanism which prevents injustice resulting is the decision of the court on the question of whether the tenant "ought not" to be granted a new tenancy of the holding.
23. The breadth of the words is illustrated by the decision of this court in Eichner v Midland Bank Executor and Trustee Co. Ltd [1970] 1 WLR 1120. The trial judge had refused to order the grant of a new tenancy, which had been opposed on ground (c). The judge found that there had been a breach of the use covenant but went on to rely upon extensive litigation between landlord and tenant in the past. The question he posed himself was whether it was fair to saddle the landlord with a tenant with whom he was in constant litigation. He answered that decision no and an appeal against his decision was dismissed.
24. Lord Denning MR, with whom Fenton Atkinson and Megaw LJJ agreed, said:

"I think the judge here was not confined to the breach of the tenant in carrying on the translation business of the Interlingua organisation. It was I think open to him to look at all of the circumstances in connection with that breach. Also, I may add, to look at the conduct of the tenant as a whole in regards to his obligations under the tenancy."

25. Mr Farrell argues that the case concerned breaches of covenant as well as litigation and that our case is distinguishable because no breach of covenant was found. However, as I have said, the decision of this court in Beard v Williams means that no breach of covenant needs to be found in order for ground (c) to come into play.
26. The judge in our case relied on the decision in Eichner v Midland Bank Executor and Trustee Co. Ltd as holding that the existence of extensive litigation between landlord and tenant could amount to a reason connected with the tenant's use and management of the holding. In my judgment he was right to do so. Where, as here, the litigation is itself concerned with vindicating rights granted under the tenancy that litigation is in my judgment connected with the tenant's use and management of the holding. Of course the mere fact that the landlord and tenant had been in litigation will not necessarily lead to the refusal of a new tenancy. But that is because of the control mechanism in the second part of the question that the trial court must pose itself; is this a case which as a result of the litigation and in particular its conduct the tenant "ought not" to be granted a new tenancy.
27. The second part of the question has been described as a discretion, although I would myself prefer to describe it as a value judgment. The phrase "ought not" does to my mind suggest that there would usually be some fault or culpability on the part of the tenant. The overall question under this head is whether it would be fair to the landlord, having regard to the tenant's past behaviour, for him to be compelled to re-enter into legal relations with the tenant; see Lyons v Central Commercial Properties Ltd [1958] 1 WLR 869. If the landlord has been the aggressor in the litigation or if the tenant's litigation has been responsibly and proportionately conducted the answer to that question may well be no. That is the value judgment for the trial judge to make. In the present case the judge concluded that the tenants' conduct had grotesquely exceeded any reasonable balance, that he had made baseless allegations of wrong-doing and fraud and that he was a legal menace. That was a value judgment to which the judge was entitled to come. I would dismiss the appeal.
28. LORD JUSTICE RYDER: I agree.
29. SIR STANLEY BURNTON: I also agree.