Michaelmas Term [2018] UKSC 62 On appeal from: [2017] EWHC 1670 (QB)

JUDGMENT
S Franses Ltd (Appellant) v The Cavendish Hotel
(London) Ltd (Respondent)
before
Lady Hale, President
Lord Sumption
Lady Black
Lord Briggs
Lord Kitchin
JUDGMENT GIVEN ON
5 December 2018
Heard on 17 October 2018
Appellant Respondent
Joanne Wicks QC Guy Fetherstonhaugh QC
Benjamin Faulkner Nicholas Taggart
(Instructed by David
Cooper & Co
)
(Instructed by Maples
Teesdale LLP
)
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LORD SUMPTION: (with whom Lady Hale, Lady Black and Lord Kitchin
agree)
1. Part II of the Landlord and Tenant Act 1954 confers a qualified security of
tenure on business tenants. A tenant in occupation of the premises under a tenancy
for a term of years certain may stay over and request a new tenancy beginning upon
its expiry, unless before the tenancy was granted the landlord had served a notice
informing the tenant of his rights and the parties had then agreed to exclude the
relevant provisions of the Act. The tenant may apply to the court under section 24(1)
of the Act for an order granting one. The court is required to make that order unless
the landlord makes out one of seven grounds of opposition specified in section 30(1),
in which case it is required to refuse one. One of those grounds is that the landlord
intends to demolish or reconstruct the premises. The question which arises on this
appeal is whether it is open to the landlord to oppose the grant of a new tenancy if
the works which he says that he intends to carry out have no purpose other than to
get rid of the tenant and would not be undertaken if the tenant were to leave
voluntarily.
2. The directly relevant provisions of the Act are section 30(1)(f) and section
31A. Section 30(1)(f) provides that the landlord may oppose the grant of a new
tenancy on the ground
“that on the termination of the current tenancy the landlord
intends to demolish or reconstruct the premises comprised in
the holding or a substantial part of those premises or to carry
out substantial work of construction on the holding or part
thereof and that he could not reasonably do so without
obtaining possession of the holding …”
Section 31A (which was inserted by the Law of Property Act 1969, section 7(1)),
provides:
“(1) Where the landlord opposes an application under section
24(1) of this Act on the ground specified in paragraph (f) of
section 30(1) of this Act … the court shall not hold that the
landlord could not reasonably carry out the demolition,
reconstruction or work of construction intended without
obtaining possession of the holding if –
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(a) the tenant agrees to the inclusion in the terms of
the new tenancy of terms giving the landlord access and
other facilities for carrying out the work intended and,
given that access and those facilities, the landlord could
reasonably carry out the work without obtaining
possession of the holding and without interfering to a
substantial extent or for a substantial time with the use
of the holding for the purposes of the business carried
on by the tenant; or
(b) the tenant is willing to accept a tenancy of an
economically separable part of the holding and either
paragraph (a) of this section is satisfied with respect to
that part or possession of the remainder of the holding
would be reasonably sufficient to enable the landlord to
carry out the intended work.”
Section 37 provides that where a court is precluded from ordering the grant of a new
tenancy on certain grounds, including this one, the tenant is entitled to
compensation.
3. The premises in issue on this appeal comprise the ground floor and basement
of 80, Jermyn Street in the St James’s area of London. The freeholders of the
building are the South London and Maudsley NHS Foundation Trust and the
landlord is the head lessee. The tenant is a textile dealership and consultancy,
specialising in antique tapestries and textiles. It occupies the ground floor and
basement under an underlease for a term of 25 years from 2 January 1989, and uses
them as a retail art gallery, showroom and archive. The rest of the building is
occupied and managed by the landlord as a hotel. The local planning authority,
Westminster City Council, has designated the St James’s area as a “special policy
area”, in which it seeks to protect and promote certain uses, namely private members
clubs, art galleries and niche retail outlets. Pursuant to that policy, the premises
occupied by the tenant are recognised as having a specific, sui generis, use for
planning purposes, namely “mixed use, comprising retail, depository, research
centre, archive library, publishing and conservation for historic tapestries, textile art
and carpets.” Any material change of use would require planning consent.
4. On 16 March 2015, the tenant served statutory notices requesting the grant
of a new tenancy. On 15 May 2015, the landlord served a statutory counter-notice
opposing the grant of a new tenancy under section 30(1)(f) of the Act. On 8 June
2015, the tenant applied in the Central London County Court for an order. A
preliminary issue was directed whether that ground of opposition was made out.
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5. The facts are unusually stark. In its defence, the landlord put forward several
successive schemes said to represent the works which it intended to carry out. These
works were designed (i) to be sufficiently “substantial” to qualify under ground (f);
(ii) to be too substantial and disruptive to be carried out by exercising a right of entry
while the tenant remained in possession; and (iii) to avoid the need for planning
permission, which would have enabled the tenant to argue that its likely refusal
would make the project ineffective. In the words of the judge (HHJ Saggerson), the
proposed scheme of works was “designed with the material intention of undertaking
works that would lead to the eviction of the tenant regardless of the works’
commercial or practical utility and irrespective of the expense.” The scheme went
through three iterations. The first scheme involved incorporating the former bar of
the hotel into the ground floor of the premises. This scheme was shortly abandoned
and replaced by a new scheme which involved creating two new retail units
incorporating the premises occupied by the tenant and part of the hotel, and carrying
out certain associated external works including the installation of a new street door
to allow access to one of the units. The planning officers of the local authority
recommended this scheme for refusal, whereupon it was withdrawn and replaced by
a third scheme, which was the one eventually relied upon at the trial of the
preliminary issue. The third scheme was based on the second, with two significant
differences. First, it omitted the external works, which would have required planning
permission. For this reason, the internal wall dividing the two proposed retail units
stopped two metres short of the shopfront at ground floor level; and there was no
external door to one of the units, so that it could be accessed only through the other.
Secondly, the new scheme added more extensive internal works, many of which
were objectively useless. They included the artificial lowering of part of the
basement floor slab, in a way which would achieve nothing other than the creation
of an impractical stepped floor in one of the units; the repositioning of smoke vents
for no reason; and the demolition of an internal wall at ground floor level followed
by its immediate replacement with a similar wall in the same place. The cost of the
scheme was estimated by the landlord at £776,707 excluding VAT, in addition to
statutory compensation of £324,000 payable to the tenant.
6. It is common ground that the proposed works had no practical utility. This
was because, although the works themselves required no planning permission, it
would be impossible to make any use of them at all without planning permission for
change of use, which the landlord did not intend to seek. Planning permission would
have been required because the scheme involved combining premises permitted for
hotel use with premises permitted for sui generis use. In addition, one of the retail
units was unusable without an entrance from the street. In accordance with a
common practice in this field, the landlord supported its evidence of intention with
a written undertaking to the court to carry out the works if a new tenancy was
refused. The sole purpose of the works was to obtain vacant possession. The
landlord’s evidence was that it was prepared to run the risk that the premises
occupied by the tenant would be rendered unusable “in order to secure its objective
of undertaking [the third scheme] and thereby remove the claimant from the
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premises.” The landlord submitted that “the works are thoroughly intended because
they are a way of obtaining possession. That is all there is to it.” As the landlord’s
principal witness put it, the third scheme was “designed purely for the purpose of
satisfying ground (f).” The judge found that the landlord genuinely intended to carry
out the works if they were necessary in order to get rid of the tenant, but that it did
not intend to carry out the works if it were not necessary to do so for that purpose.
It would not, for example, have been necessary to carry out the works if the tenant
agreed to go voluntarily, or it were to be found possible to carry them out by
exercising a right of entry without obtaining vacant possession. The landlord gave
evidence that in the longer term, it was hoped that the departure of the tenant would
facilitate a more ambitious plan of works to add 28 bedrooms to the hotel. It was
proposed to review the desirability of proceeding with this plan in 2018. These
further works were not, however, the works relied upon by the landlord for the
purpose of satisfying ground (f).
7. Schemes like this will not always be economically feasible. They depend on
the value of vacant possession exceeding the cost of the useless works. But in
locations such as the west end of London, where property values are high and/or
rentals depressed by planning restrictions, they may make economic sense as a
means of obtaining vacant possession. On that footing, Judge Saggerson found that
the landlord genuinely intended to carry out the works and that ground (f) was made
out. He therefore declined to order a new tenancy. On appeal to the High Court, Jay
J agreed, but gave permission for a leap-frog appeal to this court.
8. The justification for the leap-frog appeal was that the decision of the courts
below was based on a line of authority in the Court of Appeal and the House of
Lords to the effect that the operation of the section depended on a two-part test. The
landlord had to prove (i) that it had a genuine intention to carry out qualifying works;
and (ii) that it would practically be able to do so. It was submitted on behalf of the
landlord that the effect of these decisions was that nothing else mattered. In
particular, the landlord’s motives, the reasonableness of its intentions, or the
objective utility of the works, whether for its own purposes or in the public interest,
were all alike irrelevant, except (as the landlord accepted) as material from which
the court might infer that the intention to carry them out was not genuine.
9. The origin of the two-part test proposed by the landlord is the decision of the
Court of Appeal in Cunliffe v Goodman [1950] 2 KB 237.This was an appeal in an
action for damages for breach of a repairing covenant on the expiry of a lease. By
section 18(1) of the Landlord and Tenant Act 1927, no such damages were
recoverable “if it is shown that the premises … would at or shortly after the
termination of the tenancy have been or be pulled down, or such structural
alterations made therein as would render valueless the repairs covered by the
covenant”. The language, purpose and context of the statutory provision under
consideration were therefore quite different from those of Part II of the Act of 1954.
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But it had been held in Marquess of Salisbury v Gilmore [1942] 2 KB 38 that the
test for the application of section 18(1) depended on the intention of the landlord at
the time when the tenancy came to an end, and the judgment of Asquith LJ in
Cunliffe has been treated as a general definition of intention. He held, at p 253, that
it connoted a “state of affairs which … he decides, so far as in him lies, to bring
about, and which, in point of possibility, he has a reasonable prospect of being able
to bring about, by his own act of volition.” On the facts of that case, the landlord
failed because it was found that he had no settled intention to carry out the works
but was reserving his final decision until further information should become
available.
10. After the passage of the 1954 Act, a trio of cases addressed the question of
intention in the context of ground (f). The background to all three cases was similar.
The landlord wished to occupy the premises himself, but ground (g), which
authorised the refusal of a new tenancy in that case, was available only if he had
held his interest in the premises for at least five years before the end of the tenant’s
term. Landlords who had acquired their interest within the five-year period therefore
proposed works to redevelop the premises before moving into occupation, in order
to bring themselves within ground (f) instead. The argument was that the existence
of ground (g) implied that ground (f) should not be available to a landlord who
intended to occupy the premises himself but failed to satisfy the conditions on which
ground (g) was available.
11. In Atkinson v Bettison [1955] 1 WLR 1127, the Court of Appeal held that this
kind of problem fell to be resolved by determining which was the primary reason
for the landlord’s desire to obtain vacant possession. The judge had refused to order
a new tenancy because he found that the landlord’s real purpose was to occupy the
premises and that the proposed redevelopment was no more than an ancillary
purpose directed to that end. The Court of Appeal affirmed his decision. Denning
LJ (with whom Hodson and Morris LJJ agreed) held that, where there were two
purposes, only the primary purpose was relevant.
12. In Fisher v Taylors Furnishing Stores Ltd [1956] 2 QB 78 it was held that
the landlord’s intention to demolish and reconstruct satisfied ground (f),
notwithstanding that his purpose was to occupy the premises himself without being
able to satisfy ground (g). Denning LJ, delivering the leading judgment in the Court
of Appeal, reinterpreted his earlier judgment in Atkinson v Bettison and resiled from
his statement that only the primary purpose was relevant. A landlord might have two
purposes but, provided that the purpose of demolishing or reconstructing the
premises was genuine, it would satisfy ground (f). Grounds (f) and (g) were distinct
and each of them had to be considered on their own terms separately. The true view
of the earlier decision, he said (p 84), was that the courts should ensure that landlords
whose real purpose was to occupy the premises themselves but failed to satisfy
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ground (g), did not devise spurious schemes of works in order to obtain possession
on ground (f):
“For this purpose the court must be satisfied that the intention
to reconstruct is genuine and not colourable; that it is a firm and
settled intention, not likely to be changed; that the
reconstruction is of a substantial part of the premises, indeed so
substantial that it cannot be thought to be a device to get
possession; that the work is so extensive that it is necessary to
get possession of the holding in order to do it; and that it is
intended to do the work at once and not after a time. Unless the
court were to insist strictly on these requirements, tenants
might be deprived of the protection which Parliament intended
them to have. It must be remembered that if the landlord,
having got possession, honestly changes his mind and does not
do any work of reconstruction, the tenant has no remedy. Hence
the necessity for a firm and settled intention.”
Morris LJ, who had also sat in Atkinson v Bettison, said (p 89):
“Where, as in section 30(1)(f), proof of an intention is to be
supplied, and of an intention related to a particular time, then
the genuineness of a declared intention may have to be decided.
Considerations as to what may be a landlord’s ‘primary
purpose’, or his ‘real intention’, or his ‘main purpose’, or his
‘secondary purpose’, or his ‘real reason’ (to quote phrases
which have been used), are only of relevance and assistance in
the course of deciding whether the landlord has proved that he
genuinely has an intention of doing one of the things specified
in section 30(1)(f), and of doing it on the termination of the
current tenancy.”
13. The third case was the decision of the House of Lords in Betty’s Cafés Ltd v
Phillips Furnishing Stores Ltd [1959] AC 20. The decision is authority for two
propositions: (i) that the relevant intention of the landlord was his intention at the
date of the hearing; and (ii) that grounds (f) and (g) were distinct grounds of
opposition, and that accordingly ground (f) should not be read as implicitly
excluding cases where the landlord wished to occupy the premises himself.
However, the tenant also sought to resurrect the argument rejected in Fisher v
Taylors Furnishing Stores Ltd that redevelopment must be the landlord’s primary
purpose, and two members of the Appellate Committee, Lord Denning and Lord
Morton, commented on that attempt, obiter. Lord Denning (p 52) reaffirmed the
view which he had expressed in Fisher. Lord Morton (pp 44-45) also rejected the
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tenant’s argument, but on the more limited ground that it wrongly assumed that
grounds (f) and (g) were mutually exclusive categories. The speeches throw little
light on the broader relevance (if any) of the landlord’s motives in seeking to
redevelop the premises. But the House may fairly be said to have implicitly endorsed
the approach taken in Fisher rather than that in Atkinson.
14. The decision of the Court of Appeal in Housleys Ltd v Bloomer-Holt Ltd
[1966] 1 WLR 1244 turned on the identity of the relevant premises for the purposes
of ground (f). Diplock LJ, however, took the opportunity to point out that Betty’s
Cafés must be regarded as having definitively laid to rest the concept of the primary
purpose floated in Atkinson v Bettison. He observed (p 1251) that the fallacy in that
case lay in the proposition that “one had got to look and see what the primary
intention or purpose or motive of the landlord was.” The same point was
subsequently made by the Court of Appeal in Turner v Wandsworth Borough
Council [1994] 69 P & CR 433, where it was decisive. The facts of that case were
that the landlord proposed to demolish the premises with a view to leasing them for
a short period as a car park and selling them thereafter if market conditions were
favourable. The judge found that the intention to demolish was genuine but that it
was colourable because it was simply a device to be able to sell. The Court of Appeal
allowed the appeal. Staughton LJ, delivering the only reasoned judgment, treated
the above cases as authority for the proposition that “in general, motive is irrelevant,
provided there is a genuine intention to demolish or reconstruct” (p 436).
15. As Baroness Hale pointed out in Majorstake Ltd v Curtis [2008] AC 787,
paras 34-35, it is clear that for the purposes of section 30(1)(f) of the Act of 1954 it
is for the landlord to decide what works he wishes to carry out and where. It follows
that if his intention is genuine, it cannot matter whether it is reasonable, or whether
reasonable changes to the scheme would make it consistent with the tenant’s
continued possession of the demised premises: see Decca Navigator Co Ltd v
Greater London Council [1974] 1 WLR 748; Blackburn v Hussain [1988] 1 EGLR
77, 79 (Taylor LJ).
16. Although the point must be regarded as res integra in this court, I accept the
submission of Mr Fetherstonhaugh QC (who appeared for the landlord) that the
touchstone of ground (f) is a firm and settled intention to carry out the works. The
landlord’s purpose or motive are irrelevant save as material for testing whether such
a firm and settled intention exists. This is implicit in the abundant case law generated
by the Act since Atkinson v Bettison and it is the plain meaning of “intention” in
both ground (f) and ground (g). Mr Fetherstonhaugh is also surely right in saying
that as a statutory interference with the landlord’s proprietary rights, the protection
conferred by the Act should be carried no further than the statutory language and
purpose require. It confers no more than a qualified security on the tenant. Certain
interests of the landlord override whatever security it was intended to confer on the
tenant, and one of them is the right to demolish or reconstruct his property in
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whatever way he chooses at the expiry of the term. Nonetheless, I do not think that
these considerations avail the landlord on the facts of the present case.
17. This appeal does not, as it seems to me, turn on the landlord’s motive or
purpose, nor on the objective reasonableness of its proposals. It turns on the nature
or quality of the intention that ground (f) requires. The entire value of the works
proposed by this landlord consists in getting rid of the tenant and not in any benefit
to be derived from the reconstruction itself. The commercial reality is that the
landlord is proposing to spend a sum of money to obtain vacant possession. Indeed,
in many cases, apart from the statutory compensation, landlords with proposals like
these will not even have to spend the money. They need only supply the tenant with
a schedule of works substantial and disruptive enough to be inconsistent with his
continued occupation. If the landlord’s argument is correct, the tenant will have no
incentive to go to court just to get an undertaking to carry out the works, from which
he could derive no possible benefit. He will recognise defeat and leave voluntarily.
The landlord will then have no need to give an undertaking to the court and no reason
to carry out the works. The result is that no overriding interest of the landlord will
be served which section 30 can be thought to protect. The right to obtain vacant
possession on the expiry of the existing term, which is all that the landlord is getting
for his money, is not in itself an interest protected by section 30. On the contrary, in
a case where the parties have not agreed to contract out of statutory protection, it is
the very interest that Part II of the Act is designed to restrict.
18. These considerations are relevant not so much in themselves as because in
such a case one would usually infer what in this case the landlord has been honest
enough to admit, ie that the landlord’s intention to carry out the works was
conditional. It intended to carry them out only conditionally on their being necessary
to get the tenant out, and not, for example, if he left voluntarily or if the judge was
persuaded that the works could be done by exercising a right of entry. Does an
intention of this kind engage ground (f)? The courts below thought that it was a
sufficient answer to this question that the condition was satisfied at the time of the
trial, because it was by then clear that the tenant would not in fact leave voluntarily
and that the works could not be done by way of a right of entry while he remained
in possession. A dictum of Neuberger J in Al-Malik Carpets (Private) Ltd v London
Buildings (Highgate) Ltd [1999] All ER (D) 971, Transcript p 11, suggests that he
too would have regarded it as sufficient, although the point was not directly in issue
in that case.
19. I respectfully disagree. The problem is not the mere conditionality of the
landlord’s intention, but the nature of the condition. Section 30(1)(f) of the Act
assumes that the landlord’s intention to demolish or reconstruct the premises is being
obstructed by the tenant’s occupation. Hence the requirement that the landlord
“could not reasonably do so without obtaining possession of the holding”. Hence
also the provision of section 31A that the court shall not hold this requirement to
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have been satisfied if the works can reasonably be carried out by exercising a right
of entry and the tenant is willing to include a right of entry for that purpose in the
terms of the new tenancy. These provisions show that the landlord’s intention to
demolish or reconstruct the premises must exist independently of the tenant’s
statutory claim to a new tenancy, so that the tenant’s right of occupation under a new
lease would serve to obstruct it. The landlord’s intention to carry out the works
cannot therefore be conditional on whether the tenant chooses to assert his claim to
a new tenancy and to persist in that claim. The acid test is whether the landlord
would intend to do the same works if the tenant left voluntarily. On the facts found
by Judge Saggerson, the tenant’s possession of the premises did not obstruct the
landlord’s intended works, for if the tenant gave up possession the landlord had no
intention of carrying them out. Likewise, the landlord did not intend to carry them
out if the tenant persuaded the court that the works could reasonably be carried out
while it remained in possession. In my judgment, a conditional intention of this kind
is not the fixed and settled intention that ground (f) requires. The answer would be
the same if what the landlord proposed was a demolition, conditionally on its being
necessary to obtain possession from the court.
20. More complex issues would arise if the landlord intended to carry out some
substantial part of the proposed works whether or not it was necessary to do so in
order to obtain vacant possession from the court, and part of them only if it was
necessary in order to gain possession. This might arise if, for example, the
unconditional part of the landlord’s plan was insufficiently substantial or disruptive
to warrant the refusal of a new tenancy, so that spurious additional works had to be
added for the sole purpose of obtaining possession. In a situation like that, the
answer is likely to depend on the precise facts. If, however, it is established that, at
the time of the trial, were the tenant hypothetically to leave voluntarily, the landlord
would not carry out the spurious additional works, then the tenant’s claim to a new
tenancy would normally fall to be resolved by reference only to the works which the
landlord unconditionally intended.
21. Just as the landlord’s motive or purpose, although irrelevant in themselves,
may be investigated at trial as evidence for the genuineness of his professed intention
to carry out the works, so also they may be relevant as evidence of the conditional
character of that intention. In both cases, the landlord’s motive and purpose are being
examined only because inferences may be drawn from them about his real
intentions. Likewise, although the statutory test does not depend on the objective
utility of the works, a lack of utility may be evidence from which the conditional
character of the landlord’s intention may be inferred. I am not persuaded by Mr
Fetherstonhaugh’s submission that if the law is as I believe it to be, landlords will
disguise their intentions more effectively than his clients did. It would be unworldly
for this court to ignore that possibility. But we cannot decide an issue of statutory
construction on the assumption that landlords will withhold the truth from the court
on an application for a new tenancy. We have to proceed on the footing litigants are
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honest or, if they are not, that they will be found out by the experienced judges who
hear these cases.
22. This makes it unnecessary for me to deal with the tenant’s alternative
submission that the landlord’s apparent intention should be disregarded for want of
any commercial purpose, by analogy with the approach taken in W T Ramsay Ltd v
Inland Revenue Comrs [1982] AC 300 to tax avoidance schemes. That submission
is not only more radical in its implications but more difficult to reconcile with
established authority on the Act of 1954.
23. I would allow the appeal and declare that on the facts found the landlord does
not intend, within the meaning of section 30(1)(f), to carry out the works specified
in the scheme of works relied upon in opposition to the tenant’s application for a
new tenancy.
LORD BRIGGS: (with whom Lady Black and Lord Kitchin agree)
24. I agree with Lord Sumption’s conclusion that this appeal should be allowed,
and with his reasons for that conclusion. I add a few words of my own out of respect
for the concern persuasively expressed by the County Court judge, that the forensic
assessment, as at the hearing date, of the question whether the landlord intended to
do the proposed works if the tenant left voluntarily would be to travel not merely
into the realm of the hypothetical, but into the positively counter-factual. The
reasonable expression of such a concern by a judge experienced in this type of
litigation should not lightly be disregarded.
25. In Betty’s Cafés Ltd v Phillips Furnishing Stores Ltd [1959] AC 20 the House
of Lords laid down, in unmistakable terms, a rule that the question whether the
landlord had the requisite intention to enable the grant of a new tenancy to be resisted
under section 30(1)(f) of the Landlord and Tenant Act 1954 had to be determined
by reference to the landlord’s intention as at the time of the hearing, not at any earlier
date. In that case the company landlord only proved its intention by reference to a
board meeting held a week after the hearing started. Nothing in these judgments
alters that rule in any way. But there are potential difficulties in addressing
conditionality of intention at the hearing date, which Judge Saggerson regarded as
fatal to the submission that this was what section 30(1)(f) should be interpreted as
requiring.
26. In the real world, as a business tenancy approaches its contractual termination
date, a landlord may well be faced with alternative future scenarios: will the tenant
leave voluntarily or seek a new tenancy? These alternatives may be discussed in
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negotiations, or at a mediation, before or even after the tenant begins proceedings
for the grant of a new tenancy. The landlord may well form alternative intentions to
meet both eventualities. If the tenant leaves voluntarily the landlord may just carry
out a modest refurbishment before occupying the premises for its own business, or
selling with vacant possession. If the tenant plans to fight for a new tenancy, the
landlord may intend to do large scale works, or to demolish premises with significant
development value, in order to be able (under the law as understood by the courts
below) to oppose the tenant’s application successfully. If the landlord is a company,
there may be board minutes in which these alternative intentions are recorded.
27. But by the time of the hearing these alternative intentions about what if any
works the landlord will do if the tenant leaves voluntarily will usually just be past
history. The tenant will by then have committed substantial costs, and risked liability
for the landlord’s costs, in pursuing its claim for a new tenancy to a hard-fought
hearing. The prospect of voluntary departure may have receded to a purely
theoretical irrelevance, like a cloud the size of a man’s hand. In such a case the
landlord may no longer have any relevant intention in relation to that hypothetical
and indeed counter-factual possibility. In some cases the tenant may from the outset
have manifested such a determination to seek a new tenancy at all costs that
voluntary departure may never have been a sufficient possibility for the landlord to
have given it a moment’s thought, still less formed an intention about it. To the
question in cross examination: “does your company now intend to carry out these
works if the tenant goes voluntarily”, the landlord’s witness might say, with
complete honesty, as at the hearing date, that she and her fellow directors don’t
waste their valuable time discussing irrelevant hypothetical possibilities.
28. It is to escape this forensic cul-de-sac that legitimate recourse may now have
to be had to a forensic examination of the landlord’s purpose or motive, as Lord
Sumption suggests. As he points out at the beginning of his judgment, the real issue
of principle in this case is whether the landlord should be able to resist a new tenancy
by reference to intended works of construction if its only purpose in doing them is
to get rid of the tenant. Of course, as the cases reviewed by Lord Sumption show, a
direct invocation of a purpose test is not permitted by the language of section
30(1)(f), because it speaks solely of intention. Parliament has chosen to define this
ground of opposition by reference to intention, but cannot have intended thereby to
enable a landlord to defeat a claim under the Act by asserting and proving an
intention to do works purely for the purpose of getting rid of the tenant, such that
the works (or the qualifying works) would not be done if the tenant left voluntarily.
29. The courts have until now restricted the forensic examination of the
landlord’s purpose or motive to a test of the genuineness of that intention. By
“genuineness” I have no doubt that the court meant honesty. In practice, that
examination has, for very many years, largely been overtaken by the common use
of the undertaking to the court to carry out the works if a new tenancy is refused, as
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a reliable litmus test for genuine intention. But neither the undertaking to the court,
nor the examination of the genuineness of the landlord’s intention, will reveal
whether the landlord’s intention is of the disqualifying conditional kind, as this case
demonstrates. This landlord’s intention, backed up by a proffered undertaking to the
court, was perfectly genuine, and the fact that the avowed purpose of the otherwise
useless works was only to get rid of the tenant said nothing at all to detract from its
genuineness. But the frank admission as to the landlord’s underlying purpose said
all that was necessary to reveal that the intention to do the works was only of that
conditional kind, such that the works would not have been done if the tenant had
agreed to go voluntarily.
30. There is nothing hypothetical or counter-factual about testing the type or
quality of the landlord’s intention, as at the time of the hearing, by an analysis of the
purpose or motive behind it. The disqualifying underlying purpose (just to get rid of
the tenant) is a continuing aspect of the landlord’s then current intention, even if the
direct question whether, in other circumstances (the tenant going voluntarily), the
landlord would have intended to do the relevant works appears hypothetical and
even counter-factual.
31. Recourse to an examination of motive or purpose does not mean that a desire
to remove the tenant will always, or even usually, disqualify the landlord from
resisting the grant of a new tenancy under section 30(1)(f). An intention to demolish
and/or redevelop business premises is very frequently influenced by commercial
considerations which include the departure of the tenant. The landlord may wish to
redevelop the premises so as to be suitable for his own use, or for a sale or re-letting
to a different type of tenant who would pay a higher rent, and these considerations
may transform what would otherwise be the excessive cost of the proposed works
into something financially viable. The only legitimate purpose of the examination
of purpose, beyond testing the genuineness of the landlord’s intention, will be to
enable the court to decide whether the landlord would have done the relevant works
if the tenant had left voluntarily. This is, as Lord Sumption explains, the acid test of
the type or quality of intention under section 30(1)(f).
32. I also agree with Lord Sumption’s view that the same acid test will have to
be applied where the landlord asserts an intention to carry out works which, as a
whole, would require the tenant to vacate, but where it is alleged that the landlord
would only carry out some lesser scheme, not justifying the refusal of a new tenancy,
if the tenant were to leave voluntarily. Cases of that kind may be more likely than
the stark facts of the present case, and they will probably give rise to factual
questions of some nicety, incapable of resolution by the proffer of a simple
undertaking to the court, as happens at present. This may introduce an element of
complexity and expense into proceedings in the County Court which, for many
years, have yielded to a simple technique for speedy resolution. But I can see no
other way of giving effect to what seems to me always to have been the plain
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intention of Parliament, that a tenant’s statutory right to a new tenancy should not
be circumvented by proposed works which, viewed as a whole, would not have been
undertaken by the landlord if the tenant had left voluntarily.