Neutral Citation Number: [2018] EWHC 2071 (Ch)
Case No: PT - 2017 - 00 0052
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
(CHANCERY DIVISION)
The Rolls Building,
7 Rolls Building, Fetter Lane, London,
EC4A 1NL
Date: Thursd a y , 15 February 2018
BEFORE:
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BETWEEN:
Claimant
- and -
Defendant
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MR M WARWICK, QC ( instructed by Bude Nathan Awanier) appeared on behalf of the Claimant
MR A KINNISON ( instructed by Greenwood & Co) appeared on behalf of the Defendant
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If this transcript is to be reported or published, there is a requirement to ensure that no reporting restriction will be breached. This is particularly important in relation to any case involving a sexual offence, where the victim is guaranteed lifetime anonymity (Sexual Offences (Amendment) Act 1992), or where an order has been made in relation to a young person.
"24.2 The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –
(a) it considers that –
(i) that claimant has no real prospect of succeeding on the claim or issue; or
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
It is clear from the notes to the White Book that, where a short point of construction arises, and the court is satisfied that the evidence so far as it goes to it is complete and that neither side is disadvantaged by deciding the point at this stage, then the court should go on and deal with it as a matter of construction. That is what I have been invited to do, and that is what I am doing now.
“The Premises comprise the entrance passageway and staircase leading from the ground floor to the first floor and all the first floor premises as the same is shown for the purposes of identification only edged red on the plan attached hereto together with all the air space above the height of the Building,”
and then it continues to make a detailed provision for the margins such as floorboards, doors, windows, walls and so on. It is perfectly plain that at that stage the property consisted only of ground and first floors, but it was contemplated that a second floor could be added, and indeed I am told (although it is not formally in evidence) that the second floor was indeed added by the original lessee, Rosedraft Ltd, having obtained planning permission for this purpose on 28 June 1996.
"The tenant intends to carry out all such works as are necessary to make a self-contained flat on the first floor of the building and also intends to create an additional self-contained flat above the first floor of the building in the area which is currently the airspace of the building (which is included in the premises hereby demised) and to subdivide the premises by way of two or more separate leases or licences."
"To keep in good and substantial repair and condition the whole of the premises and every part thereof and all fixtures and fittings therein and to renew and replace from time to time all the landlord's fixtures, fittings and the pertinences in the premises which may become or be beyond repair at any time during or at the expiration or sooner determination of the term and to keep the premises clean and tidy and to clean all plate glass and other windows in the premises at least once in every month …"
Then there is this important proviso:
"… provided that the obligations to repair and maintain contained in the lease shall not apply until after the tenant shall have completed all such works as are required to convert the premises to two separate flats or three years have elapsed from the date hereof, whichever is first."
So, again, we see the contemplation of the lease that there will be works to convert the premises to two separate flats.
11. Then paragraph 10 provides that the tenant is
"not to make any structural alterations or additions to the premises without first providing the landlord with a full specification thereof including plans".
It will be noted that this does not require the landlord's consent. It is a provision requiring the landlord to be informed of the plans which are to carry out any alterations or additions. No doubt this is so that the landlord has the opportunity to consider whether they comply with the terms of the lease or not, and to take any action which the landlord considers appropriate in the circumstances.
12. Then there is paragraph 11:
"Following the obtaining of planning consent for residential use, not to use the premises or any part thereof other than for residential purposes."
13. This is followed by paragraph 12:
"Save with regard to the building work referred to in paragraph 2 of the recitals to this lease, not to do anything on the premises which may be or become a nuisance or annoyance or cause damage to the landlord or to the owners, tenants or occupiers of neighbouring property."
14. Then I can move on to paragraphs 20 and 21:
"20. Not to erect nor install on the premises without the landlord's consent (such consent not to be unreasonably withheld) any engine or machinery, provided always that the landlord's consent shall not be required for normal domestic machinery.
21. Not to load or use the walls, ceilings or structure of the premises in any manner which will cause damage to or undue strain upon the main timbers or structural parts of the building."
15. And then finally paragraph 24:
"24.1 To comply in all respects with the Planning Acts.
24.2 Immediately after the grant or refusal thereof, to supply to the landlord a copy of any planning permission or refusal relating to the premises or their use."
"To raise no objections to any application within the next three years for planning permission or other consents or any reasonable works which the tenant may carry out to create a flat on the first floor of the building and an additional flat in the area currently forming the airspace above the height of the building."
"Following the obtaining of planning consent for residential use, not to use the premises or any part thereof other than for residential purposes".
That residential planning consent having been obtained, there can be no doubt that clause 11 became effective in binding the tenant and the tenant's successors in title. However, a second planning permission, as I have said, was obtained in 2014 for a 19-bedroom hotel. I interpose at this point to mention simply that the plan apparently now is slightly different, for a 17-bedroom hotel, but I do not think anything turns on that for the purposes of what I have to decide.
"I go back to the notice for a moment to illustrate that. The fault committed is described as the part use for hotel purposes. If it is right that hotel purposes is a vague expression with no clear and consistent meaning, then it may very well be that the enforcement notice is not good enough because it does not detail with sufficient clarity the complaint which is being made. Mr Howard says that if use of a building of this kind for bedsitting accommodation is not equally clearly understood and recognisable, it can be said in this case that the part of the enforcement notice which requires those steps to be taken to restore the situation before the development took place is also too vague and ineffective for present purposes. On the other hand, if, as I believe, the distinction is clear and fully understood by all concerned, then those objections disappear because in the context of this case and with the premise of themselves to look at without studying the enforcement notice, that which is complained of and that which is required becomes clear enough. I have no doubt that this is well understood and is acceptable as an ordinary use of English, namely that the real difference between use as bedsitting rooms and use for the purposes of a hotel turns on the stability or instability of the population in the premises and the extent to which they are making the individual flatlets their homes. The essence of a hotel is that it takes transient passengers. Of course, there may be an individual here and there who stays for a long time if it suits him, and there a buildings which are wrongly described as hotels or residential hotels, but the basic feature of a hotel as the word is used in the English language is that it contains a transient population because it is there to serve people travelling who require short stays only. By contrast, the bedsitting room and the way in which the phrase is used in English is somebody's home. It is where somebody lives. It is where somebody remains for a substantial time. Accordingly, one has in bedsitting room use a far more stable population than one has in a hotel use."
"not without the company's consent to use or occupy the flat otherwise than as a single private residence in one occupation only, so that the total number in residence shall not exceed three persons".
That is a very precise form of covenant.
25. The Court of Appeal affirmed that decision. What Fox LJ said, at page 42L, was this:
"In my view, the defendant’s user is not residence user at all. It is the business of providing service accommodation, and it seems to me there is no question of the defendant using it as a residence, much less as a private residence. It is true that this was a lease granted to the company in expensive premises and a company (unlike an individual) may have limited use for such premises unless it can exploit it for value. Licencing in the manner which has been adopted in this case is such a method of exploitation, but in my view the judge's decision does not mean that the property is frozen in the defendant's hands. The defendant can exploit it simply by subletting it, and it seems to me that it is reasonable enough to suppose that a landlord would in a lease of this sort stipulate for exploitation by subletting rather than by licencing. The occupancies in the case of subletting are likely to be longer periods with less comings and goings. The subtenants will probably be more carefully chosen than would be the case with licensees, and the creating of subleases requires the consent of the landlord."
"… not to use or permit to be used the property for any purpose other than that of a private dwelling house, and no trade or business or manufacture of any kind shall at any time be permitted to be set up or carried on on any part of the property or in any building now or hereafter within the perpetuity period erected thereon."
"16. There are many people who have holiday homes to which they go as and when they can, and a significant proportion will let their properties on holiday lets when they do not want to or need to use them. For my part, if the matter was free from authority, I would have no difficulty in concluding that insofar as someone uses his or her own property for a holiday, they are using that property as their second home, and there would be no difficulty in coming to the conclusion that they were using it as a private dwelling house. Again, if the matter were free from authority, I would conclude that any use being made of that property by their family would essentially fall into the same category.
17. However, and again, apart from authority, I have difficulty in accepting the proposition that where there is a commercial transaction by which property is let on a holiday let, the use of that property for that purpose can properly be described as use of the property as the holidaymaker's own private dwelling house.
18. Although there is no direct authority on the meaning of the phrase 'use as a private dwelling house' in the context of holiday lets, there is authority to which we have been referred dealing with the phrase in other contexts."
"34. It follows that there would have been a respectable argument for saying that the use of the phrase 'dwelling house' and the word 'dwelling' in the Rent Act could, even in the absence of section 9, have excluded a tenancy for the purposes of a holiday. Clearly, however, Parliament considered that express exclusion was appropriate. That does not to my mind afford any assistance to the respondents in relation to the proper meaning to be given to the phrase which we have to consider in the covenants in question, which must be construed in their context.
35. In the light of all these considerations, I consider that the answer to the question posed by this case is dependent on whether or not one can properly describe the occupation of those who are the tenants for the purposes of their holiday as being an occupation for the purposes of the use of the dwelling house as their home.
36. Both in the ordinary use of the word and in its context it seems to me that a person who is in a holiday property for a week or two would not describe that as his or her home. It seems to me that what is required in order to amount to use of a property as a home is a degree of permanence, together with the intention that that should be a home, albeit for a relatively short period, but not for the purposes of a holiday. It follows from that analysis that the evidence before the judge and before this court really permits of only one conclusion, namely that that is that the occupation of the holidaymakers of these two properties was not for the purposes of use as a private dwelling house within the meaning of the phrase 'in these covenants'."
"It appears to me that the concept of using a property as a private dwelling-house involves the use of it, at least in some way, as a home. I can understand that a person with two houses, who spends his holidays in one of them, may fairly be regarded as spending them in his second home. However, we are not concerned with that situation here. A person renting a holiday house for, say, one or two weeks is not using it, in any sense, as his home. On the contrary, he leaves his home in order to have his holidays somewhere else."
32. The second authority relied on by the defendant is that of Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC), which is a decision of HHJ Stuart Bridge sitting in the Upper Tribunal (Lands Chamber) on appeal from a decision at first instance at the First-tier Tribunal. That was a case of a long lease in relation to which the question was posed in paragraph 1:
"A long lease contains a covenant not to use the demised premises or permit them to be used for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence. If the leaseholder advertises on the internet the availability of the premises (a flat) for short term lettings and grants a series of such lettings, do the leaseholder’s actions breach the covenant?"
"41. The emphasis is therefore on the meaning of the relevant words used in their particular, fact-specific, context. It follows that the assistance to be given from a prior decision of the courts which construes a similar provision in a particular way may be limited. Each lease is different; and so is each clause. It is necessary for considerable caution to be exercised when considering prior decisions as due weight being given to the context may lead to a different conclusion."
34. The judge then went on to consider further matters. At paragraph 48 he said:
"The clause does not state that the premises are to be used as the private residence of the lessee or the occupier, but as 'a private residence'. The use of the indefinite article (‘a’) is significant. A person may have more than one residence as any one time a permanent residence that he or she calls home, as well as other temporary residences which are used while he or she is away from home on business or on holiday. It is immaterial that the occupier may have another, more permanent residence elsewhere as there is no requirement that the occupier is using the property as his or her only (or main, or principal) residence. However, it is necessary, in my judgment, that there is a connection between the occupier and the residence such that the occupier would think of it as his or her residence albeit not without limit of time. In short, for the covenant to be observed, the occupier for the time being must be using it as his or her private residence."
35. Then at paragraphs 52 and 53 the judge said:
"52. The main thrust of the landlord’s submissions concerns the duration of the lettings being advertised and granted by the appellant. I must consider whether the duration of the letting affects the answer to the question whether the occupier is using the premises as a private residence. As I have emphasised, it is the use being made for the time being, by the occupier for the time being, that is material. If the occupier is in the property for a matter of days (rather than weeks or months or years), does that transform the nature of the use being made of the premises such that the occupier would not then be using them as a private residence?
53. I have reached the view, consistent with the decision of the Ft T, that the duration of the occupier’s occupation is material. It does seem to me that in order for a property to be used as the occupier’s private residence, there must be a degree of permanence going beyond being there for a weekend or a few nights in the week. In my judgment, I do not consider that where a person occupies for a matter of days and then leaves it can be said that during the period of occupation he or she is using the property as his or her private residence. The problem in such circumstances is that the occupation is transient, so transient that the occupier would not consider the property he or she is staying in as being his or her private residence even for the time being."
37. The defendant also relied on another planning case, called Moore v Secretary of State for Communities and Local Government and another [2012] EWCA Civ 1202. The court comprised Lord Neuberger MR, Longmore LJ and Sullivan LJ, although Sullivan LJ delivered the judgment of the court. That was a case where a property which originally formed part of an extensive hospital complex had been sold off, and permission had been granted for a particular property forming part of that complex to be converted into an eight-bedroomed dwelling. The conversion works were carried out, and originally the property was occupied as a dwelling pursuant to the permission granted to use the property for C3 purposes. That is a reference to class C3 in Schedule 1 to the Town and Country Planning (Use Classes) Order 1987, which refers to:
"Use as a dwellinghouse (whether or not as a sole or main residence) by -
(a) a single person or by people to be regarded as forming a single household;
(b) not more than six residents living together as a single household where care is provided for residents; or
(c) not more than six residents living together as a single household where no care is provided to residents (other than a use within Class C4)."
"McCullough J said that whether a building is or is not a dwelling-house is a question of fact. Having considered a number of situations where buildings would still be dwelling-houses even though they were not occupied throughout the year - second homes, houses left empty pending sale, houses unoccupied because they are flooded or undergoing extensive repair - McCullough J said at p.146:
'Suppose that a London-based company requires a succession of employees to be based one at a time for four months in a location far distant from London. Suppose that the company buys a house and makes it available to each employee and his family for his tour of duty. It would still be a dwelling-house. Take a holiday cottage subject to time-share with a number of owners each enjoying the right to occupy it for two particular weeks each year. That would still be a dwelling-house.'
What have these examples in common? All are buildings that ordinarily afford the facilities required for day-to-day private domestic existence."
Of course, this case is a case about planning control. It is far removed from the kind of case I am dealing with. The defendant, it is fair to say, relied on it really to show that there was another approach that could be taken contrary to the approach taken in the Mayflower case in the planning context.
"In Jenkins v Price [1908] 1 Ch 10 it was held that a covenant as to residence impliedly prohibited any assignment to a limited company. As to paying guests, see Thorn v Madden [1925] Ch 847. In Blanway Investments v Lynch (1993) 25 HLR 378 it was held that where a residential property is let to an individual subject to a covenant that it is to be used as a private residence for the tenant, the natural presumption is that the tenant should be entitled to occupy with his or her family, including anyone de facto a member of the family. Clear words would be necessary to confine occupation to the tenant herself or to exclude those with no legal relationship to the tenant."
The defendant relies I think on those closing words to show that it does not matter in construing the covenant that the persons might be residing in the property who had no legal relationship to the tenant.
"A covenant which limits use of land to that of a private dwelling house or to that of a private residence prohibits such non-residential uses as a shop or a school or a classroom or an office for taking orders for coal, even if no coal is kept on the premises or use of part of the land is as a roadway to other properties. The adjective 'private' makes the domestic nature of the restriction clear, thus excluding, for instance, use for a hospital, or a house where a doctor had patients under her care, or a hotel or a guest house, or for licensing a serviced apartment to tourists, or letting to holidaymakers under short tenancies, or a charitable boarding school, or a boarding house distant from a school, or a home for former medical inpatients. But it can include letting to a small group of students for a year or detached accommodation for domestic staff, even where the overall restriction is to one family."
So there we see in the second part of that paragraph the importance which the editors of the work attach to the adjective "private" when in conjunction with the word "residence", and the defendant plainly founds on that.
42. The relevant principles of construction of leases of this kind have been considered in a number of cases, in particular the decision of the Supreme Court in Arnold v Britton [2015] UKSC 36. Those principles were distilled and summarised by O'Farrell J in a case called Royal Devon and Exeter NHS Foundation Trust v ATOS IT Services UK Ltd [2017] EWHC 2197 (TCC), where she said:
"When interpreting a written contract, the court is concerned to ascertain the intention of the parties by reference to what a reasonable person, having all the background knowledge which would have been available to the parties, would have understood them to be using the language in the contract. It does so by focussing on the meaning of the relevant words in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the contract, (iii) the overall purpose of the clause and the contract, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions …"
"In my view, the defendant’s user is not residence user at all. It is the business of providing service accommodation, and it seems to me there is no question of the defendant using it as a residence",
is very much the principle which applies in the context of this lease. Accordingly, I hold that the purpose of carrying on a boutique hotel pursuant to the planning permission granted in that behalf would infringe covenant number 11 in schedule 4 of the lease.
Epiq Europe Ltd hereby certify that the above is an accurate and complete record of the proceedings or part thereof.