High Court of Ireland Decisions

11 December 1997

COSTELLO P:

INTRODUCTION.

These proceedings relate to a site in the heart of the city of Cork of a little over .7 acres. Entrance to the site is by means of an archway under a three storey house on Grand Parade and from another access on South Main Street. On the left of the site (as one enters it) is the River Lee. The site is presently, and has for many years, been used as (a) a filling station and garage selling the products of Irish Shell Ltd and (b) as a car park. Over the entrance to the site on Grand Parade is a sign which displays Irish Shell's logo and the words "City Car Park". By agreement of the 17 December, 1996 the plaintiffs agreed to purchase the site from Irish Shell Limited and they intend to develop it by constructing apartments and commercial units, purchasing it subject to a hiring and license agreement dated the 1 October, 1994 made between Irish Shell Limited and one Stephen Leonard, who is the first named defendant. Mr Leonard sold his interest in the site on the 12 December, 1996 to Lecorn Limited who are the second named defendants. Mr Leonard's agreement of the 1 October, 1994 with Irish Shell terminated on the 30 September, 1997 but by notice of the 30 September given pursuant to section 20 of the Landlord and Tenant (Amendment) Act 1980 Lecorn Limited claimed that a monthly tenancy of #1,446 per month (plus vat) had been created by the agreement of the 1 October, 1994 and the grant of a new tenancy under Part II of the 1980 Act or, in the alternative, #1m compensation. This was followed by an application for a new tenancy to the Cork Circuit Court on 4 November, 1997. It claimed that the premises were a "tenement" within the meaning of the Act, that they were held under written contract of tenancy made the 1 October, 1994 between Irish Shell Limited and Mr Leonard, that they were in the occupation of the then tenant and had been continuously in occupation of the then tenant and his predecessors in title for upwards of 20 years or alternatively during the whole of three years preceding the 1 October, 1994 and bona fide used by the tenant thereof for the purpose of carrying on a business. By answer filed the 17 November, 1997 the plaintiffs herein claimed inter alia that the premises were not "a tenement", and that the contract of the 1 October, 1994 was not a contract of tenancy. In addition the defendants pleaded that if the contract was a contract of tenancy they intended to pull down or rebuild or reconstruct the buildings on the premises and further that the creation of the tenancy would not be consistent with good estate management.

These proceedings had been commenced by summons in this court of the 6 October, 1997 and on the same day a motion for an injunction restraining the defendants, that is Mr Leonard and Lecorn Limited, from trespassing on the plaintiffs lands at the "City Car park", Grand Parade, Cork. It is now agreed that if the plaintiffs are entitled to relief an order should be made against the second-named defendant only. Affidavits were filed by the parties and eventually it was ordered that this motion be tried as the trial of the action on oral evidence.

Preliminary Issue.

At the hearing of the trial counsel on behalf of the defendants raised a preliminary issue. It was submitted that the court had no jurisdiction to grant an injunction because of the proceedings pending in the Cork Circuit Court under the 1980 Act. It was urged that (a) exclusive jurisdiction was given to the Circuit Court under the 1980 Act to determine Lecorn's right to a new tenancy, (b) that this court had no jurisdiction to determine the issues arising on that application, (c) that by virtue of section 28 of the 1980 Act Lecorn were entitled to retain possession of the premises pending their application for a new tenancy, (d) that accordingly the injunction claimed could not be granted. I disagreed with these submissions. I concluded that (a) the Circuit Court had exclusive jurisdiction under the 1980 Act to hear and determine claims for a new tenancy, (b) that the present proceedings were for injunctive relief based on a claim that the defendants were trespassers (c) that the 1980 Act did not deprive this court of jurisdiction to hear such a claim, (d) that ordinarily, where a right to a new tenancy under the 1980 Act was contested on the ground that a "tenancy" did not exist or that the premises were not a "tenement" these issues should be determined in the Circuit Court and this Court should stay proceedings in which these issues were raised, that (e) because of the particular urgency in this case the court should not decline jurisdiction, that (f) should the court decide that (i) the agreement of the 1 October, 1994 constituted a "tenancy" and (ii) the site constituted a "tenament" within the meaning of the Act then section 28 of the Act applied and Lecorn would be entitled to retain possession pending the determination in the Circuit Court of the application for a new tenancy, and I would accordingly dismiss these proceedings. I therefore decided to hear oral evidence and determine these two issues. Should I decide them in Lecorn's favour, the Circuit Court would then be required to determine whether or not a new tenancy should be granted in the light of the plaintiff's intended use of the site and perhaps the issue of compensation.

The Facts.

The defendant Mr Stephen Leonard had two brothers, Jack and Christie. The three brothers had worked on the site since 1960. At all times they occupied under agreements made with Irish Shell with one or other of them. Initially these agreements were yearly and later for three-yearly periods. They were firstly made between Irish Shell Limited and Jack Leonard. After his death in 1988 they were between Irish Shell and Christie Leonard. Christie died in 1992 and the two final agreements were made with Stephen Leonard the first-named defendant herein. The earlier agreements are not now available but Mr Leonard accepts that they were in the same form as the three agreements which were proved in evidence.

The first agreement which was proved was dated the 28 June, 1990. It was made between Irish Shell Limited and Christopher Leonard. It is entitled "Hiring and License Agreement". It was an agreement by which Irish Shell hired the equipment referred to in the agreement for three years from the 10 December, 1988 and granted him a license to be present at the filling station known as "City Car Park" for this period. The second agreement was made with Mr Stephen Leonard and was signed by him on the 25 November, 1992. It is similarly headed and was an agreement for the hire of the equipment for three years from the 1 October, 1991 and the granting of a similar license. The third agreement is also between Irish Shell Limited and Stephen Leonard. It was signed by him on the 25 May, 1994 and is similarly entitled and is an agreement to hire the equipment for three years from the 1 October, 1994 and to grant a similar license for that period.

Over the years the occupation of the site and its physical characteristics have changed. In the 1960's it was used as a garage and petrol filling station and initially consisted of petrol pumps, repair ramps, repair workshops and a car washing unit. The business that was carried on was the sale of petrol and oil and the carrying out of repairs and the painting and washing of vehicles. A spray painting operation was initially carried on by a person who paid a rent to the Leonard brothers. At one period there were 32 people working on the premises. In 1969 the operator of the spray painting unit left and it and 12 workshops were closed down. There was then a letting made of this area to a Mr Maher for two years from 1970 to be used by him as a public car park. Mr Maher left and after 1972 the Leonard brothers took over the operation of the car park and carried it on in conjunction with the garage and petrol filling station. In 1972 larger petrol tanks and new petrol pumps were installed by Irish Shell Limited and work was done on the canopies over the petrol pumps. There were derelict buildings on other land adjacent to the site and these were knocked down by Irish Shell in the 1970's. The car park area was extended and a license to use the larger site was granted by Irish Shell.

There are presently, as one enters from Grand Parade, 4 petrol pumps under a canopy, then two petrol pumps under a canopy. There are two small offices between the first set of pumps. There is a small car park office which is used to receive payment and keys from users of the car park. There is a three storey building over the entrance arch on Grand Parade, which for a time was used for storage but now it is derelict. There are four large motor fuel tanks underground. These are built under the area now used as a car park. There is a garage and compressor house beyond the pumps as well as two garages which are derelict and boarded up. A low wall divides the filling station area from the car park area.

There are in fact two businesses being carried on on the site (a) the business of supplying petrol and motor fuel to the public and (b) a car park business. In considering the land which is associated with the first business I accept that part of the land in the car park under which the tanks have been built and an area around them must be considered as land associated with the first business. I accept the evidence of Mr Ryan, a Chartered Surveyor called on behalf of the plaintiffs, and hold that approximately one third of the site is associated with the first business. Approximately two third's of the area of the site is associated with the car park business. Quite clearly the land around this office is not ancillary to the small office which receives payment and keys. On the contrary, the office is ancillary to the business of parking cars. The defendants case is that the area of the car park is ancillary to the business of selling petrol and motor fuels and submit that the whole site is a "tenement" within the meaning of the 1980 Act as (a) the land on the site is ancillary to the buildings on it in which the business is carried on and (b) it is held under a contract of tenancy. I will return to this point later.

Mr Noel O'Reilly was the retail superintendent of Irish Shell in the Cork area between 1982 and 1990 and negotiated contracts entered into between Irish Shell and the Leonard brothers during that period. Mr Noel Coughlan carried out similar duties since 1990 and negotiated the agreement signed by Mr Stephen Leonard in November 1992 and the agreement signed by Mr Stephen Leonard on 2 May, 1995. There is a conflict of evidence between the testimony of Mr Noel Reilly and Mr Noel Coughlan on the one hand and Mr Stephen Leonard on the other. I think that the recollection of Mr Stephen Leonard is infirm and I prefer the evidence of Mr Noel Reilly and Mr Noel Coughlan where it conflicts with his. In particular I do not think that either Mr Noel Reilly or Mr Noel Coughlan referred to the agreements which Mr Christie Leonard and later Mr Stephen Leonard entered into as "leases" or that they referred to the sums payable under the agreements as "rent". I am satisfied that at all times the representatives of Shell referred to Shell's agreement with the Leonard brothers as "licences" and the sums payable under the agreements as "licence fees".

Major repairs were carried out to the quay wall abutting the river Lee. The first repairs were carried out by the Cork Corporation and the second repairs were carried out by Irish Shell. The Leonard brothers were not required to make any payment in respect of the works carried out.

The agreement signed by Mr Stephen Coughlan on the 25 November, 1992 was for a three year period from the 1 October, 1991. It would, accordingly, expire on the 30 September, 1994. Prior to this date speculation had grown concerning the future use of the site and particularly whether it might be sold by Irish Shell for development. This was discussed between Mr Stephen Leonard and Mr Noel Coughlan and Mr Leonard wrote on the 27 September, 1994 to confirm their discussion. He went to his solicitor, Mr James Riordan, who had a discussion about the situation with Mr Coughlan and Mr Riordan wrote to him on the 29 November, 1994. In the course of this letter he expressed the opinion that Mr Leonard was a tenant and not a licensee and that he was making an offer to purchase the site strictly without prejudice to his rights. On the 3 January 1995 Mr McDonagh, the retail network manager of Irish Shell, replied to Mr Riordan pointing out that the site was not currently on offer for sale and further pointing out that Mr Leonard held the property under a license agreement which contained an express clause to the effect that the agreement did not create the relationship of landlord and tenant between the parties. Mr McDonagh wrote again on the 26 April, 1995 to Mr Leonard pointing out that the license agreement of the 1 October, 1991 came up for renewal on the 1 October, 1994, that a new license agreement had been offered at the same fee which Mr Leonard had refused to complete and stating that unless the attached license agreement was completed recovery of Shell's property would have to be sought. Mr Riordan replied on the 2 May, 1995 referring to certain "representations" which it was said had been made to Mr Leonard and on the strength of these representations Mr Leonard had signed the agreement "but strictly on the understanding that his status as occupier of the premises would continue as hitherto". Mr Fallon, the Corporate Services Manager replied to Mr Riordan on the 26 June, pointing out that it was not accepted that the agreement created the relationship of landlord and tenant, that the company had at that time no intention of making any change in the "Cork City Car Park" and that one part of the agreement was returned "on the strict terms outlined in the agreement with no supplementary conditions attaching thereto".

The Hiring and License Agreements.

I must now refer in greater detail to the agreements which the parties entered into. The three agreements proved in evidence are each headed "Hiring and License Agreement". Each contained the same printed terms and allowed for variation in certain of the conditions in accordance with the parties agreement. The last agreement is dated the 1 October, 1994. It was signed by Mr Leonard on the 2 May, 1995. It was made between Irish Shell Limited of the one part and Mr Stephen Leonard (who is referred to throughout as "the hirer") of the other part. Clause 1 provides that the company agrees to hire to the hirer the tanks, pumps machinery, goods and articles described and sets out in the schedule hereto which is referred to in the agreement as "said equipment" for a period of three years from the 1 October, 1994. Clause 2 conferred a license on the hirer to attend at the "City Car Park" at all times necessary for the care of or the use thereon of the equipment. Clause 3 contained an agreement by which the hirer agreed to pay for the first period of twelve months the sum of #1,446 plus vat and during the second twelve months and the third twelve months period "such fee as may be determined under normal review by the profitability sharing basis for each twelve month period". The evidence establishes that there was never any review of the monthly payments either under this or previous agreements. Clause 4 provided that the purpose of the hiring and the "ancillary license" was to enable the hirer to carry on the business of selling the company's motor fuel. Clause 5(a) provided that agreement and the benefits conferred on the hirer were a "personal privilege to the hirer". Clause 6 provided as follows:-

"It is hereby agreed and declared and it is the intention of the parties hereto and each of them that nothing in this agreement shall be, or ought to be construed as granting any interest whatsoever in said site to the Hirer or giving rise to the relationship of the landlord and tenant between the Company and the Hirer, or as conferring on the Hirer any exclusive right to possession of the site or any part thereof, or any right of possession at all therein, save to the extent necessary to give effect to the hiring and to enable the provisions of this agreement to be fulfilled".

Clause 7 contained a number of sub-clauses imposing obligations on the hirer during the currency of the agreement. Clause 8 provided that the company would insure the equipment and repair and replace it when necessary and would supply motor fuel to the hirer. Clause 9 dealt with the termination of the agreement, and inter alia, allowed the company to terminate on one month's notice the hiring should the hirer reach the age of 65 during the continuance of the agreement. Clause 10 provided that the agreement would not be, renewed, inter alia, should the company require vacant possession for the purpose of redeveloping the site or disposing of the interest therein or operating the site through an employee of the company.

The agreement dated the 1 October, 1994 contained no schedule of the equipment hired. The previous agreement between the party did contain such a schedule and in my opinion nothing turns on the fact that the parties failed to incorporate a schedule in this agreement. It is clear that the parties were well aware of the equipment to which the agreement related.

Conclusions.

The first issue: Lease or License.

The legal principles to be applied in relation to the first issue have been established by the Supreme Court in Irish Shell and BP Limited v John Costello Limited ([1981] ILRM 66). That was a case in which Irish Shell had hired equipment on a site to the defendant from year to year from 1967 to 1974. A new agreement gave the defendant a license to use the premises and the use of the equipment. The new agreement omitted some clauses which had been present in the original agreement including a clause whereby the defendant had covenant not to interfere with the possession and use of the premises by Irish Shell. The issue in the case was whether the agreement created a license or a tenancy. Giving the judgment of the majority of the court Griffin, J pointed out that the court should look at the transaction as a whole and at the terms of the contract between the parties "to find whether in fact it is intended to create a relationship of landlord and tenant or that of licensor and licensee" (p 70). Having concluded that the agreement gave the right to exclusive occupation and possession to the defendant Griffin, J pointed out that the right to exclusive possession is no longer conclusive that a tenancy exists but that nevertheless it is one of the important indicators in an agreement that a tenancy and not a license is given. He then went on to detail further factors tending to establish that a tenancy had been created in the instant case. These were;

"(i) Provisions expressly prohibiting the defendants from doing what they would have no right to do if they were licensees -- eg assigning or charging the benefit of the agreement; close clause 4(q);

(ii) Although the plaintiffs had erected the workshop for the defendant and intended that they should use it as such, the purported "license" is only to use the premises "for the use therein of the said equipment". If this were the true intention and agreement of the parties, the defendants would not be entitled to use the workshop or carry on the repair and maintenance of motor vehicles notwithstanding that this was the sole purpose for which the workshop was erected;

(iii) Clause 6 is essentially a re-entry clause, even though the word re-enter is not used and is much more appropriate to a tenancy agreement than a license -- indeed it would be inconsistent with a license;

(iv) The proviso in Article 8 of the earlier agreements, whereby it was agreed that nothing in the agreement would be deemed to create the relationship of landlord and tenant between the parties, was omitted from the agreements with the defendants. Its omission is in my view clearly of major significance in determining whether a license or a tenancy was intended".

Griffin, J concluded that;

"In all the circumstances of this case, although some of the provisions of the agreement appear to be personal in their nature (eg that in relation to the sale of the plaintiffs products), in my opinion, what was given to the defendants went far beyond the personal privilege given to the occupier of the site, and was in the nature of a tenancy of the site" (p 71).

Applying these principles established by that case I will firstly consider whether or not, on an examination of the terms of the contract entered into, the parties in fact intended to create the relationship of landlord and tenant rather than that of licensor and licensee.

The agreements entered into between the parties could not have been in clearer terms. Quite explicitly the parties agreed (a) that the relationship of landlord and tenant was not to be created and (b) that there would be a hiring of the equipment referred to in the agreements and a license granted to occupy the site. According to the agreements no exclusive possession of the site was given by Shell to any of the Leonard brothers with whom they contracted. The agreements were very different to those under consideration in Irish Shell Limited v John Costello Limited In the present case the contracts contain no re-entry clause but a termination clause; the parties did not delete a clause to the effect that no landlord and tenant relationship would be created but in fact retained such a clause throughout their relationship; there was no provision expressly prohibiting the occupier for doing what they would have no right to do if they were licensees; the user clauses were different.

I turn then to the evidence relating to the transactions as a whole between the parties. In my opinion the length of time during which the Leonard brothers occupied the site does not assist the defendants case. The evidence establishes that they occupied under agreements entered into under a regular basis, and that these were described as "Hiring and License Agreements". The last three agreements which were proved in evidence establishes that the agreements explicitly stated that the relationship of landlord and tenant was not created by them and accordingly the length of possession could not in itself effect the relationship created by the successive agreements by which possession was permitted.

Although at all times the Leonard brothers held the keys of the site and Shell did not have any duplicate keys this does not necessarily mean that the parties intended that the possession of the Leonard brothers would be an exclusive one. This practice was in fact adopted by Shell in respect of all their company-owned sites in respect of which licenses were granted for their operation. The agreements they entered into declared that the operators occupied as licensees. To give effect to this agreement it was not necessary for Shell to retain keys of the premises -- they had contractual rights over the site which they could enforce at any time. In my opinion it is not to be inferred that because Shell allowed the Leonard brothers to occupy the site for many years the possession which they enjoyed was an exclusive one -- the regular agreements which the parties signed establish otherwise.

Mr Leonard stated that when he signed the agreements tendered to him by Shell he did not read them. But even if this is so he is still bound by his signature and he cannot rely on his own default to claim that he understood that he was a tenant of the site when, by reading the agreements tendered, it would have been clear that he was not.

Nor do the circumstances surrounding the signing of the last agreement transform the license contained in it into a tenancy. Shell denied the claim made by Mr Leonard's solicitor that the previous agreements had created a tenancy and the parties entered the new agreement, which expressly negatived a tenancy, without reconciling their differences. If the plain meaning of the contract he signed was that he took the site as a licensee Mr Leonard cannot now claim that, merely because he had erroneously argued the contrary, a contract of tenancy was created.

There was an increase in the license fee as a result of negotiations carried on between Mr Leonard and Mr Coughlan in November, 1992. I accept Mr Coughlan's evidence of what occurred during these negotiations. Shell, of course, knew the amount of fuel sold at the station and could accurately estimate the profits Mr Leonard had earned from them. It would have estimates of future sales and so could assess what in its opinion a reasonable fee should be. In addition it is clear that it took into account the fact that Mr Leonard was carrying on another business on the site. Shell did not request to see Mr Leonard's books in relation to either the petrol filling station or the car-park business but the estimated profit from the two businesses could be reasonably assessed. The negotiations took place over a number of days and in the course of them Mr Coughlan expressed a willingness to have the charges he was seeking for the premises confirmed by an auctioneer. In my opinion what Mr Coughlan said did not amount to an admission that Shell's charges were to be regarded as "rent" and I do not think that Mr Coughlan in any way negatived the clear words of the contract which the parties had entered into in the past and were proposing to enter into in November, 1992. The evidence establishes that the license fee was fixed not only by reference to the petrol filling business but also to the car-park business and that permission to use part of the premises as a car-park was also given. Accordingly the written agreements did not contain all the terms agreed between the parties. But the inclusion of the Leonards car-parking business in the transaction between the parties did not, in my judgment, effect the legal relationship created by the written agreement.

I hold, therefore, that the defendant, Mr Leonard, did not hold the site under a lease or contract of tenancy and that accordingly neither he nor Lecorn have a right to a new tenancy under the 1980 Act. The defendants Lecorn are now trespassers on the site as section 28 of the 1980 Act does not entitle them to retain possession of the site. The plaintiffs are entitled to an injunction to prohibit the continued occupation of the site.

Second Issue: Are the premises a "tenement"?

A new lease can only be granted if the premises in respect of which it is sought is a "tenement".

Section 5 of the 1980 Act provides that "tenement" means premises complying with certain conditions. Those relevant for the present case are the requirement that the premises;

"(i) . . . consist either of land covered wholly or partly by buildings or of a defined portion of a building;

(ii) if they consist of land covered in part only by buildings, the portion of the lands so covered is subsidiary and ancillary to the buildings".

Here, the premises the subject matter of Lecorn's application for a new tenancy consists of land covered in part only by buildings and Shell have submitted that the portion of the land not covered by building is not subsidiary and ancillary to the building and accordingly the premises are not a tenement. The right to a new tenancy only arises if the premises is a "tenement" and it is submitted that even if Mr Leonard was a "tenant" within the meaning of the 1980 Act the premises in respect of which a new lease is sought is not a "tenement" as therein defined and accordingly no right to a new tenancy exists. Furthermore, it is submitted that Lecorn has no right to remain in occupation of the premises pending the application of the Cork's Circuit Court because under the 1980 Act as the right to remain in occupation is only given to a tenant who occupies a "tenement".

As I have said, it is accepted by the plaintiffs that the petrol storage tanks are "buildings" within the meaning of the 1980 Act and that a small area of land around these tanks (as well as the land over the tanks themselves) should be included in the land which is ancillary to the filling station business. Mr Ryan, the Chartered Surveyor called on behalf of Shell Limited and the map which he produced showed the area of land on the site which is ancillary to the buildings in which the filling station business is carried on.

In fact only approximately one third of the land on the site is ancillary and subsidiary to the buildings in which the filling station business is carried on. This figure excludes the area of the site in which cars are parked. It was submitted on behalf of the defendants that this area should be included and it also is "ancillary and subsidiary" to those buildings because a great number of persons who park their cars in the car-park also obtain petrol when arriving at or departing from the car-park. But the evidence falls far short of establishing this fact. The defendants must have the figures for the turnover of the two businesses and it should have been possible to show what percentage of the total turnover is attributable to each business. It would not have been difficult to have kept a record of the number of persons parking who also purchased petrol over a given period. In the absence of some convincing evidence to support the defendants assertion I cannot hold that it has been established that the parking area is ancillary and subsidiary to the buildings associated with the filling station building. There is a small hut or kiosk at the entrance to the car park and situated in the car park itself in which an attendant takes the parking charges and the keys of parked cars. But the land in the car park is not ancillary and subsidiary to this small building -- indeed this small structure is ancillary to the land used to park cars.

Because the premises in suit are not " tenement" this means that Lecorn has no right to a new tenancy under the 1980 Act and no right to retain possession of it pending its application. This is an additional reason why the plaintiff's are entitled to the relief they claim.