England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand London WC2
		Tuesday 25th January, 2000

MRS JUSTICE ARDEN: The claimant in this case, Peter Geoffrey Webb, previously occupied premises at Sandown Park Race Course. He has now ceased to do so, and the issue which the court has to determine is whether in consequence he is entitled to compensation under section 37 of the Landlord and Tenant Act 1954. The history of events is as follows.

1. In about September 1973 Mr Webb took up and occupied part of the property from which he ran a ski retail business. In September 1981 he purchased a timber lodge which he erected on the site which he occupied. In about 1992 the present defendant, Sandown, acquired a lease of the property. Mr Webb continued in occupation as Sandown's tenant carrying on his business. His position was formalised in April 1996, when an underlease and a licence to use certain additional facilities were granted. Under the underlease the rent payable was made up of a fixed element and an additional rent calculated by reference to Mr Webb's turnover. In addition, there were covenants to use the premises only for the sale of skiing equipment and ski clothing, and the provision of ancillary services, and to use best endeavours to promote the fullest possible use of the demised premises for the purposes of the business and not without the previous consent in writing of Sandown to erect or display any advertisement on the premises or any part.
2. In October 1996 Mr Webb complained that Sandown was displaying an advertisement in their Ski Slope Information Pack about another ski shop. On 8th November 1996 Sandown served a notice pursuant to section 25 of the Landlord and Tenant Act 1954 objecting to the grant of a new tenancy. The notice in fact contained an error, in that the notice was stated to expire on 31st May 1996. A further notice was served which was dated to expire on 19th June 1997. On 24th February 1997 Mr Webb made an application for a new tenancy to the Kingston County Court. Sandown objected to his application, relying on ground (g) in section 30(1) of the 1954 Act.
3. By July 1998 Mr Webb had begun making arrangements to relocate his business and was advertising the fact. On 4th October he ceased trading at the property and he took away his personal belongings and stock from the property, save certain items which he says he returned to take on 19th October 1998. Subsequently, at the end of October 1998, Sandown served a section 146 notice on Mr Webb. On 17th November 1998 Sandown forfeited the underlease by peaceable re-entry. At that stage the lodge was still on the property.
4. Mr Webb claimed that the lodge was his property and his personal chattel. This claim was discontinued in September 1999. Mr Webb concedes that he is liable under the terms of the underlease to pay Sandown's reasonable costs of serving the section 146 notice and to pay rent properly due under the underlease up to the date of - I am not clear up to what date, but I think it was up to the date of the termination of the tenancy.
5. On 20th January 2000 Mr Webb offered to pay a sum in satisfaction of the first defendant's claim for costs, which has now been agreed. So the only remaining issue with which the court has to deal is whether Mr Webb is entitled to compensation. The amount of compensation has been agreed. The claim made by Mr Webb is that he quit the property on 19th October 1998. The defendant, Sandown, contests this and also states that if the lease then continued in being, it was forfeited by peaceable re-entry and thus there could be no claim for business compensation at the end of the lease.
6. On 21st October 1998 Mr Webb discontinued his claim for a new tenancy. That is a crucial event for the purposes of section 37, to which I will come in a moment. He made a claim to relief from forfeiture by proceedings begun on 23rd October 1998, to which I will refer below. These proceedings were withdrawn by an amendment to the pleading made on 19th February 1999 and permitted by the order of the court made in June 1999.
7. The issue then, on the first part of the case, is whether Mr Webb quitted the property. As I have said, quitting the property is a precondition of compensation under section 37. It is common ground that quitting the property is not the same as termination of the tenancy. The 1954 Act, indeed, provides specifically that where an application for a new tenancy is discontinued, then the tenancy will continue for a period of three months unless it would have determined earlier for some reason.
8. The principal section with which I am concerned is section 37. Section 37(1) provides:

"Where on the making of an application under section twenty-four of this Act the court is precluded (whether by subsection (1) or subsection (2) of section thirty-one of this Act) from making an order for the grant of a new tenancy by reason of any of the grounds specified in paragraphs (e), (f) and (g) of subsection (1) of section thirty of this Act and not of any grounds specified in any other paragraph of the subsection or where no other ground is specified in the landlord's notice under section 25 of this Act or, as the case may be, under section 26(6) thereof, than those specified in the said paragraphs (e), (f) and (g) and either no application under the said section 24 is made or such an application is withdrawn, then, subject to the provisions of this Act, the tenant shall be entitled on quitting the holding to recover from the landlord by way of compensation an amount determined in accordance with the following provisions of this section."

9. The opening conditions of that subsection were satisfied. There had been an application for a new tenancy, the landlord's notice had been on ground (g) and the application for a new tenancy was withdrawn. Thus the tenant's right to compensation arises, provided that it can be said that he has "quit" the premises.
10. The requirements for quitting were considered in Morrisons Holdings Ltd v Manders Property (Wolverhampton) Ltd [1976] 1 WLR 533. In that case the question was whether a tenant who leaves premises because of a fire and has ceased to occupy the premises, can be said to have ceased to occupy the premises for the purposes of his business within section 23 of the Landlord and Tenant Act 1954. Section 23(1) of the 1954 Act provides:

"Subject to the provisions of this Act, this Part of this Act applies to any tenancy where property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes."

11. The matter came before the Court of Appeal. Scarman LJ, having referred to a statement from Caplan v Caplan, per Cross J, Scarman LJ said (at page 540):

"I would put it in my own words as follows: in order to apply for a new tenancy under the [1954] Act a tenant must show either that he is continuing in occupation of the premises for the purposes of a business carried on by him, or, if events over which he has no control have led him to absent himself from the premises, if he continues to exert and claim his right to occupancy. This is a question which did not arise in terms in Caplan (I & H) Ltd v Caplan (No2), where there was a temporary absence of the tenant which the judge held did not interrupt the continuity of his occupation in the circumstances of the case. However, the temporary absence in Caplin (I & H) Ltd v Caplin (No 2) which did not destroy the continuity of occupation was absence at the volition of the tenant. In the present case the absenting by the tenants of themselves from the premises after the devastating fire was not their choice, but was brought about by the state of the premises created by the fire, which was none of the tenants' making. Nevertheless, they exhibited immediately after the fire, and continued to exhibit, an intention to retain and to claim their right of occupancy, and reminded the landlords from time to time of what they thought were the landlords' obligations to reinstate."

12. Later he said:

"It seems to me that, when events such as I have detailed arise and a tenant is faced with the difficulties of occupation that these tenants were, it must be a question of fact to determine whether the tenant intended to cease occupation or whether he not only, as the judge found these tenants were, cherishing the hope of return, but also making it quite clear that he intended to maintain his right of occupancy and to resume physical occupation as soon as the landlords reinstated."

13. Stephenson LJ agreed with Scarman LJ, and Sir Gordon Willmer gave his own judgment but came to the same conclusion. In the circumstances it was held that the tenants had remained in occupation and were tenants for the purposes of section 23(1) of the 1954 Act.
14. So the critical question is whether events occurred over which Mr Webb had no control and whether Mr Webb cherished the hope of return and, in addition, made it quite clear that he intended to maintain his right of occupancy and to resume physical occupation as soon as the landlords reinstated.
15. Mr Webb had prepared a witness statement and given evidence. In his witness statement the critical paragraphs are 8-12 and 20. In paragraph 8 he says:

"Although I had good reason to seek a new tenancy, it was impossible for me to keep trading without the facilities granted by the licence. Negotiations took place, but eventually I was forced to discontinue my proceedings."

16. He then refers to the relationship that he had had with Sandown and the complaints that had been made against him. In particular, there were disputes about the use of car parking and lavatory facilities, and the use of the facilities in the Members Club which Sandown had next to the property.
17. There was correspondence about those matters and the correspondence which I have seen is in the first three months of 1998. Then Mr Webb says that on 10th March 1998 Mr Watkins wrote to him again, threatening to terminate the licence. Mr Webb said that he knew his business could not continue should the licence be terminated, so he, Mr Webb, decided to look for alternative premises. Sandown was well aware of this and while he attempted to find alternative premises in Sandown Park, that did not prove possible and finally he took a commercial lease of a unit in Ditton Road, Surbiton. Once that lease had been formally entered into, there were negotiations between the first defendant and Mr Webb. Those negotiations broke down, leaving no alternative but to serve notice of discontinuance. Mr Webb says that he vacated the ski lodge on or about 4th October 1998. He then went back on 19th or 20th October to collect stock and paperwork, but found a legal-looking document, in his words, pinned to the door and decided not to enter the building and has not been there since.
18. In paragraph 20 of his witness statement Mr Webb says:

"Finally, the first defendant complains that I was in breach of covenants in the lease by vacating the premises and removing my business elsewhere. I had no choice."

19. When Mr Webb was called he confirmed his witness statement. He accepted in cross-examination that in his witness statement he said nothing about his intention when he went back to the premises on 18th/19th October and he accepted that the only communications about the vacation of the premises were between solicitors.
20. The relevant correspondence between solicitors occurs between 21st and 28th October 1998. In a letter dated 21st October 1998 Mr Webb's solicitors write saying that they enclose a copy of the notice of discontinuance. They say that Mr Webb has conceded possession to Sandown early, but then later state that they request a confirmation that business compensation will be paid "when our client quits the holding". So there seem to be two different things said in that letter, first, that Mr Webb has given up possession and, secondly, that he has not yet given up possession but will do so at a later point when he expects to be paid compensation.
21. In a further letter of 23rd October Mr Webb's solicitors, Gardner Weller, write to Sandown's solicitors informing them that to protect their client's position that have issued a writ for relief and for an appropriate injunction against Sandown in order to prevent Sandown from seeking to re-enter the property physically until a reasonable time has elapsed from the date of any section 146 notice. At the date of their letter they were under the impression that no such notice had been served.
22. They then invited the solicitors for Sandown to give an undertaking not to re-enter. Mr Webb, for his part, would seek to take out proceedings for declaratory relief as to ownership of the lodge and to prosecute those proceedings with all reasonable endeavour or to remove the lodge in the same period. By this point in time, a dispute had arisen as to who owned the lodge. Mr Webb says that it is a chattel, that it rests on the ground purely by its own weight. It has been contended by Sandown - and I think its head lessor - that the lodge belongs to them.
23. Subsequently Gardner Weller wrote, on 26th October 1998, to the solicitors for Sandown. They said that the period stated in the section 146 notice, which by then they had received, was not a reasonable one for compliance. The period stated for remedying the breaches was not one with which they could comply. Then they said:

"Further, it is clearly insufficient for our client to make arrangements for and complete the removal of the lodge."

24. The removal of the lodge is given therefore as an additional reason for stating that the period for complying with the notice was inadequate. The suggestion in the first reason is that Mr Webb would return to the premises. However, in a later paragraph in the same letter, Gardner Weller state that Mr Webb does not abandon his claim to the lodge and intends to remove it. It is difficult to see how he could return to the property and carry on business there without the lodge, since it was at the lodge that he maintained his stock under cover and was able to deal with customers.
25. In a letter dated 27th October the solicitors to Sandown said that they were not prepared to give an undertaking not to effect a physical re-entry because:

"Once the lease has been forfeited, if the ski lodge is indeed a tenant's fixture, if it remains in situ it will represent an actionable trespass, and therefore your client will have to decide whether he intends to remove it or issue proceedings for declaratory relief."

26. As I said, the actions of Mr Webb had placed the landlord in a predicament. The rent, as I have explained, was a basic rent, an additional rent by reference to turnover and unless the property was occupied for the purposes of carrying on the business, then additional rent might not be received and the landlord was in difficulty knowing what Mr Webb's intentions were.
27. On 27th October the solicitors to Sandown write again to Gardner Weller, saying that the time limit in the section 146 notice is quite sufficient to remedy the breaches, namely by moving back to the lodge. On 28th October 1998 Gardner Weller write to Sandown's solicitors making a number of points, but ending their letter:

"At present our position in relation to the forfeiture and relief is reserved."

28. I should explain that on 23rd October 1998 the writ which had been issued claimed relief from forfeiture and, in addition, an injunction restraining the defendants from exercising any right of re-entry until trial or further order. The proceedings referred to a purported notice under section 146 dated 19th October 1998, and it is stated that the plaintiff had not been served with a copy of the notice and that accordingly Sandown had not served appropriate notice under section 146.
29. The correspondence and writ may be seen as suggesting that Mr Webb had no intention to quit at all. Mr Higgins submitted that in order that he should prove that he has quit the premises, Mr Webb's actions had to be unequivocal and he had to disavow any right to return. For my own part, I prefer to rely on what Scarman LJ said, that the tenant had to make it quite clear (if he wished to be held to have remained a tenant) that he intended to maintain his right of occupancy and to resume physical occupation as soon as the landlords reinstated. What Mr Webb needs to show is the reverse of this, that he had made it clear that he no longer wished to occupy and that that was his intention.
30. Mr Higgins also draws attention to the injunction which was claimed in the proceedings. He says that this was a claim to exclude the defendants from the property. The landlord, Sandown, found itself in a position whereby if that injunction had been granted, then even if Mr Webb had vacated it would have been unable to take possession of it, the property, it in order to carry on business there itself because of the wide terms of the injunction. In other words, Mr Webb was claiming, through that claim to an injunction, a right to exclude Sandown from the premises.
31. As against that, the claim was never actually pursued. Mr Webb never made an application to the court for such an injunction and in the circumstances what is relied upon is the fact that these events occurred, that these proceedings were issued and that they throw light on Mr Webb's intentions on 19th October, when he said that he went to the premises for the last time.
32. The position is this. I have to decide what are the proper inferences to draw from the evidence that Mr Webb went to the property and by 19th October had removed substantially all of his property. First of all, on the issue that he intended to vacate the property, as I have said the correspondence and writ suggest that he had no intention to quit at all, that he was wanting to preserve the tenancy and wanted to be treated as still being in occupation and not to be treated as having left the premises. But on the other hand, there are other factors which go the other way. It would make little sense for him to acquire new business premises and remove his stock and say that he wanted to remove the lodge, if in fact he did intend to continue in occupation for the purposes of his business. There is also evidence that what he was trying to do was to preserve his claim to the lodge, that he was concerned that if he did nothing the lodge would be treated as a landlord's fixture and that he would lose his right to the item. It is said that the lodge may have been worth as much as £25,000.
33. He was also claimed business compensation. So far as the claim to the lodge is concerned, the claim for the injunction was, as Mr Higgins points out, misconceived. First, it claimed relief which is too broad because it claimed to prevent the landlord from re-entering the property. Second, if it tried to prevent the landlord from, say, executing a mortgage over the lodge or selling the lodge without going on to the property, it would be ineffective. However that may be, there is evidence in the correspondence which suggests that the real concern was with the lodge and the investment tied up in that.
34. There is also evidence that Mr Webb was forced to leave, that is in effect in my judgment what he is saying in his witness statement. I appreciate that there are points which can be made about what he says in his witness statement by reference to other correspondence, but the position is that in his witness statement he takes the position that he was forced to leave and to find other premises. That would bring him within the principle in Morrisons.
35. At the end of the day, the position in my judgment is this. There is evidence from which the court can infer that he had an intention to quit on 19th October. As I have said, it is reasonable to infer that he did not intend to return because he had acquired other premises to carry on his business and he intended to remove the lodge. There are matters which could have been put to Mr Webb, but which were not put to him. In particular, he was not asked to explain what his solicitors had been contending in the correspondence and whether that represented his intention at the time. The correspondence is not wholly clear. There are factors which can be read each way, but none of those matters was put to Mr Webb and likewise it was not put to him that the events which he says forced him to move did not force him to move at all.
36. In those circumstances, in my judgment, it would be inappropriate for me to resist drawing the inference which in my judgment can properly be drawn, that he did not intend to return and that he manifested this by removing his property and setting up premises elsewhere and by not returning to the property. It would be wrong for me to resist drawing that inference on the basis of matters which could have been put to Mr Webb, but which were not put and for which an explanation may exist.
37. As Miss Stevens-Hoare, for Mr Webb, has said, there was a concern about the lodge and this may be one of the explanations why the claim for an injunction was made. I am not in a position to deal with the points that have been made against Mr Webb because Mr Webb has not had an opportunity of explaining them himself. Therefore I find that he did indeed quit the premises on the evidence before me and that, accordingly, he is entitled to compensation.
38. There is an alternative case which I must mention. It is said that if Mr Webb is wrong and he did not quit the premises in October, the lease continued in existence until January 1999 (by virtue of section 64) and that he thereupon quit because obviously the lease then came to an end and he had to vacate the premises then if he had not previously done so.
39. Mr Higgins, for his part, says that by that date there had been peaceful re-entry and the lease was then forfeit. He draws my attention to the fact that in section 23(1) begins "Subject to the provisions of this Act". Section 24(1) provides:

"A tenancy to which this Part of this Act applies shall not come to an end unless terminated in accordance with the provisions of this Part of this Act; and, subject to the provisions of section twenty-nine of this Act, the tenant under such a tenancy may apply to the court for a new tenancy-

(a) if the landlord has given notice under section 25 of this Act to terminate the tenancy, or

(b) if the tenant has made a request for a new tenancy in accordance with section twenty-six of this Act.

(2) The last foregoing subsection shall not prevent the coming to an end of a tenancy by notice to quit given by the tenant, by surrender or forfeiture ..."

40. So the position is this, that a business tenancy is not terminated unless it is terminated in accordance with the provisions of Part II of the Landlord and Tenant Act 1954. But section 24(1) does not prevent the coming to an end of a tenancy by forfeiture. In effect Mr Higgins says it is the policy of the Act that the tenant has to observe the provisions in the lease down to the bitter end, that is down to the termination of the tenancy. Otherwise he runs the risk of forfeiture. This applies even if the tenant has quit. He is still bound by the covenants in the lease until the end of the period. (That is, as I have said, governed by section 64.) So there is a set period. This period, Mr Higgins submits, is for the benefit of both landlord and tenant. They each know where they stand. The tenant has time to relocate, the landlord has time to plan for a new tenant and to make plans accordingly.
41. Mr Higgins relied on Meadows v Clerical Life Assurance Society [1981] 1 Ch 70. In this case the question was whether a tenant against whom a lease had been forfeited on terms, by order of the court, could claim a new tenancy, that is whether or not he was still a tenant for the purposes of Part II of the Act of 1954. The matter came before Sir Robert Megarry, V-C. He said at page 76:

"The point is not easy, but in my judgment the answer to the question is `No'."

42. The question he had put is:

"Is a forfeited tenancy which is the subject of a subsisting application for relief, which may restore the tenancy as if it had never been forfeited, a tenancy which has come to an end for these purposes, at any rate in the sense in which a tenancy has been surrendered has come to an end?"

43. The Vice-Chancellor continued:

"I think that such a tenancy is a tenancy which may or may not have truly come to an end, and that the subsection is contemplating a tenancy which has in fact come to an end. The right of a tenant to apply for relief is part of the process of forfeiture, and until that process is complete, I do not think that the tenancy has come to an end under the meaning of section 24(2) of the Landlord and Tenant Act 1954. The plaintiff's tenancy in this case had accordingly not been taken out of the operation of section 24(1), and it continued under it, thus enabling the plaintiff to apply for a new tenancy. I do not think that it matters much whether the form that any relief would take would be a restoration of the old lease or the grant of a new lease on the terms of the old: in either case the relief would relate back to the date of the forfeiture and so produce a tenancy which was within the Act when the originating summons was issued."

44. Later he says this:

"Mr Levy contended that to hold the plaintiff in this case was entitled to claim a new tenancy would mean that a tenant who deliberately dragged out his proceedings for relief from forfeiture could thereby obtain an unmerited extension of his tenancy in a case in which in the end he would obtain no relief."

45. Then later the Vice-Chancellor said:

"I can, of course, see the force of this. I can also see some force in Mr Prince's contention that if the Act is held not to apply, landlords may find in timely proceedings for forfeiture a means of depriving some tenants of the protection which they ought to have. I agree that the Act should, if possible, be construed in such a way as to prevent it being manipulated by either landlords or tenants so as to produce results contrary to its purposes. I think that at least something of the sting would be taken out of Mr Levy's contention if it is held, as I think it should be, that undue delay in seeking relief may indicate that the claim to relief is unreal and so ought to be disregarded. I do not consider that at present there is any question of that in this case. Furthermore, I do not think that a decision now that the plaintiff's originating summons should not be dismissed could preclude the defendants from seeking the dismissal of the originating summons at a later date on the ground that there is no longer any genuine application for relief, and so the forfeiture has by then become fully effective. Doubtless such an application would have its problems, but at least it could be made. All that I decide is that the originating summons was not a nullity when it was issued and that as matters stand today the plaintiff has not ceased to have a tenancy to which this Act applies."

46. Miss Stevens-Hoare, for Mr Webb, says that the appropriate point in time to which the court should have regard was the position on 22nd January 1999 when the tenancy would otherwise have come to an end by virtue of section 64. At that point in time, there were the proceedings for relief from forfeiture issued on 23rd October 1998, which were still outstanding. However, the position is that those proceedings were subsequently amended. The intention to amend was evidenced by the service of a draft Amended Statement of Claim in February and subsequently in June 1999 the court made an order permitting that amendment. The claim for relief from forfeiture was then abandoned.
47. As I see it, the position is this. A person is not a tenant if the lease has actually become forfeit and the question of relief from forfeiture no longer exists. In the present case, I am asked to consider whether Mr Webb was a tenant on January 22nd 1999. It is said that I should do so with the knowledge that I would have had on that date and not any other knowledge. But in my judgment, the court should not ignore subsequent events, but should take them into account and look at the situation as it really was by virtue of events that occurred subsequently.
48. The fact is that I have explained the claim to relief was abandoned. It is clear, as I see it, that in retrospect that there was no tenancy on 19th January 1999 and, accordingly, if the question was whether Mr Webb could be said to have quit the property on that date, in my judgment he would have had no claim under section 37 because he was no longer a tenant for the purposes of that section by virtue of the peaceable re-entry and forfeiture and the abandonment of the claim for relief from forfeiture.
49. In those circumstances, I allow the claimant the compensation in the sum agreed, subject however to the counterclaim (which has also been agreed) for the rent which is due and for the expenses of the section 146 notice. In the case of both the claim and the counterclaim there are agreed amounts allowed by way of interest.