England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		Friday, 28th November 2002

MR JUSTICE PUMFREY:

1. This is an appeal from an Order by His Honour Judge Cox sitting at the Lambeth County Court whereby he struck out proceedings for a new tenancy commenced by Mr Walbert Pennycook in respect of premises at l30 Railton Road, London SE24. The premises in question are principally a barber shop and, I believe, a floor over.
2. Mr Pennycook was the tenant under a lease for l0 years of the premises granted by the then landlord, Mayshore Property Company Limited, on 27 March 1991. The demise was for a period of ten years from 25 March 1989. Towards the end of the contractual term, Mr Pennycook entered into some inconclusive negotiations with the landlord in respect of a purchase of the freehold of the premises, and even gave a tenant's notice under part 2 of the Landlord and Tenant Act 1954 in respect of which the necessary proceedings were not commenced in time. The history which gives rise to the present proceedings starts with a landlord's notice which was served on Mr Pennycook on 8 November 2001 pursuant to section 25 of the Act. On 4 December 2001, Mr Pennycook served a counter notice. This counter notice was served on a form printed by the well-known law stationers, Oyez, headed "Landlord and Tenant Act 1954 ss 25(5) and 29(2)" and is entitled "Tenant's counter notice as to willingness to give up possession of business premises". After reciting the essential features of the landlord's notice, the pro forma continues, against a marginal note 6, "Delete if tenant does not wish to apply for a new tenancy, see note 3" with the following:

"Take notice that I/We will [not] be willing to give up possession of the property comprised in the tenancy on that date."

3. Mr Pennycook's solicitor, Mr Alfonso Constantine Winter, sets out in his witness statement the circumstances in which this notice came to be given. He says that he perused the papers when he was instructed by Mr Pennycook on 4 December 2002 and he prepared the counter notice, and he says that he typed it, and at the same time he instructed a surveyor to act for Mr Pennycook in negotiations of the terms for a new lease. It was the surveyor who detected the error in the counternotice, since he received a letter from Mr Winter telling him that Mr Pennycook wished to renew the lease and was going to instruct Mr Winter to apply to the court for a new lease unless terms could be agreed with the landlord.
4. This evidence, at its lowest, strongly suggests that Mr Winter made a grave error in the completion of the form and completed it contrary to his instructions (but I say no more about that at this stage), since the two month period for a counternotice to the landlord's notice had, when Mr Winter gave the defective notice, another month to run. As soon as the surveyor detected the error and notified Mr Winter of it on 2 January 2002, Mr Winter on 4 January 2002 gave a further notice, this time in the correct form. Purportedly pursuant to that notice, Mr Pennycook issued his claim in the Lambeth County Court for a new tenancy and the claim was struck out by His Honour Judge Cox on 9 July this year.
5. The relevant provisions of the Landlord and Tenant Act l954 are, as follows. By section 24(1):

"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 29 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 26 of this Act."

6. Section 25, as is well known, sets out the prerequisites for the termination of a tenancy by the landlord. The notice to be given by the landlord to the tenant must be in the prescribed form and must specify the date at which the tenancy is to come to an end, which is defined as the date of termination. The section concerns itself both with the permitted range of dates of termination and prescribes by sub-section (4) that subject to the provisions of sub-section (3), "a notice under the section shall not specify a date of termination earlier than the date on which, apart from this part of this Act, the tenancy would have come to an end by effluxion of time".
7. By sub-section (5), "a notice under this section shall not have effect unless it requires the tenant, within two months after the giving of the notice, to notify the landlord, in writing, whether or not at the date of termination, the tenant will be willing to give up possession of the property comprised in the tenancy". The landlord's notice being on a pre-printed form, as one would expect, complied with this requirement and Mr Pennycook availed himself of the opportunity provided to notify the landlord, first that he would be willing to give up possession, and second that he would not.
8. By section 29(1),

"…subject to the provisions of this Act on an application under sub-section (l) of section 24 of this act for a new tenancy,

(1) the court shall make an order for the grant of a tenancy comprising such property at such rent and on such other terms as are hereinafter provided;

(2) where such an application is made in consequence of a notice given by the landlord under section 25 of this Act it shall not be entertained unless the tenant has duly notified the landlord that he will not be willing at the date of termination to give up possession of the property comprised in the tenancy;

(3) no application under sub-section (1) of section 24 of this Act shall be entertained unless it is made not less than two, nor more than four months after the giving of the landlord's notice under section 25 of this Act or, as the case may be, after the making of the tenant's request for a new tenancy."

9. There is no doubt that Mr Pennycook's application to the county court satisfied sub-section (3) of section 29; the question is whether it satisfied the requirements of sub-section (2). In approaching this question, the learned Judge relied upon the decision of Brightman J, as he then was, in the case of Re 14 Grafton Street London Wl, de Haviland Antiques Limited v Centrovincial Estates Mayfair Limited [1971] l Ch 935. This was a case in which the tenant sought compensation under the part of Landlord and Tenant Act l954 as amended by the Law of Property Act 1969, an amendment which came into effect during the currency of the two month period permitted for the tenant's notice. The headnote sets out the determinations of Brightman J as follows:

"1. that in order to be entitled to compensation for disturbance the tenant must first have served a counter notice on the landlord under section 29(2) of the Act of l954, stating that he was unwilling to vacate the premises, and secondly, under section 37(1) of the Act, before amendment, he must have applied to the court for a new tenancy, but a counter notice which expressed willingness to quit was irrevocable and that accordingly after October 13, the tenants could not give notice of unwillingness to quit, and had lost their right to apply to the court, and the landlords in turn had acquired an indefeasible right to obtain possession on April 1, l970 without paying compensation."

10. It is important in this case to observe the material dates. The notice to terminate the tenancy was given on April 1, l970, the notice being given on September 27, l969. The tenants gave what was subsequently described as a positive counternotice, that is to say, a notice indicating their intention to vacate the premises, on October 13, l969. On October 22, 1969, the Royal Assent was given to the amending statute which came into effect on January l, l970 and the tenants enquired about compensation on February ll, 1970. The two month period from service of the notice therefore expired somewhere around about November 27, l969.
11. Brightman J first interpreted the expression "duly notified" in section 29(2), which I have read, as meaning a notification within two months after the giving by the landlord of a section 25 notice. He said that that is made clear by the wording of section 25(5), which I have also read, and if I may respectfully say so, I respectfully agree.
12. He then turned to the scheme of the statutory provisions on page 942 at letter F, in a passage which I should read out in full:

"It appears to be the scheme of the Act that a landlord's notice under section 25 shall be followed by a notification by the tenant either that he iswilling or that he is not willing to give up possession on the date of termination specified in the landlord's notice. For convenience, I refer to such a notification by the tenant as a positive or a negative counter notice, according to whether the tenant is or is not agreeable to the landlord's demand. A negative counter notice is a condition precedent to an application by the tenant to the court: see section 29 (2). An application by the tenant to the court was, prior to the Act of 1969, a condition precedent to the tenant's becoming entitled to compensation for disturbance. It is therefore hard to see how it can ever have been to a tenant's financial advantage to serve a positive counter notice. Before the Act of 1969 the result can only have been to deprive the tenant of the chance of obtaining compensation. Indeed, no counsel was able to suggest what practical function is performed by a positive counter notice, except an act of courtesy to the landlord.

On October 22, 1969, the Law of Property Act 1969 received the Royal Assent. Part I of the Act is headed: "Amendment of Part II of the Landlord and Tenant Act 1954."

Section 11 of the Act amends section 37 (1) of the Act of 1954 by inserting new words. Section 37 (1) as amended is set out in Schedule 1 to the Act of 1969; the additional words follow the words "of that subsection" and read:

"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, ..."

The effect, therefore, of the amendment was to entitle the tenant to obtain compensation notwithstanding the absence of an application to the court.

Section 31 (2) of the Act of 1969 provided that the parts of the Act relevant to this application should come into force on January 1, 1970.

On February 11, 1970, the tenants' solicitors wrote to the landlords' solicitors:

"Further to the notice to determine our client's lease of the above premises, our client now proposes to leave approximately at the end of February. In the circumstances, will you kindly let us know what arrangements are being made regarding compensation payable under the Landlord and Tenant Act 1954 as amended by the Law of Property Act 1969."

The landlords' section 25 notice had been sent with a letter dated September 26, 1969, and it is common ground that this notice should be treated as "given" on September 27. The position therefore, on that day, was that November 26 or 27 (I assume November 27, without so deciding) was the last day available to the tenants for serving a negative counter notice as a prelude to an application by the tenants to the court for an order for the grant of a new tenancy. In fact, as I have mentioned, the tenants' solicitors on October 13 had written a letter which the landlords accepted as. and which I hold to have been, a notification by the tenants within the meaning of section 25 (5) of the Act of 1954 that, on April 1, 1970, they would be willing to give up possession of the property. There was some discussion, unsupported by authority as I was told none existed, as to whether the tenants could, on or before November 27, have revoked their positive counter notice and given the negative counter notice required by section 29 (2) to enable proceedings to be taken. In my view the purpose of section 25 (5) is to introduce an element of certainty into the relationship between the landlord and the tenant. A tenant is not bound to serve a negative counter notice before the end of the two month period allowed to him. He may pause for that period of time while he makes up his mind. If however he does serve a positive counter notice during the two month period, I think that he must abide by what he has done. If that were not the case, the positive counter notice would serve no purpose whatever compared with complete inaction, for in either case the landlord would not know where he stood until the end of the two month period. If a positive counter notice is revocable the tenant serving the same would be able to serve a negative counter notice right up to the end of the two month period. If on the other hand the tenant does nothing, he may likewise serve a negative counter notice right up to the end of the two month period. It follows that a positive counter notice would be wholly devoid of any function, even that of courtesy, if it were revocable at the will of the tenant. I, therefore, conclude that a positive counter notice is irrevocable; and that in this case the tenants ceased to be able to serve a negative counter notice after October 13, 1969, and that they then lost their right to apply to the court for an order for the grant of a new tenancy.

I have not overlooked the fact that the Act of 1954 is not expressed to impose on the tenant an obligation to serve a notice of either description within the two month period. All that the Act does is to impose on the landlord, as a condition of a valid section 25 notice, the obligation of informing the tenant that he is required to serve a notice one way or the other within the two month period, and to place the tenant under a disability if he fails to serve a negative counter notice. In my view, however, it is a necessary implication from section 25 (5) that a tenant is under a statutory obligation to serve notice one way or the other within the two month period, although I accept that there is no sanction imposed on him for ignoring that obligation, except his inability to apply to the court.

In these circumstances the position in my view was as follows:

On October 14, 1969, that is to say, about eight days before the Act of 1969 received the Royal Assent, the landlords had an indefeasible right to recover possession on April 1, 1970, without payment of compensation, if I am correct in my conclusion that the tenants were precluded from withdrawing their letter of October 13, and from serving a negative counter notice."

13. The learned Judge, having quoted the material passage in Brightman J's judgment relating to the revocability of the positive counter notice, said this:

"On the face of it, that passage from the judgment of Brightman J, concludes the issue in this case. If that passage is binding upon me and is good law, then it is perfectly clear in the circumstances of the case that whatever the circumstances in which the positive notice was given it is binding upon the tenant and it has brought to an end the tenancy. Mr Geldart, who has said everything that could be said on behalf of the claimant in these proceedings, has sought to distinguish in re 14 Grafton Street on a number of bases."

and he sets out the arguments of counsel and so far as the transcript I have only in part, the learned county court judge concluded that the judgment of Brightman J was binding upon him and that he had no hesitation in following it. He accordingly struck out these proceedings.

14. I think that it may be helpful, in considering the judgment of Brightman J, to examine the passage which I have quoted at length, in a little more detail than did the learned Judge. Brightman J was unable to identify any practical function which was performed by a positive counternotice except to act as an act of courtesy to the landlord. That being so, it is at first sight surprising that the effect of serving such notice is to preclude the tenant in all circumstances from giving a negative counter notice within the two month statutory period. I say in all the circumstances, since it is easy to envisage circumstances in which it would be wrong to permit a tenant to resile from a positive counternotice. But I am concerned with the question whether in every case it is impossible to do that. Brightman J's reasoning on this question is found in the passage beginning with the words, "The landlord's section 25 notice had been sent with the letter dated September 26, 1969".
15. The stages in the argument commence with the words, "There was some discussion unsupported by authority, as I was told none existed, as to whether the tenants could, on or before November 27 (which, it will be recalled is the expiry date of the two month period) have revoked their positive counter notice and given the negative counter notice required by section 29(2) to enable proceedings to be taken. The crucial passage then follows:

"In my view the purpose of section 25(5) is to introduce an element of certainty into the relationship between the landlord and the tenant. A tenant is not bound to serve a negative counter notice before the end of the two month period allowed to him. He may pause for that period of time while he makes up his mind. If, however, he does serve a positive counter notice during the two month period, I think he must abide by what he has done. If that were not the case the positive counter notice would serve no purpose whatever compared with complete inaction, for in either case the landlord would not know where he stood until the end of the two month period. If a positive counter notice is revocable, the tenant serving the same would be able to serve a negative counter notice right up to the end of the two month period. If, on the other hand, the tenant does nothing, he may likewise serve a negative counter notice right up to the end of the two month period. It follows the positive counter notice would be wholly devoid of any function, even that of courtesy, if it were revocable at the will of the tenant. I therefore conclude that a positive counter notice is irrevocable."

16. I approach this passage with all the respect which is owing from me to a judge of great experience and authority in this field. I would, however, respectfully doubt whether the "therefore" in the words, "I therefore conclude that a positive counter notice is irrevocable" in fact indicates a logical conclusion from the premises. It seems to me that it is a possible view that a positive counternotice is not devoid of any function including that of courtesy if the tenant gives it, and thereafter it is acted upon by the landlord. If, however, there is no (to use a shorthand expression) as "change of position" on the part of the landlord in reliance upon the serving of a positive counter notice, I do not, as presently advised, understand why it is necessary to conclude that the notice is irrevocable. Mr Vickery, who appeared on behalf of the landlord in the present case, suggested a number of reasons why that should be so. He pointed to the symmetrical nature of the provisions of the statute relating first of all to landlord's notices under section 25 and secondly to the tenant's notice under section 26. He points out, correctly, that if a landlord gives a counter notice, as is permitted under section 26(6), it is well settled that the grounds of opposition set out in such a notice are, like the grounds of opposition specified in the landlord's notice under section 25, unamendable and irrevocable. He submits that to treat the tenant's counter notice under section 25(5), albeit it appears to have no other legal effect, as revocable, introduces an anomaly in the scheme of the Act which must be doubtful in view of the irrevocability of the other notices.
17. Mr Vickery submits further that there is a good reason for treating a tenant's positive counter notice as irrevocable. If the only question, he says, is whether in all the circumstances it is fair to allow the tenant to resile from a positive counter notice, then an undesirable species of satellite litigation is introduced into a well-understood, well-circumscribed, kind of application made all the time in the county court and well understood by all involved. He says that it is thoroughly undesirable to introduce into this well understood system a possibility of satellite disputes as to the validity of tenants' negative notices if previously positive notices have been given and the tenant has for some reason or other changed its mind.
18. I see the force of these submissions. However, I am not satisfied that in point of fact the circumstances arising here are likely as a practical matter to arise at all frequently. There can be little doubt that there is no question of a change of mind here, but a simple error on the part of the solicitor. Second, I cannot see why, in the ordinary course, a tenant will give a positive notice unless quite satisfied that it does indeed intend to give up possession at the end of the notice period. I am not satisfied that positive counter notices are such a common phenomenon in any event that it is necessary to consider the risks involved from the point of view of the proper administration of justice in permitting, in a proper case, a negative counter notice to be substituted for a positive counter notice already given. So although I freely accept the possibilities to which Mr Vickery refers, I doubt very much whether in point of fact they amount to a cogent objection to the construction of the relevant provisions, which I prefer. The construction which I prefer is that section 29(2) is satisfied if in point of fact within the two month period, thus giving proper emphasis to the word "duly", a notice stating that the tenant will not be willing at the date of termination to give up possession, has in point of fact been given.
19. I do not believe that this construction is precluded by the judgment of Brightman J, since in that case although Brightman J says in the passage which I have quoted that the landlords had an indefeasible right to recover possession on April 1 l970 without payment of compensation, Brightman J is considering the indefeasible right of landlords having regard to the ability of the tenants to give a negative counter notice after October l3. It is to be observed that in that case no negative counter notice was in fact given. The point, therefore, did not arise and the tenants took no steps to raise the question until after the expiry of the two month period. I do not think it can be seriously contended that the two month period is in any way extensible, and it would follow, therefore, that the expiry of the two month period the landlord's right became indefeasible whether or not during the period from October 13 to November 27 there had been a contingent right in the tenants to revoke their original positive notice. Accordingly, it does not seem to me that this determination was essential to the decision of Brightman J, but if that is a wrong analysis I would, to the extent that I have indicated, very respectfully disagree with the generality of what he said.
20. It follows that in my view this appeal ought to succeed on the grounds that the tenant was entitled to give a second notice and that section 29(2) was potentially satisfied. However, it seems to me that in any case where the tenant has made a positive representation, it will be a question whether it is in fact entitled to resile from the positive notice which is given in answer to a section 25 notice given by the landlord. I say no more about that in this case, save to say that it must be open to the court to determine that in all the circumstances it is wrong for a tenant to seek to substitute a new statement of his intention for the purposes of section 29(2), but each such case must be dealt with on its own merits. I would accordingly allow this appeal on this ground.
21. I should add that the learned Judge granted appeal only upon certain arguments which were addressed to him and addressed to me in far greater detail in writing by Mr Geldart and Mr Vickery, on points arising under the Human Rights Act, under the European Convention on Human Rights, and in particular the First Protocol to the Convention. These arguments raised points of what seemed to me to be very great difficulty. I have deliberately abstained from hearing the oral argument and from considering these points in detail. I have come to the conclusion which I have done, accordingly, without considering the Human Rights points. The learned Judge gave permission to appeal only upon the Human Rights points, but Mr Vickery has realistically accepted that, first of all it would be difficult to resist an application for permission to appeal out of time on the ground upon which I have decided the appeal also, and also I think that the investigation of the effect of Brightman J's decision is a necessary prerequisite to the application of the principles articulated in the Human Rights Act. For these reasons therefore I shall allow this appeal.