England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM WINCHESTER COUNTY COURT
SITTING AT SOUTHAMPTON COUNTY COURT
MR RECORDER NORMAN
9WC00850

		Royal Courts of Justice Strand, London, WC2A 2LL
		2nd July 2014

Lady Justice Gloster :

Introduction

1. This is an appeal from the judgment of Mr Recorder Norman, sitting in the Winchester County Court, dated 28 August 2012 ("the judgment") whereby he ordered that the defendant's lease ("the lease") of 6 Romsey Road, Winchester ("the property") dated 5 May 1994 was terminated in accordance with section 64 of the Landlord and Tenant Act 1954 ("the 1954 Act") without the grant of a new tenancy. The judge ordered the defendant to pay 75% of the claimant's costs and to pay the sum of £35,000 on account of these costs by 20 November 2012.
2. The claimant in the action, and the respondent on this appeal, is Mrs Joan Mussellwhite ("the respondent"). She is the current lessor of the property, the original lessor having been her late husband, Mr Alan Mussellwhite. The defendant in the action, and the appellant on this appeal, is Ms Zoe Youssefi ("the appellant"). The property is described in the lease as a "dwelling house shop and premises". The premises included a rear garden or yard. The term of the lease was 15 years from 1 April 1994. It was common ground between the parties that, when the term expired on 31 March 2009, the lease continued pursuant to the provisions of Part II of the 1954 Act. Although there appears to have been some dispute as to whether any trading activity was in fact carried out at the property, the respondent did not dispute that the property as at the date of the trial was occupied for the purposes of a business carried on by the appellant and therefore was within the protection of the 1954 Act. The issue which the judge had to decide was whether the respondent, as landlord, had established to the satisfaction of the court any of the grounds set out in her notice served pursuant to section 26(6) of the 1954 Act, thereby entitling the judge to make an order for the termination of the tenancy without the grant of the new tenancy under section 29(4) of the 1954 Act. The issue on this appeal is whether, in certain particular respects, the judge was right to conclude that the respondent had established the requisite grounds to obtain an order under section 29(4).

Procedural history

3. On 31 March 2009 the appellant served a notice on the respondent under section 26 of the 1954 Act requesting a new tenancy which was to commence on 26 January 2010. By that notice she sought a new 15 year term on substantially the same terms as the existing lease at a rent of £5,000 per annum. On 13 May 2009 the respondent's solicitors served a notice opposing the request for a new tenancy pursuant to section 26(6) of the 1954 Act. The respondent relied upon the following grounds of opposition (as respectively set out in subsections 30(1)(a), (b) and (c) of the 1954 Act):

i) "(a) where under the current tenancy the tenant has any obligations as respects the repair and maintenance of the holding, that the tenant ought not to be granted a new tenancy in view of the state of repair of the holding, being a state resulting from the tenant's failure to comply with the said obligations;" this was referred to in the judgment as Ground A;

ii) "(b) that the tenant ought not to be granted a new tenancy in view of her persistent delay in paying rent which has become due;" this was referred to in the judgment as "Ground B";

iii) "(c) that the tenant ought not to be granted a new tenancy in view of other substantial breaches by her of her obligations under the current tenancy, or for any other reason connected with the tenant's use or management of the holding;…" this was referred to in the judgment as "Ground C".

4. On 14 September 2009 the respondent issued proceedings seeking an order under section 29(2) of the 1954 Act for the termination of the tenancy without the grant of a new tenancy.
5. The trial was heard over five days starting on 25 June 2012. That date had been fixed following numerous adjournments, mainly at the appellant's request. The appellant instructed a member of the Bar to represent her on the first day in order to seek an adjournment which was refused by the judge. Counsel then informed the Court that he had no instructions to represent the appellant at trial and withdrew. Thereafter the appellant represented herself. The respondent was represented by counsel.
6. For the remainder of the first day and the morning of the second day the respondent called her evidence. The relevant witnesses were: the respondent herself, a Mr Charles Denny (who owns and runs a business from the neighbouring property), the respondent's daughter Ms Jean Gregory (who also holds a power of attorney granted by the respondent in relation to this matter), and the respondent's son, Mr Robert Mussellwhite. All these witnesses were cross-examined by the appellant. At approximately 2.30 p.m. on the second day the respondent's evidence was completed. The third day had been set aside for expert evidence. At this point the appellant informed the judge that she had decided not to give live evidence herself. Counsel for the respondent informed the Court that if the appellant did not give evidence, he would be submitting in closing that her reason for refusing to give evidence was that she did not believe her evidence would stand up to cross-examination. The judge adjourned the matter at that point to give the appellant a break and an opportunity to reflect on the question whether she wished to give evidence or not. He was prepared to allow her to postpone her final decision on the matter until after the expert evidence had been heard.
7. On the third day, the expert chartered surveyors appearing respectively for each side (Mr Sealey for the appellant and Mr Eyley for the respondent) gave live evidence and were cross-examined. Their evidence took up virtually the whole of the day. Where the opinions of the two experts differed, the judge preferred the evidence of the respondent's expert, Mr Eyley, on the grounds that he was more detached and independent, whereas the judge considered that he "was not getting the same independent judgment" from Mr Sealey.
8. On the morning of the fourth day of the trial the appellant confirmed her decision not to give live evidence. Closing submissions were made which were completed on the morning of the fifth day. The judge reserved judgment.
9. Judgment was delivered on 28 August 2012.
10. In relation to Ground A, the judge held that, in relation to the eight items alleged by the respondent to evidence disrepair, only the creeper growth on the rear elevation of the premises was sufficiently serious and substantial for the purposes of Ground A; the other alleged item of disrepair, namely decoration of the ground floor shop, was not sufficiently substantial by itself but was taken into account. It is relevant to quote the material paragraphs of the judgment in relation to Ground A:

"52. Moreover, I approach this case upon the basis that the standard of repair expected of the tenant was not high; more particularly that I have to find that the state of repair of the holding was sufficiently impaired even if as a result of the failure of the tenant to comply with her repairing obligation to require me, as a matter of judgment to conclude that the tenant ought not to be granted a new tenancy.

53. Aside from the express covenants to repair, the tenant had an obligation to treat and use the premises in a tenant like manner. I note and accept the reliance by Mr Browne in paragraph 24 of his skeleton argument on paragraph 13.020 of Woodfall. I accept therefore that the tenant was under an obligation as a matter of routine maintenance to control weeds, creeper and plant growth and to keep the rear yard free of debris …

55. I deal with each of them in turn: …

Creeper Growth

Mr Eyley's evidence on this is summarised in the right-hand column on pp 2/609 and 611. In essence his evidence is that there is unrestricted plant growth covering the wall concealing the condition of the walls and the downpipe, and areas of the eaves and roof. This evidence was not substantially contradicted. The failure to control the plant growth is not of itself a breach of the Tenant's repairing covenant. It is however, in my judgment, a breach of the Tenant's implied covenant to use the premises in a tenant-like manner. It obscures the condition of the exterior of the property, risks causing damage to the exterior and makes it impossible to examine the exterior to determine its state and condition. I consider that it can properly be said that the covering of the exterior walls with climbing plant is an aspect of the state of repair of the holding. The holding ought not to be in that state of repair and it is caused to be so as the result of the breach by the Defendant of her obligation to use the premises in a tenant like manner. In this connection that is an obligation which can properly be said to relate to the repair and maintenance of the holding (within the meaning of Section 31 (a) of the 1954 Act). I therefore find that the exterior plant growth is an element of the state of repair of the holding and in my judgment it is sufficiently serious and substantial for me to consider whether it supports the Claimant's opposition under Ground A. If I am wrong about that, I consider that I can take it into account under Ground C as any other reason connected with the Tenant's use or management of the holding.

56. The matters which I take into account as elements of the state of repair of the holding which engage my judgment under Ground A are the creeper growth and the state of the decoration on the ground floor. Specifically as regards the creeper growth, I consider that the state of repair of the holding as regards the rear elevation and the rear yard is grossly compromised by the rampant and uncontrolled climbing plants. The extent of the disrepair is unquantifiable until the plants have been removed. The Defendant has made no attempt prior to the hearing of these proceedings to remove the plants and to carry out any consequent repairs that are necessary. If she was in all other respects a model tenant, I might not ground any decision to terminate her tenancy on this ground. However she is not a model tenant. She is combative and obstructive. The difficulties that the Claimants have found in obtaining access to the building is a consequence of her approach to them. I can have no confidence that if the tenancy was renewed, the Defendant would voluntarily and adequately carry out the required works in order to comply with her obligation to use the premises in a tenant like manner.

57. Accordingly I find that the Claimant does establish ground A on the limited basis relating to the state of repair of the holding consequent upon the breach of her covenant to use it in a tenant like manner and in deciding that I take into account the state of the decorations on the ground floor." [Emphasis added.]

11. In relation to Ground B, the judge held that it would not be right to treat the arrears of rent as a ground of objection; accordingly the respondent failed under Ground B. It is relevant to quote the material paragraphs of the judgment at paragraphs [58] to [63] in relation to Ground B:

"58. The assertion that there has been a persistent delay in paying the rent rests upon 2 distinct allegations. The first relates to the monthly rental payments. The second relates to the insurance premiums.

59. As regards the monthly rental payments they are analysed in the schedule at 3/956-3/959. From analysis in that schedule Mr Browne was able to submit that arrears of rent arose immediately in March 2002 which was the date when full rent should have recommenced in accordance with Deputy District Judge Courtney Stewart's judgment. Thereafter it was never zeroed. By the end of December 2003 she was £1,346.25 in arrears. By the end of 2004 she was still in arrears by £676.25. So also by the end of 2005. The arrears moved in a range between £176.25 and £676.25 going up to the latter figure on the rental day. Similarly although the higher figure reduced to £576.25 in 2006 and through the following years to 2010, in 2011 the rent was paid more erratically and by the date of the hearing it was £1,076.25 in arrear.

60. He accepted that the landlord could have attempted forfeiture, but given the history of this case that would have led to further conflict. Instead the landlord took the line of least resistance.

61. Mr and Mrs Gregory wrote a letter on 3 September 2003 (3-665) which made it clear that they wanted the rent paid on the first day of each month. The fact is therefore that demonstrably the Defendant has persistently since 2003 been in arrear (in small amounts) with the rent. We are dealing with an application for the renewal of a lease. In my judgment the landlord is entitled to expect the rent to be paid on time and not persistently late. The Defendant did not offer herself for cross-examination to persuade me that this was an oversight on her part and would be remedied. Therefore I take the rent record at face value, demonstrating a persisting situation of arrears of rent and an apparently wilful refusal not to remedy that situation.

62. I do not take the same view in relation to the insurance rent. I consider that an objective interpretation of paragraph 7 of the Tomlin Order Schedule is that there was a variation of the terms of the lease to the effect that the Defendant's obligation from the date of the Tomlin Order was to pay just one half of the insurance premiums paid by the Claimant. I had no evidence that there was any, or any significant, default on the part of the Defendant in relation to payment of the insurance rent, if her liability is limited to one half.

63. Balancing these findings, I do not think it right to treat arrears of rent as a ground of objection that is made out. The Claimant therefore fails on Ground B."

12. In relation to Ground C:

i) Breach of access covenant: The judge held that there had been substantial breaches of the appellant's access covenant. The judge said:

"65. I find the Defendant has been in substantial breach of this access covenant as appears clearly from the history tabulated below. [He then set out in the chronology of the relevant events and continued…]

This lamentable history demonstrates a long-standing intransigence on the part of the Defendant to afford access by the Landlord to the property. Her approach to inspections has been without justification. Her obligation under Clause 2(5) of the Lease is straightforward. She was required to permit the Landlord and persons authorised by the Landlord with or without workmen and others at reasonable times to enter upon and examine the condition of the premises. She had no business creating difficulties for the appointments by imposing conditions on them or by being obstructive. Moreover were she running the premises as an Al or A3 business, there should have been no difficulty whatsoever in arranging a suitably convenient time for a surveyor to inspect without disrupting her business. Her obstructive behaviour with regard to access undermined the efficient working of the relationship between Landlord and Tenant and substantiates a ground of objection under Ground C (whether framed as a Ground based on substantial breaches or for any other reason connected with Tenant's use and management of the holding). The Claimant therefore succeeds on Ground C — failure to permit access."

ii) Breach of user covenant: The judge held that there had been a substantial breach of the appellant's user covenant. There had not been use of the property in accordance with the user covenant contained at clause 29 (b) of the lease (namely retail trade within classes A1 and A3 of the Town and Country Planning (Use Classes) Order 1987). The judge dealt with this issue at paragraphs [66] to [89] of the judgment. Having recited the evidence and his findings, he concluded:

"86. It follows that I find that there is a breach of the user covenant set out in paragraph 64 above. The question that I then have to consider is whether the breach comprises a substantial breach by the Defendant and whether in the light of it the Defendant ought not to be granted a new tenancy.

87. I find that the breach is a substantial breach. These premises were let for a business purpose and there was a requirement that in the absence of consent for use for any other class of business, they should be used for a business within classes Al and A3. No consent has been sought or granted for any other business use and the failure to use the premises for a purpose within the wide categorisation of classes Al and A3 is in my judgment substantial.

88. On the question whether in the light of such substantial breach, the tenant ought not to be granted a new tenancy, I reach that conclusion as a matter of judgment. I reach it for these reasons, principally:

88.1. This case concerns a tenant's right of renewal of a lease for business purposes: it is fundamental to that right of renewal that the tenant should be operating a business from the premises and it is important to that right of renewal that that business should be compliant to the covenants of the lease.

88.2. If the Defendant is running any business from the premises (as to which she has not produced any evidence of substance) such business is extremely low key and is properly characterised as vestigial:

88.3. The Defendant has been on notice since at least the service of the Claimant's Section 26 Notice of Opposition on 13 May 2009 (para 3.2 above) of the reliance by the Claimant on the breach of the user covenant: and she corresponded about that in July 2009 (para 70 above): yet she was not then operating a business within classes A1 and A3 and she has not attempted to start one in the three years that have ensued:

88.4. I have concluded as a matter of fact that she has not been the subject of aggression or abusive behaviour by the Claimant's family: there is therefore no reasonable justification for the failure either to open a business that complies with classes A1 and A3 or to seek consent for another business. I therefore find that the Defendant has no intention to run a business on the premises complying with the user covenant, whether a business within classes Al and A3 or another business subject to consent being obtained from the Claimant: …"

iii) Any other reasons connected with the tenant's use or management of the holding: The judge held that it would be an impossible task to analyse the landlord and tenant relationship over the whole period of the lease to make findings with confidence in relation to the origins of the breakdown in trust and confidence between landlord and tenant; see paragraphs [90] to [93] of the judgment. Accordingly the respondent failed under Ground C in establishing any other reason connected with the tenant's use or management of the property.

13. Accordingly the judge found that the respondent had established the necessary grounds of opposition to the grant of a new tenancy and made the appropriate order for the termination of the current tenancy without the grant of a new tenancy, pursuant to section 29(4) of the 1954 Act.
14. On 24 October 2013 Vos LJ granted permission to appeal on the following issues:

i) "Whether the trial judge was correct to find the particular breaches element under section 30(1) of the 1954 Act was correctly applied; and

ii) Whether the "ought not" test under section 30(1) of the 1954 Act was correctly applied."

The appellant was ordered to file modified grounds of appeal within 14 days of the order.

15. On 18 November 2013 the appellant filed modified grounds of appeal (expanded to 4 separate grounds). These were in the following terms:

"MODIFIED GROUNDS OF APPEAL

1. The judge was wrong in law to conclude that there was a breach of section 30(1)(a) LTA 1954. The judge was incorrect in his interpretation of the lease to conclude that exterior parts of the premises were the Appellant's obligations either as regards disrepair or, indirectly, through her general tenant obligations. Neither the yard nor anything growing in it was the Appellant's responsibility.

2. The judge failed to find that any of the found breaches of a repairing obligation were substantial. Any breach of the lease for failing to behave in a tenant-like manner does not warrant termination under s.30(1)(a) LTA 1954.

3. The judge was wrong in law or reached a decision outside the permitted range that the breaches under section 30(1)(c) LTA were substantial. Access to the premises was given for the limited purposes identified under the lease. The Appellant was using the premises for the purposes of retail trade within classes A1 and A3 as required by the lease. No other purpose was identified by the judge which would amount to a breach. Any failure to comply with all the criteria under these classes did not mean that the lease was breached and, consequently, there was no substantial breach.

4. The judge then incorrectly applied s.30(1) LTA 1954, taking into account immaterial considerations as set out above and failing to identify any ongoing prejudice and any unfairness to the Respondent as lessor, when deciding that a fresh tenancy 'ought not' to be granted."

16. On 2nd December 2013 the respondent served a Respondent's Notice seeking to uphold the judge's order on additional grounds. The grounds which the respondent pursued on this appeal were in the following terms:

"2. The learned judge's finding that the persistent arrears of rent albeit small in amount demonstrated a wilful refusal to comply with the terms of her lease, ought to be considered such as would justify a refusal to grant the Appellant a new tenancy pursuant to section 30(1)(b) Landlord & Tenant Act 1954.

3. The totality of the learned trial judge's findings of fact in relation to alleged breaches of covenant by the Appellant demonstrates a persistent and wilful refusal to comply with the terms of her lease. Further, the findings of fact which the learned trial judge made as to the hostility of the Appellant towards the Respondent's family in paragraph 92 of his judgment clearly shows that the Appellant has caused the relationship of landlord and tenant to break down fundamentally. It follows therefore she ought not to be granted a new tenancy due to her overall use and management of the holding as provided for by section 30(1)(c) Landlord & Tenant Act 1954."

The relevant provisions of the 1954 Act

17. In so far as material, the relevant provisions of the 1954 Act provide as follows:

"Section 30

Opposition by landlord to application for new tenancy.

(1) The grounds on which a landlord may oppose an application under subsection (1) of section 24 of this Act are such of the following grounds as may be stated in the landlord's notice under section 25 of this Act or, as the case may be, under subsection (6) of section 26 thereof, that is to say:-

(a) where under the current tenancy the tenant has any obligations as respects the repair and maintenance of the holding, that the tenant ought not to be granted a new tenancy in view of the state of repair of the holding, being a state resulting from the tenant's failure to comply with the said obligations;

(b) that the tenant ought not to be granted a new tenancy in view of his persistent delay in paying rent which has become due;

(c) that the tenant ought not to be granted a new tenancy in view of other substantial breaches by him of his obligations under the current tenancy, or substantial breaches by him of his obligations under the current tenancy, or for any other reason connected with the tenant's use or management of the holding;…"

The relevant terms of the lease

18. The relevant terms of the lease were as follows:

i) the tenant's covenants:

Clause 2(3):

"throughout the term to keep the whole of the interior of the premises and all additions thereto and the fixtures thereon including the windows and window frames the drains soil and other pipes sanitary and water apparatus thereof in good tenantable repair and condition PROVIDED ALWAYS THAT nothing in this subclause or this Lease shall oblige the Tenant to put the Premises into any better state or condition than they were in as at the date hereof PROVIDED FURTHER THAT this covenant shall also extend to and include the exterior of the window frames."

Clause 2(4):

"without prejudice to the preceding sub-clause in a good and workmanlike manner and to the reasonable satisfaction of the landlord or the landlord's surveyor to decorate with good quality materials the interior of the premises in every fifth year of the term and also in the last year of the term (howsoever determined) but the tenant shall not be required so to decorate any part of the premises that was so decorated within the previous twelve months and provided that the colours design and materials of all work done in the last year of the term shall be such as the landlord shall reasonably require and provided further that this covenant shall also extend to the exterior of the window frames".

Clause 2(5):

"to permit the Landlord and persons authorised by the Landlord with or without workmen and others at reasonable times to enter upon and examine the condition of the premises....".

Clause 2(9)(b):

"at all times during the said term to use the Premises for the purposes of any retail trade within Classes A1 and A3 of the Town & Country Planning (Use Classes) Order 1987 and not to use the Premises or any part thereof for any other purpose without the written consent of the Landlord (such consent not to be unreasonably withheld)…"

ii) the landlord's covenants:

Clause 3(3):

"to keep the structure of the Building in tenantable repair and condition including the exterior maintenance and general repairs thereto but excluding the windows and window frames."

19. The classes within Classes A1 and A3 of the Town & Country Planning (Use Classes) Order 1987 in force at the time the lease was granted were as follows:

"Class A1. Shops

Use for all or any of the following purposes—

(a)for the retail sale of goods other than hot food,

(b)as a post office,

(c)for the sale of tickets or as a travel agency,

(d)for the sale of sandwiches or other cold food for consumption off the premises,

(e)for hairdressing,

(f)for the direction of funerals,

(g)for the display of goods for sale,

(h)for the hiring out of domestic or personal goods or articles,

(i)for the reception of goods to be washed, cleaned or repaired,

where the sale, display or service is to visiting members of the public.

Class A3. Food and drink

Use for the sale of food or drink for consumption on the premises or of hot food for consumption off the premises."

Following the amendments introduced by the Town & Country Planning (Use Classes) (Amendment) (England) Order 2005, the sale of hot food for consumption off the premises has been assigned its own use class, A5 (hot food takeaways).

The approach to the decision which has to be made by the court under section 29(4)

20. As set out above, one of the appellant's grounds of appeal was that the judge failed to identify any ongoing prejudice and any unfairness to the respondent as lessor, when deciding that a fresh tenancy 'ought not' to be granted to the appellant. Argument in relation to this ground revealed a possible divergence between what Mr Thomas Jefferies, counsel for the appellant, submitted was the correct approach to the decision which had to be taken by the court under section 29(4) of the 1954 Act, and that advocated by Mr James Browne, counsel for the respondent.
21. Mr Jefferies submitted, based on the statement of the Court of Appeal in Beard v Williams [1986] 1 EGLR 148, that, in deciding whether a fresh tenancy 'ought not' to be granted, the relevant question was:

"whether the landlord's interest was likely to be prejudiced by the occurrence of the matters relied on as constituting reasons within section 30(1)"; see per Mustill LJ at 150J.

22. Mr Browne, on the other hand, submitted that as a matter of law there was no requirement specifically to consider the question of ongoing prejudice. The test is whether it would be fair to the landlord to require him to continue with this particular individual as a tenant.
23. Beard v Williams was a decision of this Court (Fox and Mustill LJJ) in a case where the appellant tenant had been refused a new tenancy of fields and stables where he had been breeding and training greyhounds. The appellant had been living on the respondent landlady's land and storing a decrepit van on the land in breach of covenant. The matter came before the county court on the landlady's objection to the grant of a new lease under s.30(1)(c) and the County Court judge decided not to grant the appellant a new tenancy.
24. In setting out the relevant test, Mustill LJ (p.150 at J) said:

"The next question is whether, in the exercise of his discretion, the learned judge should have concluded that the tenant ought not to be granted a new tenancy. As I understand the position, it was common ground in the argument before us, that, as part of the exercise of his discretion, the learned judge should have asked himself whether the landlord's interest was likely to be prejudiced by the occurrence of the matters relied upon as constituting reasons within section 30(1). Authority for the proposition that such matters should be taken into account can be found in John Kay Ltd v Kay [1952] 2 QB 258; Lyons v Central Commercial Properties (London) Ltd [1958] 1 WLR 869 and Eichner v Midland Bank Executor and Trustee Co Ltd [1970] 1 WLR 1120".

25. The requirement that prejudice to the landlord's interest should be considered was therefore common ground between the parties in Beard v Williams, rather than any decision made by the Court. Mr Browne submitted that the authorities cited by Mustill LJ did not support the agreed test applied in that case.
26. John Kay Ltd v Kay was a decision under the provisions of the Leasehold Property (Temporary Provisions) Act 1951. Section 12 (3) provided:

"(3) The court shall not order the grant of a new tenancy if it is satisfied - (a) that the tenant has broken any of the terms or conditions of the expiring tenancy, and that in view of the nature and circumstances of the breach a new tenancy ought not to be granted; or… (e) that having regard to all the circumstances of the case greater hardship would be caused by ordering the grant of a new tenancy than by refusing to do so."

Whilst the alternative "greater hardship" test does not appear in sections 29 and 30 of the 1954 Act, nonetheless, contrary to Mr Browne's submission, the alternative test in subsection Section 12(3)(a) clearly is roughly equivalent to the requirement in section 30 of the 1954 Act that the tenant "ought not to be granted a new tenancy in view of [the breaches]"which the court has to find established before exercising its powers make an order under section 29(4). In John Kay Ltd v Kay Evershed MR said at page 271:

"I think that I have now covered the matter of greater hardship, and there remains only the question (which I have left till last though perhaps logically I should have dealt with it first) under section 12 (3) (a) that the tenants have broken terms and conditions of the previous leases. I have left the matter till last, because it needs a reference to the further evidence. I am still confining myself to St. Stephens Street. In July, 1951, a schedule of dilapidations, which extended over many pages and was embraced under no fewer than 127 heads, was served upon the tenants. The judge found that there had been breaches of the repairing covenant. A reference to para (a) in subsection (3) shows that that of itself does not suffice, because a court must also be satisfied, in view of the nature and circumstances of the breach, that a new tenancy ought not to be granted. Again I refrain from attempting any exhaustive exposition of the significance of that phrase, but plainly the second half of the paragraph involves the judge in the duty of considering whether, if the tenancy is extended as suggested, the breach is such as will really prejudice the proper interests of the landlord." [My emphasis]

Jenkins and Hodson LJ J agreed. But as Evershed MR made clear, it was not appropriate to attempt to articulate any exhaustive exposition of the phrase "that a new tenancy ought not to be granted" and his description of the function of the judge in considering whether there should be an extension of the tenancy as having to decide whether "the breach is such as would really prejudice the proper interests of the landlord" is fairly loosely stated. Accordingly, what Evershed MR said is in my view instructive to our consideration of the correct approach in the present case.

27. As Mr Browne submitted, the question of what constituted "prejudice" to "the proper interests of the landlord" was not actually considered in Eichner v Midland Bank Executor & Trustee Co Ltd. In that case the issue was whether the court, when faced with an objection to a new tenancy under s.30(1)(c), was entitled to look at the conduct of the tenant as a whole in regard to his obligations under the tenancy or was limited to the various grounds set out in the landlord's notice opposing the grant of a new tenancy. Lord Denning MR, after quoting from Harman J and Ormerod LJ in Lyons v Central Commercial Properties London Ltd, held that a judge, under s.30(1)(c) (which is, of course, stated in wide terms, as compared with s.30(1)(a) and (b)), was not limited to the various grounds set out in the landlord's notice opposing the grant of a new tenancy but was entitled to look at all the circumstances in connection with the relevant breaches and to look at the conduct of the tenant as a whole in regard to his obligations under the tenancy.
28. Mr Browne submitted that the correct test was set out in the Court of Appeal case of Lyons v Central Commercial Properties London Ltd. That was a case where the ground of opposition was the tenant's breaches of repairing covenants. There was clear evidence that the ground of opposition was made out and that the tenant was in serious breach. Morris LJ noted that the words "ought not" connoted a measure of discretion allowed to the judge. He then said this at page 877:

"But where Parliament has not precisely defined, I would hesitate to adopt any particular formula as being all embracing or which might be thought to be restrictive or definitive. I do not think that it is desirable to say more than that once a court has found the facts as regards the tenant's past performances and behaviour and any special circumstances which exist, then, while remembering that it is the future that is being considered, in that the issue is whether the tenant should be refused a new tenancy for the future, the court has to ask itself whether it would be unfair to the landlord, having regard to the tenant's past performances and behaviour, if the tenant were to enjoy the advantage which the Act gives to him."

Ormerod LJ, agreeing with Morris LJ, stated at page 878:

"It is clear from the words of the section that there is a measure of discretion as regards the state of disrepair. The words are "ought not to be granted a new tenancy in view of the state of repair of the holding." Paragraphs (b) and (c) respectively refer to the "persistent delay" of the tenant in paying rent, and "other substantial breaches" by the tenant of his contractual obligations. These provisions seem to indicate that the neglect to repair to which section refers should be substantial. But the word "ought" in the section in my judgment implies that the discretion of the judge is not confined to the consideration of the state of repair. Without attempting to define the precise limits of that discretion, the judge, as I see it, may have regard to the conduct of the tenant in relation to his obligations, and the reasons for any breach of the covenant to repair which has arisen. …

The object of paras (a), (b) and (c) of s 30(1), as I see it, is to enable the judge to refuse to grant a new lease to a tenant who has shown himself to be unsatisfactory in the performance of his obligations under the contract of tenancy."

Harman J, at page 880, said:

"In my judgment, the discretion vested in the court under s.30(1)(a), (b) and (c) is a narrow one; it is limited to the question whether, having regard only to the grounds set out, a new tenancy "ought not to be granted". This must mean, I think, whether, having regard to the tenant's past conduct as a tenant it would be equitable to exclude the landlord from his property for a further term or to foist the tenant on him contrary to the contract."

29. In my view, in the light of the authorities, the so-called difference in approach contended for respectively by Mr Jefferies and Mr Browne is in reality no more than a semantic one. Thus under s.30(1)(a), the court has to ask itself whether "in view of the state of repair of the holding", brought about by the tenant's breach of its obligation to repair and maintain the holding, the tenant "ought not to be granted" a new tenancy. This involves the court, for the purposes of this subsection, focusing exclusively on the state of repair and asking itself whether, looking forward to the hypothetical new term, "the proper interests of the landlord would be prejudiced", by continuing in a landlord/tenant relationship with this particular tenant (as per the formulation in John Kay Ltd v Kay); or, put another way, whether it "would be unfair to the landlord" (as per the formulation of Morris LJ in Lyons v Central Commercial Properties London Ltd), having regard to the tenant's past performances and behaviour in relation to its obligation to repair and maintain the holding, if the tenant were to be "foisted on the landlord for a new term" (as per the formulation of Harman J in Lyons v Central Commercial Properties London Ltd). The discretion is not circumscribed in any way other than by the requirement that, in asking itself the question whether the tenant "ought not to be granted" a new tenancy, the court has to focus on the state of repair of the holding. A similar approach applies in relation to the court's consideration of the question whether the tenant "ought not to be granted" a new tenancy under s.30(1)(b). In that case the focus is on the persistent delay in paying rent which has become due and nothing else. Under s.30(1)(c), however, the approach is broader. The court, when considering the "ought not to be granted" issue, is entitled to focus not merely on "other substantial breaches" but also, or alternatively, on "any other reason connected with the tenant's use or management of the holding."
30. However, contrary to Mr Jefferies' submissions, I do not consider that it is necessary for the landlord, in order for him to demonstrate that his interests are prejudiced or that it would be unfair for a new tenancy to be granted, to prove that the relevant breach adversely affects the rental income or the value of the reversion - although of course in many instances this might well be the case. That seems to me to be too concrete a test and an inappropriate constraint on the wide discretion given under the section.
31. Mr Jefferies also sought under Ground 4 of the appellant's Modified Grounds of Appeal to argue that the judge failed under each of the relevant heads of alleged breach to consider whether there was any ongoing prejudice to the respondent's interests or unfairness to the respondent in deciding whether to grant a new lease. I deal with this argument below separately in relation to each of Grounds A, B, and C.

Was the judge's approach correct in the present case? Discussion and determination

Ground A

32. It was common ground between the parties that, for the purposes of s.30(1)(a), the neglect to repair had to be substantial; see Lyons v Central Commercial Properties London Ltd at page 878. As I have already stated, the judge found that there was unrestricted plant growth on the rear wall of the building. He correctly held that this was not a breach of the tenant's repairing covenant, but concluded that it was nonetheless a breach of the implied obligation to use the premises in a tenant like manner.
33. In summary Mr Jefferies submitted that:

i) The judge was wrong to hold that the plant growth fell within Ground A, because the obligation to use the demised premises in a tenant like manner was not an obligation to repair at all, but an implied obligation as to the tenant's conduct and use of the premises; see Regis Property Co Ltd v Dudley [1959] AC 370 at 407.

ii) The appellant, as tenant under the subject lease, was only liable to repair the interior. In contrast, the landlord was obliged under her express covenants to "keep the structure of the building in tenantable repair and condition including the exterior maintenance and general repairs thereto." Thus repair and maintenance of the external wall was the express liability of the landlord. In those circumstances, any suggested implied obligation imposed on the appellant as tenant to clear the creeper from the outside wall would be inconsistent with the express obligations of the landlord under the lease. Accordingly the appellant had no such obligation.

iii) The obligation on a landlord to keep the exterior in tenantable condition went beyond repair, and included preventative work if required; see Dowding & Reynolds "Dilapidations" 5^th Edition at 4-30 to 31; Welsh v Greenwich LBC [2000] 3 EGLR 41 at 43M and 44D. Thus, if the creepers needed to be removed to keep the exterior in good condition, it was the responsibility of the landlord to do so, not the tenant.

iv) Even if the requirement to keep the exterior in good condition added nothing to the obligation to repair, if the creeper growth did amount to disrepair of the holding, the respondent as landlord was required to remove it. The respondent was clearly on notice of the ivy. She had caused to be carried out extensive work to the exterior in 1999/2000, as the judge described at paragraph 7 of his judgment. The respondent also inspected the exterior in 2008, and drew attention to the need to remove the ivy.

v) Alternatively, the judge was wrong to conclude that the failure to control the growth was substantial. The cost of the work required to remove the ivy had been estimated by the landlord's own surveyor at £350.

vi) The other breach of repair, which the judge found proved, was the internal state of repair of the premises. However the judge found that if this were the only matter in issue it would not have given rise to a Ground A objection. Accordingly it was plainly not a substantial breach. It was only one item out of 130 considered by the respondent's Mr Eyley in his schedule. In terms of cost, it was equally clearly not an expensive item of work to carry out. Accordingly, since it was not substantial, it should not have been taken into account at all under Ground A.

vii) Further, in paragraph 56 of the judgment, the judge was wrong to have regard to matters other than those related to repair. Thus, he wrongly had regard to the fact that, as he held, the appellant was not a model tenant, that she was combative and obstructive and had wrongly put difficulties in the way of the appellant obtaining access to the building.

34. As both the judge and the respondent accepted, the failure to control the creeper growth was not in itself a breach of the appellant's express repairing covenant. The question was, therefore, whether it was nonetheless a breach of the implied term to use the demised premises in a tenant-like manner (see Woodfall at paragraph 13.020) despite the landlord's express obligation under clause 3.3 of the Lease to "keep the structure of the Building in tenantable repair and condition including the exterior maintenance and general repairs thereto". Whilst it is true that the entirety of the building and the garden, or rear yard, had been demised to her, and it may have been the appellant's responsibility to keep down weeds in the garden and to control the plants generally as part of routine maintenance, I do not think that the removal of the creeper from the structure of the building was her responsibility.
35. Moreover, it seems to me that the judge was wrong to think that the failure to remove the creeper, even if it were a breach of a tenant's repairing obligation, was a substantial breach when the sum involved in carrying out the work was said to be only £350.
36. Thus the judge did not need to consider whether a new tenancy "ought not" to have been granted under s.30(1)(a). Had he reached that stage, he would have been entitled to aggregate the breach of this obligation with the state of decoration of the ground floor arising from the appellant's breach of covenant. But I do not think that these breaches so prejudiced the proper interests of the respondent or made it unfair to the respondent as to allow the judge to conclude that the appellant ought not to be granted a new tenancy. These were relatively modest problems that could have been quite easily remedied. Had the creeper been the appellant's responsibility, the judge would have been entitled to take into account the likelihood of the appellant carrying out the required works, and, in the future, keeping the property in adequate tenantable repair. But the judge's reliance on the fact that the appellant was not a model tenant, was combative and obstructive, and did not allow access is, in this connection, somewhat problematic. Whilst some of those matters might in theory have a bearing on the likely prejudice arising from proved breaches of covenant and the likelihood of future breaches, the judge seems to have gone further in aggregating his consideration of other breaches with those relevant to the task under s.30(1)(a). Since I take the view that there was not a relevant substantial breach under s.30(1)(a), it is not necessary further to consider this aspect under Ground A.
37. Accordingly I would allow the appeal against the judge's decision in relation to Ground A.

Ground C - Access

38. Mr Jefferies submitted that the judge's conclusion on the facts (namely that the chronology demonstrated a long-standing intransigence on the part of the appellant to afford access by the respondent to the property, and that accordingly she was in substantial breach of the access covenant) was not supported by the evidence. The judge had wrongly concluded that refusing access for valuation purposes in 2003 was a breach of covenant. Access had indeed been permitted on various occasions by the appellant for permitted purposes. The judge's conclusion that the appellant's obstructive behaviour undermined the efficient working of the relationship between landlord and tenant was an impermissible approach. It was tantamount to treating the relationship like a marriage which had broken down, when in truth the relationship between the parties was a contractual relationship governed by the terms of the lease. The relevant question was whether a new tenancy ought to be granted having regard to the purpose of the covenant in question and the effect, if any, of the breaches on the landlord. Furthermore, Mr Jefferies submitted that the covenant to allow entry for inspection was only ancillary to the repairing covenants; thus, if there were substantial breaches of the Tenant's covenant to repair which warranted the refusal of a new tenancy, the breaches of the access covenant would add nothing. If, on the other hand, as the appellant contended, there were no breaches of the appellant's covenants which warranted the refusal of a new tenancy, the primary purpose of the repairing covenants and access covenant would have been served, and it would be wrong to refuse a new tenancy on the grounds of breaches of the access covenant. In addition the judge had failed to have regard to the fact that the respondent had not been able to show any loss resulting from the refusal of access. Finally Mr Jefferies submitted that the judge had also failed to have any or adequate regard to the fact (as found by him at paragraph [25] of the judgment) that the motive of the respondent was to obtain possession of the property in order to sell it, and that from September 2009 proceedings for possession were under way. Accordingly the requests for access were not made in the context of a normal landlord and tenant relationship.
39. I reject these arguments. It was clear from the evidence before the judge, as summarised by him in tabular form, and to which we were referred by Mr Browne, that the appellant had on numerous occasions thwarted the proper attempts made by the respondent, her agents and experts to gain access to the premises for the precise purpose set out in the lease – namely to examine their condition. The fact that some of the inspections related to the proceedings in the County Court was not a ground for objection: the issue throughout was as to the condition of the premises. The judge was clearly entitled to reach the conclusion on the facts that "This lamentable history demonstrates a long-standing intransigence on the part of the Defendant to afford access by the Landlord to the property". The fact that the respondent had frankly admitted that she did not want to renew the lease and wanted to sell property with vacant possession, because, as the judge found, she had become exasperated with all the issues which surrounded the tenancy, was irrelevant to the issue as to whether the appellant's breaches of the access covenant were substantial. The fact (assuming it to have been the case) that the respondent had not been able to show any loss resulting from the refusal of access was also irrelevant. Indeed on the evidence before the judge, the respondent would inevitably have incurred financial loss in the form of wasted surveyors' fees for visits to the premises when they had been unable to obtain access.
40. Finally, it is true that the judge did not expressly state in paragraph 65 of the judgment that, having found substantial breaches of the access covenant, he was going on to consider as a separate issue whether, "in view of other substantial breaches", "the tenant ought not to be granted a tenancy". It was, however, implicit in his findings in paragraph 65 of the judgment that he was addressing the issue, as formulated above, as to whether it would be prejudicial or unfair to the respondent to subject her to a new tenancy with the appellant. As Mr Browne submitted, it was clear from the judge's conclusion that he took the view that to expect the respondent to continue with the appellant as her tenant in light of her persistent and wilful refusal to comply with the terms of her tenancy would be unfair to the respondent and therefore prejudicial. It is impossible to read his conclusions in relation to the refusal to grant access, in any other way. I refer in particular to the penultimate sentence of the paragraph.
41. I should note, in this connection, that the "ought not" exercise would have been better undertaken taking into account all the breaches established under s.30(1)(c). The judge does not seem to have approached the matter in this way, but for the reasons I have given, I think he was entitled to find that a new tenancy ought not to have been granted even on the basis of the access breach alone.
42. Accordingly, I would uphold the judge's decision in relation to this item of Ground C and reject Grounds 3 and 4 of the appellant's Modified Grounds of Appeal, in so far as they apply to this item of Ground C.

Breach of user covenant - failure to open the premises as a shop.

43. As appears from the relevant paragraphs of the judgment quoted above, the judge found that:

i) there was some evidence of use of the premises by the appellant for preparation of cold meals for consumption off the premises, but not to visiting members of the public. There was no evidence of any walk in trade or use of the premises actually to make sales, even by way of telephone ordering;

ii) thus the appellant was not using the premises for a use within class A1, since, although the classification in that class included the sale of sandwiches or other cold food for consumption off the premises, that was only if the sale was to visiting members of the public;

iii) thus the appellant was not using the premises for a use within class A3 (as originally classified) as the premises were not and had never been used for the sale of food or drink for consumption on the premises or for the sale of hot food for consumption off the premises;

iv) the breach was substantial; and

v) the appellant ought not to be granted a new tenancy for the reasons set out in paragraph 88.

44. Mr Jefferies submitted that the judge was wrong to find that there had been a breach of the user clause because in substance the covenant was negative; it thus prevented use other than that permitted, but did not impose any positive obligation on the tenant to keep the shop open. A similar conclusion had been reached at first instance by Mr Thomas Morison QC sitting as a deputy judge of the Chancery Division in Montross Associated Investments SA v Moussaieff [1990] 2 EGLR 61 at 64H to 65D. If the parties had intended the tenant to be obliged to keep the shop open, they could and would have included a "keep open" covenant of the sort which was in issue in Co–operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997] 3 All ER 297. Mr Jefferies did not suggest that the judge's findings of fact that the premises were not open to the public were subject to any serious challenge. The focus of his attack was on the judge's conclusion that the breach was substantial. Mr Jefferies argued that minimum compliance could have been demonstrated by including only a few sticks of furniture in the premises; that the respondent could not reasonably have refused an application for consent to a change of user; and that the respondent as landlord would have had no reason to require the shop to be kept open. It made no difference to the rent, which assumed an open market letting with vacant possession both under the rent review or on a renewal under the 1954 Act. There was no evidence that the respondent owned other shops in the same parade which could be adversely affected if the subject premises were not kept open as a retail shop. In other words there was no evidence of any damage to the respondent's reversion.
45. Further or alternatively, Mr Jefferies submitted that, in deciding that the appellant ought not to be granted a new tenancy:

i) The judge had been wrong to have regard to the fact that the appellant's business was low key and vestigial. It was not in dispute that the appellant had the protection of the 1954 Act, and it was accordingly immaterial whether the business carried on there was low key or vestigial.

ii) The judge had been wrong to conclude that "it is important to the right of renewal that the business should be compliant with the covenants of the lease". Compliance with the covenants was not a pre-condition to the protection of the 1954 Act. On the contrary, the Act gave a tenant protection even if the business was carried on in breach of a covenant such as that which was applicable in this case; see s23(4) of the 1954 Act; Reynolds & Clark on Renewal of Business Tenancies at 1-129.

iii) The judge should have had regard to the fact that the purpose of a user covenant was to protect the value of the reversion to the subject premises or adjoining property; see Hill & Redman Landlord and Tenant at A3025; he also should have had regard to the lack of evidence that the alleged breach had any adverse effect on the respondent as landlord.

iv) The judge wrongly failed to have regard to the fact that consent could not be unreasonably refused to a change of use, and that consent could only be refused if the landlord could show that it would suffer some harm from change of use to that carried on by the tenant; see Anglia Building Society v Sheffield BS [1983] 1 EGLR 57 at 59J.

v) On the evidence before the judge, he ought to have concluded that the respondent as landlord had suffered and would suffer no loss as a result of the breach of user covenant, that consent could not reasonably be withheld to change to that use, and that there was no good reason why a new tenancy should not be granted.

46. Again, largely for the reasons put forward by Mr Browne, I would also reject this head of appeal. In my judgment the judge was right to conclude on the construction of clause 29 (b) of the lease that there was a positive obligation actually to use the premises for one of the stipulated purposes and not merely a negative obligation not to use the premises for some other purpose. The decision in Montross Associated Investments SA v Moussaieff [1990] 2 EGLR 61 at 64H to 65D at first instance is no persuasive authority in the light of the Court of Appeal's decision in the same case reported at [1992] 1 EGLR 55 CA. Nourse LJ (with whom Butler-Sloss LJ agreed) said at page 56:

"it is certainly possible that the second part of [the relevant clause] is positive in substance as well as in form. For my part, I think it neither necessary nor desirable to express a view on that point."

That was because on the facts he did not consider that there had been a breach of a positive obligation to use the premises for a particular business. Parker LJ, who also found it unnecessary to express a view, said:

"As to the question whether the second part of the clause is positive in substance, I find it hard to suppose that, when a series of negative covenants are followed by the words "but will use", the intention was merely to create an emphatic negative. The change of language is marked, it is positive in form and I am not convinced that any good reason exists for holding that the substance is different from the form."

47. In the present case the positive obligation precedes the negative obligation, which in my judgment serves to underline the positive nature of the first obligation. Likewise, the change of language between the positive and negative obligations is marked and must have been intentional. The absence of an express "keep open" covenant of the type which was under consideration in the very different context of Co–operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd does not detract from the conclusion that the covenant in the present case imposed a positive obligation.
48. The appellant did not assert that, at any point after the lease was entered into, any consent for alternative use was requested or granted or unreasonably withheld. As the judge found, she had not attempted to start a business within classes A1 or A3 within three years of being notified by the respondent of her breach of the user covenant. In all the circumstances of this somewhat unusual case, where as the judge found the appellant was carrying on only vestigial business activity at the premises, the judge did not need to speculate, as part of his analysis, as to whether the respondent could reasonably have refused consent to a change of user, if one had been applied for. That was particularly so in circumstances where, as the judge found, the appellant had no intention whatsoever of running any business on the premises complying with the user covenant, whether a business within classes A1 and A3 or another business. He was clearly entitled to take into account, in the exercise of his discretion in the application of the "ought to" test, these wider considerations. The fact that the respondent had accepted that the tenancy was indeed a business tenancy, did not prevent the judge from taking into account the many other matters he mentioned when deciding whether the appellant ought to be granted a new tenancy.
49. Whilst the reason for user covenants may normally be to preserve the value of the reversion or the reversion of adjoining property, it was not in my view incumbent upon the respondent to demonstrate a quantifiable loss to the value of the reversion in order to establish her case under this head. The judge was entitled to conclude, particularly in the absence of any evidence from the appellant, that the failure on the part of the appellant to operate a business within the relevant classes was prejudicial to the legitimate interests of the respondent. It is not hard to envisage, for example, that the sale of a landlord's reversionary interest in shop premises, subject to a business tenant in possession, would be likely to achieve a better price if the tenant was actually carrying on a user compliant retail business, than if the tenant was not doing so, and the premises were not even open to the public for retail sales. That could clearly be the case even if the rent under the new tenancy were to be calculated on the hypothesis that the tenant was complying with the user covenants. I have hesitated as to whether the judge was entitled to find that the breach of the user covenant was substantial, but I think in the special circumstances of this case, he was.
50. Finally, I have considered the complaint that the judge did not specifically address the question of prejudice to the proper interests of the respondent in connection with the breach of the user covenant. Here again, I accept Mr Browne's submission that it is implicit in the judge's conclusion that he considered that to expect the respondent to continue with the appellant as her tenant in light of her refusal to comply with the user covenant and the other matters that he was entitled to take into account under s.30(1)(c) including the breach of the access covenant would be unfair to her and therefore prejudicial.
51. Accordingly I would uphold the judge's decision in relation to this item of Ground C and reject Grounds 3 and 4 of the appellant's Modified Grounds of Appeal 4, in so far as they apply to this item of Ground C.

The respondent's notice

52. In the circumstances, it is not necessary to address the two points taken in the respondent's notice to support the judge's decision on additional grounds. Had it been necessary to do so, I would have upheld the judge's decision as to Ground B. The reason he gave, namely that the insurance rent findings balanced the persistent non-payment of rent, has not seriously been challenged. I would also have upheld his findings on the alleged additional breaches of Ground C based upon "any other reason connected with the tenant's use or management of the holding". The matters in respect of which he made findings at paragraph 92 of his judgment did not fall within that description, and the other matters that he found proved were properly taken account of under the other limb of Ground C.

Disposition

53. I should not leave this case without making clear that the facts identified by the judge revealed an exceptionally difficult relationship between landlord and tenant that was characterised by the two substantial breaches of the appellant's obligations that I would uphold as having been proved. Such situations will not often arise, but on the unusual facts of this case, I have no doubt that the judge was right to hold under s.30(1)(c) and s.29(4) of the 1954 Act that the appellant ought not to be granted a new tenancy.
54. Accordingly I would allow the appeal on Ground A, but dismiss it on the other grounds, and dismiss the Respondents' Notice.

Postscript

55. By e-mail dated 14 March 2014, together with five attachments, the appellant supplied further materials which she sought to rely upon in support of her appeal. Whilst the appellant has no entitlement to introduce further evidence at this stage, I have considered the further materials. They do not persuade me to change my conclusions in relation to the any of the issues which arise on this appeal.

Lord Justice Vos:

56. I agree.

Lord Justice Moore-Bick:

57. I also agree.